Q2 2025 StandardAero Inc Earnings Call

It plays into the question queue at any time by pressing star one on your telephone keypad and we ask you. Please ask one question and one follow up then return to the queue.

As a reminder, this conference is being recorded its now my pleasure drove up Clover to run a bunch of other vice President of Investor Relations. Please go ahead. Thank you and good afternoon, everyone. Welcome to standard <unk> second quarter 2025 earnings call.

And today by Russell for our Chairman and Chief Executive Officer, Dan Satterfield, Our Chief Financial Officer, and Alex dropped our Chief strategy Officer.

Alongside today's call you can find our earnings release as well as the accompanying presentation on our website at IR Dot standard Aero Dot com and <unk>.

A replay of this call will also be made available, which you can access on our website or by phone the phone number for the audio replay is included in the press release announcing this call.

Before we begin as always I would like to remind everyone that statements made during this call include forward looking statements under federal Securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections such risks and uncertainties include the factors set forth in the earnings release.

And in our filings with the Securities and Exchange Commission, including in the risk factors section of our annual report on Form 10-K for the year ended December 31, 2024, we assume no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise except as required.

Mired by law.

Additionally, during today's call, we will discuss certain non-GAAP financial measures such as adjusted EBITDA adjusted EBITDA margin free cash flow net debt to adjusted EBITDA leverage ratio and organic revenue growth.

A definition and reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings release and in the appendix to the earnings slide presentation on our website non-GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures.

With that out of the way I'd like to now turn the call over to our chairman and CEO Russell Foreign Russ over to you.

Thank you Rama and thanks to everyone for joining our earnings call today, let's begin on slide three for the second quarter. We again delivered robust results, increasing revenue 13, 5% and adjusted EBITDA increased by 20% compared to the prior year period.

Speaker #3: Greetings and welcome to the StandardAero second quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press *0 on your telephone keypad.

Operator: Greetings and welcome to the StandardAero second quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad, and we ask that you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Rama Bondada, Vice President of Investor Relations. Rama, please go ahead.

Speaker #3: A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad, and we ask that you please ask one question and one follow-up, then return to the queue.

Our performance was underpinned by robust demand across our key end markets as well as disciplined operational execution within both of our segments engine services and component repair services, we continue to expand our margins. While also advancing our ramp in new growth platforms, which are a near term headwind to March.

Speaker #3: As a reminder, this conference is being recorded. It's now my pleasure to look over to Rama Bondada, Vice President and Investor Relations. Rama, please go ahead.

Speaker #4: Thank you. Good afternoon, everyone. Welcome to StandardAero's second quarter 2025 earnings call. I'm joined today by Russell Ford, our Chairman and Chief Executive Officer; Dan Satterfield, our Chief Financial Officer; and Alex Trapp, our Chief Strategy Officer.

Rama Bondada: Thank you and good afternoon, everyone. Welcome to StandardAero's second quarter 2025 earnings call. I'm joined today by Russell Ford, our Chairman and Chief Executive Officer; Dan Satterfield, our Chief Financial Officer; and Alex Trapp, our Chief Strategy Officer. Alongside today's call, you can find our earnings release as well as the accompanying presentation on our website at ir.standardero.com. An audio replay of this call will also be made available, which you can access on our website or by phone. The phone number for the audio replay is included in the press release announcing this call. Before we begin, as always, I would like to remind everyone that statements made during this call include forward-looking statements under federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

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Our diversified portfolio spans more than 40 engine platforms across all major Oems and end markets, including commercial aerospace business aviation military and helicopter. This breadth not only provides multiple avenues for growth, but also creates built in resilience across market.

Speaker #4: Alongside today's call, you can find our earnings release, as well as the accompanying presentation on our website at ir.standardero.com. An audio replay of this call will also be made available, which you can access on our website or by phone.

Cycle now looking more closely at our end markets, our commercial aerospace sales grew 14% year over year, driven by a 34 leap CFM 56, and our turboprop platforms. Our backlog of MRO work here remains strong with demand for engine aftermarket service.

Speaker #4: The phone number for the audio replay is included in the press release announcing this call. Before we begin, as always, I would like to remind everyone that statements made during this call, including forward-looking statements under Federal Securities Laws.

Speaker #4: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission, including in the risk factors section of our annual report on Form 10-K for the year ended December 31, 2024.

So is outpacing MRO supply globally, we expect this favorable supply demand environment to continue for the foreseeable future.

Rama Bondada: Such risks and uncertainties include the factors set forth in the earning release and in our filings with the Securities and Exchange Commission, including in the risk factors section of our annual report on Form 10-K for the year ended December 31, 2024. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, during today's call, we will discuss certain non-GAAP financial measures such as adjusted EBITDA, adjusted EBITDA margin, free cash flow, net debt to adjusted EBITDA leverage ratio, and organic revenue growth. A definition and reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings release and in the appendix to the earnings slide presentation on our website.

Our business aviation sales increased 9% versus Q2 last year solid demand for engine platforms that power midsize and Super midsize business Jets drove strong revenue growth this quarter.

Speaker #4: We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise except as required by law.

Our military sales grew 12% year over year due to the contribution from our Aero turbine acquisition, which closed in August of 2024, as well as from growth on our AE $11, seven and J 85 programs that more than offset some lighter work scopes on other military platforms that we service.

Speaker #4: Additionally, during today's call, we will discuss certain non-GAAP financial measures, such as adjusted EBITDA, adjusted EBITDA margin, free cash flow, net debt to adjusted EBITDA leverage ratio, and organic revenue growth.

Moving on to adjusted EBITDA margins continued to expand in Q2, increasing 80 basis points year over year to 13, 4%. This.

Speaker #4: A definition and reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings release and in the appendix to the earnings slide presentation on our website.

This improvement was driven by strong sales growth favorable mix pricing and productivity initiatives within both of our segments. Additionally, our higher margin component repair services segment delivered a record margin this quarter and continues to represent a greater share of our overall business consistent with.

Speaker #4: Non-GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures. With that out of the way, I'd like to now turn the call over to our Chairman and CEO, Russell Ford.

Rama Bondada: Non-GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures. With that out of the way, I'd like to now turn the call over to our Chairman and CEO, Russell Ford. Russ, over to you.

Speaker #4: Russ, over to you.

Speaker #3: Thank you, Rama, and thanks to everyone for joining our earnings call today. Let's begin on slide three. For the second quarter, we again delivered robust results, increasing revenue by 13.5% and adjusted EBITDA increased by 20% compared to the prior year period.

Russell Ford: Thank you, Rama, and thanks to everyone for joining our earnings call today. Let's begin on slide three. For the second quarter, we again delivered robust results, increasing revenue 13.5% and adjusted EBITDA increase by 20% compared to the prior year period. Our performance was underpinned by a robust demand across our key end markets, as well as disciplined operational execution within both of our segments, engine services and component repair services. We continue to expand our margins while also advancing our ramp in new growth platforms, which are a near-term headwind to margins. Our diversified portfolio spans more than 40 engine platforms across all major OEMs and end markets, including commercial aerospace, business aviation, military, and helicopter. This breadth not only provides multiple avenues for growth but also creates built-in resilience across market cycles.

Our strategic direction.

Turning to slide four as a result of our continuing top line growth expanding margin performance and robust end market demand in the quarter. We are again, increasing our 2025 guidance with our continued outlook for double digit revenue performance and adjusted EBITDA margin expansion year over year.

Speaker #3: Our performance was underpinned by robust demand across our key end markets, as well as disciplined operational execution within both of our segments: Engine Services and Component Repair Services.

In both of our segments.

Now relative to our operational and commercial highlights in the second quarter, we remain focused on executing across our strategic priority areas, which we think will drive long term value for our shareholders. These initiatives include accelerating the ramp up of our lead program expanding our CFM 56.

Speaker #3: We continue to expand our margins while also advancing our ramp in new growth platforms, which are a near-term headwind to margins. Our diversified portfolios span more than 40 engine platforms across all major OEMs and end markets, including commercial aerospace, business aviation, military, and helicopter.

In CF 34 capacity and enhancing our capabilities in component repair services, let me begin by providing more detail on our progress on the leap program.

Speaker #3: This breadth not only provides multiple avenues for growth but also creates built-in resilience across market cycles. Now, looking more closely at our end markets, our commercial aerospace sales grew 14 percent year over year, driven by CF34, LEAP, CFM56, and our turboprop platforms.

In the second quarter, we completed our first leap shop visits and began deliveries from our facility in San Antonio.

Russell Ford: Now, looking more closely at our end markets, our commercial aerospace sales grew 14% year over year, driven by CF34, LEAP, CFM 56, and our TurboProp platforms. Our backlog of MRO work here remains strong, with demand for engine aftermarket services outpacing MRO supply globally. We expect this favorable supply-demand environment to continue for the foreseeable future. Our business aviation sales increased 9% versus Q2 last year. Solid demand for engine platforms that power mid-size and super mid-size business jets drove strong revenue growth this quarter. Our military sales grew 12% year over year due to the contribution from our aeroturbine acquisition, which closed in August of 2024, as well as from growth on our AE 1107 and J85 programs that more than offset some lighter work scopes on other military platforms that we service.

<unk> sales tripled sequentially and while volumes are still modest the momentum has been exceptional we remain in the early stages of this programs ramp with continuing acceleration expected through the second half of 2025, our technicians and leadership team are focused on completing <unk>.

Speaker #3: Our backlog of MRO work here remains strong, with demand for engine aftermarket services outpacing MRO supply globally. We expect this favorable supply-demand environment to continue for the foreseeable future.

Anil industrialization steps this year delivering our first performance restoration shop visit or Prs <unk> in the second half and continuing to scale.

Speaker #3: Our business aviation sales increased 9 percent versus Q2 last year, solid demand for engine platforms that power mid-size and super-mid-size business jets drove strong revenue growth this quarter.

Demand for leaf MRO services continues to grow with our pipeline and win rates strengthening each quarter standard Arrow's total leap bookings now exceed one 5 billion up from $1 billion. We mentioned at the end of last year supported by strong wins year to date.

Speaker #3: Our military sales grew 12 percent year over year, due to the contribution from our aeroturbine acquisition, which closed in August of 2024, as well as from growth on our AE-1107 and J-85 programs that more than offset some lighter work scopes on other military platforms that we service.

We continue to expect leap revenues to reach $1 billion annually by the end of the decade.

Speaker #3: Moving on to adjusted EBITDA, margins continue to expand in Q2, increasing 80 basis points year over year to 13.4 percent. This improvement was driven by strong sales growth, favorable mix, pricing, and productivity initiatives within both of our segments.

Russell Ford: Moving on to adjusted EBITDA, margins continued to expand in Q2, increasing 80 basis points year over year to 13.4%. This improvement was driven by strong sales growth, favorable mix, pricing, and productivity initiatives within both of our segments. Additionally, our higher margin component repair services segment delivered a record margin this quarter and continues to represent a greater share of our overall business, consistent with our strategic direction. Turning to slide four, as a result of our continuing top-line growth, expanding margin performance, and robust end-market demand in the quarter, we are again increasing our 2025 guidance with a continued outlook for double-digit revenue performance and adjusted EBITDA margin expansion year over year in both of our segments.

Turning to see at 34, and <unk> 56, we continue to capitalize on the organic investments. We've made in these platforms on CF 34, we again achieved robust year over year growth. Following the expansion of our GE relationship at the end of 2024.

Speaker #3: Additionally, our higher-margin component repair services segment delivered a record margin this quarter and continues to represent a greater share of our overall business, consistent with our strategic direction.

Given our growing market position, we expect to see a 34 platform to drive growth well into the next decade.

On CFM 56 recall that we are one of the only independent MRO businesses in the world that is adding meaningful overhaul capacity.

Speaker #3: Turning to slide four, as a result of our continuing top-line growth, expanding margin performance, and robust in-market demand in the quarter, we are again increasing our 2025 guidance with a continued outlook for double-digit revenue performance and adjusted EBITDA margin expansion year over year in both of our segments.

This engine platform currently has the largest installed base in the history of commercial aviation and we are well positioned to keep gaining share.

We continue to make progress on the industrialization of our CFM 56, Dallas Fort worth facility and are simultaneously winning sales campaigns to build out our backlog with a diverse top tier customer base in the second quarter, we inductor, our first Prs the full performance restoration shop visit asset.

Speaker #3: Now, relative to our operational and commercial highlights in the second quarter, we remain focused on executing across our strategic priority areas, which we think will drive long-term value for our shareholders.

Russell Ford: Now, relative to our operational and commercial highlights in the second quarter, we remain focused on executing across our strategic priority areas, which we think will drive long-term value for our shareholders. These initiatives include accelerating the ramp-up of our LEAP program, expanding our CFM 56 and CF34 capacity, and enhancing our capabilities in component repair services. Let me begin by providing more detail on our progress on the LEAP program. In the second quarter, we completed our first LEAP shop visits and began deliveries from our facility in San Antonio. LEAP sales tripled sequentially, and while volumes are still modest, the momentum has been exceptional. We remain in the early stages of this program's ramp, with continuing acceleration expected through the second half of 2025.

Facility. In addition to our Prs V capabilities, we have continued to grow our menu of service offerings for this platform from quick turn events to green time on lease assets and now into engine exchanges, while staying consistent with our strategy of offering OEM alarm solutions. These service offerings.

Speaker #3: These initiatives include accelerating the ramp-up of our LEAP program, expanding our CFM56 and CF34 capacity, and enhancing our capabilities in component repair services. Let me begin by providing more detail on our progress on the LEAP program.

Which are synergistic across our enterprise has been a cornerstone of many of our mature program offerings on other platforms and we're pleased to be able to support the CFM 56 in the same way, while also maintaining our asset light structure.

Speaker #3: In the second quarter, we completed our first LEAP shop visits and began deliveries from our facility in San Antonio. LEAP sales tripled sequentially, and while volumes were still modest, the momentum has been exceptional.

Speaker #3: We remain in the early stages of this program's ramp, with continuing acceleration expected through the second half of 2025. Our technicians and leadership team are focused on completing final industrialization steps this year, delivering our first performance restoration shop visit, or PRSV, in the second half and continuing to scale.

Moving on to another area of organic investment we are approaching the grand opening of our newly expanded business aviation facility in Augusta, Georgia. This.

Russell Ford: Our technicians and leadership team are focused on completing final industrialization steps this year, delivering our first performance restoration shop visit, or PRSV, in the second half and continuing to scale. Demand for LEAP MRO services continues to grow, with our pipeline and win rates strengthening each quarter. StandardAero's total LEAP bookings now exceed $1.5 billion, up from $1 billion we mentioned at the end of last year, supported by strong wins year to date. We continue to expect LEAP revenues to reach $1 billion annually by the end of the decade. Turning to CF34 and CFM 56, we continue to capitalize on the organic investments we've made in these platforms. On CF34, we again achieved robust year-over-year growth following the expansion of our GE relationship at the end of 2024. Given our growing market position, we expect the CF34 platform to drive growth well into the next decade.

This expansion, which we announced in April of 2024 at 60% capacity to this facility and is on track to come online in the third quarter of 2025. This is very timely given that we hit a new record in HTM 7000 sales in Q2, the expansion in Augusta will increase our ACF.

Speaker #3: Demand for LEAP MRO services continues to grow, with our pipeline in wind rate strengthening each quarter. StandardAero's total LEAP bookings now exceed 1.5 billion dollars, up from 1 billion dollars we mentioned at the end of last year, supported by strong winds year to date.

<unk> thousand capacity and the facility performed the complete suite of MRO work Scopes. In addition, the expanded footprint will be capable of performing airframe services on large cabin business Jets. We are the exclusive independent heavy overhaul provider on the HTS 7000 and with this.

Speaker #3: We continue to expect LEAP revenues to reach $1 billion annually by the end of the decade. Turning to CF34 and CFM56, we continue to capitalize on the organic investments we've made in these platforms.

Additional capacity coupled with growing demand we see this platform as an important element of our continued growth in business aviation. This expansion came about in close collaboration with the Augusta Regional Airport, the Augusta Economic development authority and the state of Georgia, It's expected to generate about 100, new <unk>.

Speaker #3: On CF34, we again achieved robust year-over-year growth, following the expansion of our GE relationship at the end of 2024. Given our growing market position, we expect the CF34 platform to drive growth well into the next decade.

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Turning to growth initiatives for our component repair services segment, we continue expanding our portfolio of OEM authorized leap repairs. This is expected to drive increased third party sales and greater in sourcing of addressable repairs from our engine services business as we strengthen integration between our two segments.

Speaker #3: On CFM56, recall that we are one of the only independent MRO businesses in the world that is adding meaningful overhaul capacity. This engine platform currently has the largest installed base in the history of commercial aviation, and we are well positioned to keep gaining share.

Russell Ford: On CFM 56, recall that we are one of the only independent MRO businesses in the world that is adding meaningful overhaul capacity. This engine platform currently has the largest installed base in the history of commercial aviation, and we are well positioned to keep gaining share. We continue to make progress on the industrialization of our CFM 56 Dallas Fort Worth facility and are simultaneously winning sales campaigns to build out our backlog with a diverse top-tier customer base. In the second quarter, we inducted our first PRSV full performance restoration shop visit at the facility. In addition to our PRSV capabilities, we have continued to grow our menu of service offerings for this platform, from quick turn events to green time and lease assets, and now into engine exchanges while staying consistent with our strategy of offering OEM-aligned solutions.

Now pivoting to capital allocation.

Speaker #3: We continue to make progress on the industrialization of our CFM56 Dallas-Fort Worth facility and our simultaneously winning sales campaigns to build out our backlog with the diverse top-tier customer base.

We think we're exceptionally well positioned to deliver strong returns through a multi pronged approach combining organic investments in platforms, where we hold strong market positions strategic M&A additional platforms and additional repair capability.

Speaker #3: In the second quarter, we inducted our first PRSV full-performance restoration shop visit at the facility. In addition to our PRSV capabilities, we have continued to grow our menu of service offerings for this platform, from quick turn events, to green time and lease assets, and now into engine exchanges while staying consistent with our strategy of offering OEM-aligned solutions.

With respect to organic investments you just heard about our expansion initiatives with CFM 56, CF 34, and <unk> 7000, there are more opportunities such as these in the near and medium term that will allow us to continue this pattern of disciplined organic investments that we expect will generate a high return.

Turn on invested capital for our shareholders on.

Speaker #3: These service offerings, which are synergistic across our enterprise, have been a cornerstone of many of our mature program offerings on other platforms, and we're pleased to be able to support the CFM56 in the same way while also maintaining our asset light structure.

Russell Ford: These service offerings, which are synergistic across our enterprise, have been a cornerstone of many of our mature program offerings on other platforms, and we're pleased to be able to support the CFM 56 in the same way while also maintaining our asset light structure. Moving on to another area of organic investment, we are approaching the grand opening of our newly expanded business aviation facility in Augusta, Georgia. This expansion, which we announced in April of 2024, adds 60% capacity to this facility and is on track to come online in the third quarter of 2025. This is very timely given that we hit a new record in HTF 7,000 sales in Q2. The expansion in Augusta will increase our HTF 7,000 capacity, and the facility performs the complete suite of MRO work scopes.

On the M&A front, we're staying close to the market, we have a growing pipeline of targets and ample balance sheet capacity, we will remain disciplined and focused on allocating capital to areas, where we see strong strategic and synergistic alignments such as air turbine.

Speaker #3: Moving on to another area of organic investment, we are approaching the grand opening of our newly expanded business aviation facility in Augusta, Georgia. This expansion, which we announced in April of 2024, adds 60 percent capacity to this facility and is on track to come online in the third quarter of 2025.

That now concludes my comments and I'll ask Dan Satterfield, our CFO to walk through our financial results and outlook with additional detail Dan.

Thank you Russ I will begin on slide five with some highlights from our second quarter results.

For the second quarter ended June 32025, we generated revenue of $1 $5 3 billion as compared to 135 billion for the second quarter last year, representing 13, 5% growth of which 11, 5% was organic.

Speaker #3: This is very timely given that we hit a new record in HTF 7000 sales in Q2. The expansion in Augusta will increase our HTF 7000 capacity, and the facility performs the complete suite of MRO work scopes.

Saw strong growth at both our engine services and component repair services segments.

Speaker #3: In addition, the expanded footprint will be capable of performing airframe services on large cabin business jets. We are the exclusive, independent, heavy overhaul provider on the HTF 7000, and with this additional capacity, coupled with growing demand, we see this platform as an important element of our continued growth in business aviation.

Russell Ford: In addition, the expanded footprint will be capable of performing airframe services on large cabin business jets. We are the exclusive independent heavy overhaul provider on the HTF 7,000, and with this additional capacity, coupled with growing demand, we see this platform as an important element of our continued growth in business aviation. This expansion came about in close collaboration with the Augusta Regional Airport, the Augusta Economic Development Authority, and the state of Georgia. It's expected to generate about 100 new jobs for the area. Turning to growth initiatives for our component repair services segment, we continue expanding our portfolio of OEM-authorized LEAP repairs. This is expected to drive increased third-party sales and greater insourcing of addressable repairs from our engine services business as we strengthen integration between our two segments.

Adjusted EBITDA increased to $205 million for the second quarter of 2025 compared to $170 million for the prior year period, representing 20% growth.

As adjusted EBITDA margins expanded 80 basis points year on year inclusive of our growth platforms, which are dilutive to margins as they ramp.

Speaker #3: This expansion came about in close collaboration with the Augusta Regional Airport, the Augusta Economic Development Authority, and the State of Georgia. It's expected to generate about 100 new jobs for the area.

This was driven by continued topline growth and margin expansion in our key MRO programs and continued strong growth and expansion in our higher margin component repair services segment, including the acquisition of Aero turbine last year.

Speaker #3: Turning to growth initiatives for our component repair services segment, we continue expanding our portfolio of OEM-authorized LEAP repairs. This is expected to drive increased third-party sales and greater in-sourcing of addressable repairs from our engine services business as we strengthen integration between our two segments.

Net income increased to $68 million for the second quarter of 2025 compared to $5 million for the prior year driven by increased sales and expanding margins paired with our reduced interest expense from our debt Paydown and subsequent refinancing events.

Free cash flow was $31 million of use in the quarter, which was in line with our expectations given our ongoing growth investments.

Speaker #3: Now, pivoting to capital allocation, we think we're exceptionally well positioned to deliver strong returns through a multi-pronged approach combining organic investments in platforms where we hold strong market positions, strategic M&A, additional platforms, and additional repair capability.

Russell Ford: Now, pivoting to capital allocation, we think we're exceptionally well positioned to deliver strong returns through a multipronged approach, combining organic investments and platforms where we hold strong market positions, strategic M&A, additional platforms, and additional repair capability. With respect to organic investments, you just heard about our expansion initiatives with CFM 56, CF34, and HTF 7,000. There are more opportunities such as these in the near and medium term that will allow us to continue this pattern of disciplined organic investments that we expect will generate a high return on invested capital for our shareholders. On the M&A front, we're staying close to the market. We have a growing pipeline of targets and ample balance sheet capacity. We will remain disciplined and focused on allocating capital to areas where we see strong strategic and synergistic alignment, such as aeroturbine.

Higher earnings and lower interest from refinancing actions were offset by higher working capital and Capex driven.

Driven by growth for the leap CFM 56, and <unk> 34 platforms.

I'll dive a little deeper into the cash flow on a later slide.

Speaker #3: With respect to organic investments, you just heard about our expansion initiatives with CFM56, CF34, and HTF 7000. There are more opportunities such as these in the near and medium term that will allow us to continue this pattern of disciplined organic investments, which we expect will generate a high return on invested capital for our shareholders.

Now moving into our two segments, starting with engine services on slide six.

Engine services revenue increased by $139 million to $1 $35 billion in the second quarter.

Representing a 11, 5% growth compared to the prior year period.

Drivers included robust aftermarket activity across key established platforms at accelerating production ramp on our growth programs and commercial aerospace as well as strong performance in business aviation.

Speaker #3: On the M&A front, we're staying close to the market. We have a growing pipeline of targets and ample balance sheet capacity. We will remain disciplined and focused on allocating capital to areas where we see strong strategic and synergistic alignments, such as aeroturbine.

On the commercial side of the segment, we set at the beginning of the year that our four big growth platforms would be leap CFM 56, CF 34, and turboprops and those again this quarter drove our top line growth.

Speaker #3: That now concludes my comments, and I'll ask Dan Satterfield, our CFO, to walk through our financial results and outlook with additional detail. Dan? Thank you, Russ.

Russell Ford: That now concludes my comments, and I'll ask Dan Satterfield, our CFO, to walk through our financial results and outlook with additional detail. Dan.

We also saw continued strength in our mid and Super midsize business jet engine platforms and as Russ mentioned earlier, our <unk> 7000 business saw record levels in the quarter.

Dan Satterfield: Thank you, Russ. I will begin on slide five with some highlights from our second quarter results. For the second quarter ended June 30, 2025, we generated revenue of $1.53 billion as compared to $1.35 billion for the second quarter last year, representing 13.5% growth, of which 11.5% was organic. We saw strong growth at both our engine services and component repair services segments. Adjusted EBITDA increased to $205 million for the second quarter of 2025, compared to $170 million for the prior year period, representing 20% growth. As adjusted EBITDA margins expanded 80 basis points year on year, inclusive of our growth platforms, which are diluted to margins as they ramp. This was driven by continued top-line growth and margin expansion in our key MRO programs and continued strong growth and expansion in our higher margin component repair services segment, including the acquisition of aeroturbine last year.

Speaker #3: I will begin on slide five with some highlights from our second quarter results. For the second quarter ended June 30, 2025, we generated revenue of 1.53 billion, as compared to 1.35 billion for the second quarter last year, representing 13.5 percent growth.

On the military side, a strong rebound in <unk> $11 seven work and strength of the <unk> five engine were partly offset by lower than expected work scopes on the military transport side of the business.

On the earnings front engine services adjusted EBITDA grew 16% in the second quarter and represented a 50 basis point margin expansion year on year to 13, 2%.

Speaker #3: Of which 11.5 percent was organic. We saw strong growth at both our engine services and component repair services segments. Adjusted EBITDA increased to 205 million dollars for the second quarter of 2025, compared to 170 million dollars for the prior year period.

The increase reflects strong performance across our core commercial and business aviation segments, driven by a favorable product mix volume growth and productivity improvements.

Speaker #3: Representing 20 percent growth, as adjusted EBITDA margins expanded 80 basis points year on year, inclusive of our growth platforms, which are diluted to margins as they ramp.

Once again margin expansion in CF 34, and our turboprop business continued to more than offset the dilutive margins on our growth platforms, namely leap CFM 56, Dallas Fort worth.

Speaker #3: This was driven by continued top-line growth and margin expansion in our key MRO programs, as well as continued strong growth and expansion in our higher margin component repair services segment, including the acquisition of Aeroturbine last year.

On the business aviation side mix and pricing drove the margin expansion.

And in military the higher volumes in <unk> 11, or seven paired with continued strong margins in J D. Five offset the above mentioned lower work scopes in the military transport business.

Speaker #3: Net income increased to 68 million dollars for the second quarter of 2025, compared to 5 million dollars for the prior year, driven by increased sales and expanding margins, paired with our reduced interest expense from our debt paydown and subsequent refinancing events.

Dan Satterfield: Net income increased to $68 million for the second quarter of 2025, compared to $5 million for the prior year, driven by increased sales and expanding margins, paired with our reduced interest expense from our debt paydown and subsequent refinancing events. Free cash flow was a $31 million use in the quarter, which was in line with our expectations given our ongoing growth investments. Higher earnings and lower interest from refinancing actions were offset by higher working capital and CapEx, driven by growth for the LEAP, CFM 56, and CF34 platforms. I'll dive a little deeper into cash flow on a later slide. Now moving into our two segments, starting with engine services on slide six. Engine services revenue increased by $139 million to $1.35 billion in the second quarter, representing 11.5% growth compared to the prior year period.

On slide seven component repair services second quarter revenue increased 31% compared to the prior year period to $178 million.

Speaker #3: Free cash flow was a 31 million dollar use in the quarter, which was in line with our expectations, given our ongoing growth investments. Higher earnings and lower interest from refinancing actions were offset by higher working capital and CapEx.

Notable drivers included continued growth in our land and marine business the contribution of $27 $3 million in revenue from the Aero turbine acquisition and robust underlying demand across our served platforms.

Speaker #3: Driven by growth for the LEAP, CFM56, and CF34 platforms. I'll dive a little deeper into cash flow on a later slide. Now moving into our two segments, starting with engine services on slide six.

This was somewhat offset by slower timing of inputs from certain commercial customers as.

As we stated last quarter, we expect the input from these customers to rebound in the second half of this year and we are already seeing early signs of this.

Speaker #3: Engine services revenue increased by 139 million dollars to 1.35 billion dollars in the second quarter. Representing 11 and a half percent growth, compared to the prior year period.

In the quarter component repair services adjusted EBITDA grew 50% year on year, which was the result of our revenue growth and over 360 basis points year on year margin expansion to 29%.

Speaker #3: Notable drivers included robust aftermarket activity across key established platforms, and accelerating production ramp on a growth programs in commercial aerospace. As well as strong performance in business aviation.

Dan Satterfield: Notable drivers included robust aftermarket activity across key established platforms and accelerating production ramp on growth programs in commercial aerospace, as well as strong performance in business aviation. On the commercial side of the segment, we said at the beginning of the year that our four big growth platforms would be LEAP, CFM 56, CF34, and TurboProps, and those again this quarter drove our top-line growth. We also saw continued strength in our mid and super mid-size business jet and engine platforms. And as Russ mentioned earlier, our HTF 7,000 business saw record levels in the quarter. On the military side, a strong rebound in AE 1107 work and strength in the J85 engine were partly offset by lower than expected work scopes on the military transport side of the business.

This is a record adjusted EBITDA margin quarter in Crs.

This increase reflects strong volume pricing and favorable mix as well as the impact of the <unk> acquisition now moving to slide eight I'll discuss our free cash flow for the quarter.

Speaker #3: On the commercial side of the segment, we said at the beginning of the year that our four big growth platforms would be LEAP, CFM56, CF34, and turboprops.

Free cash flow for the quarter was $31 million use we saw a $108 million a build of working capital in Q2 nearly.

Speaker #3: And those again this quarter drove our top-line growth. We also saw continued strength in our mid and super-mid-size business jet and engine platforms. And as Russ mentioned earlier, our HTF 7000 business saw record levels in the quarter.

Nearly half of this increase was driven by our growth ramp for the leap and CFM 56, Dallas Fort worth programs.

We expect working capital activity to turn to a meaningful tailwind in the second half of 2025, driven by the timing of receivables and as our supply chain activity improves, which we expect to more than offset increased working capital from ramping growth programs.

Speaker #3: On the military side, a strong rebound in AE-1107 work and strength in the J-85 engine were partly offset by lower than expected work scopes on the military transport side of the business.

Maintenance capex in the quarter was $9 million, which is less than 1% of revenue.

Speaker #3: On the earnings front, engine services adjusted EBITDA grew 16 percent in the second quarter and represented a 50 basis point margin expansion, year on year, to 13.2 percent.

Dan Satterfield: On the earnings front, engine services adjusted EBITDA grew 16% in the second quarter and represented a 50 basis point margin expansion year on year to 13.2%. The increase reflects strong performance across our core commercial and business aviation segments, driven by favorable product mix, volume growth, and productivity improvements. Once again, margin expansion in CF34 and our TurboProp business continued to more than offset the diluted margins on our growth platforms, namely LEAP and CFM 56 Dallas Fort Worth. On the business aviation side, mix and pricing drove the margin expansion. And in military, the higher volumes in AE 1107, paired with continued strong margins in J85, offset the above-mentioned lower work scopes in the military transport business. On slide seven, component repair services second quarter revenue increased 31% compared to the prior year period to $178 million.

Major platform investments in <unk> were $30 million, we paid the remaining $15 million for our CF 34 license expansion in the quarter.

Speaker #3: The increase reflects strong performance across our core commercial and business aviation segments, driven by favorable product mix, volume growth, and productivity improvements. Once again, margin expansion in CF34 and our turboprop business continued to more than offset the diluted margins on our growth platforms, namely LEAP and CFM56, Dallas-Fort Worth.

For leap, we spent $7 million, which brings the year to date investment for that platform to $26 million.

For our CFM 56 expansion in Dallas Fort Worth, we spent $8 million, which brings that investment year to date to $10 million we continued.

To expect $90 million in major platform investments for the full year of which year to date, we have completed $66 million.

Speaker #3: On the business aviation side, mix and pricing, drove the margin expansion. And in military, the higher volumes in AE-1107, paired with continued strong margins in J-85, offset the above-mentioned lower work scopes in the military transport business.

Our cash taxes in the quarter included our full year estimated 2025 tax payment for the U S.

We continue to expect free cash flow for 2025 to be in the range of $155 million to $175 million.

Yeah.

Speaker #3: On slide seven, component repair services second quarter revenue increased 31 percent compared to the prior year period, to 178 million dollars. Notable drivers included continued growth in our land and marine business, the contribution of 27.3 million dollars in revenue from the aeroturbine acquisition, and robust underlying demand across our served platforms.

Turning to slide nine our leverage at the end of the quarter improved to $2 99 times net debt to EBITDA. This.

This compares to five four times at the end of Q2, 'twenty four and $3. One four times at the end of fiscal 2024.

Dan Satterfield: Notable drivers included continued growth in our land and marine business, the contribution of $27.3 million in revenue from the aeroturbine acquisition, and robust underlying demand across our served platforms. This was somewhat offset by slower timing of inputs from certain commercial customers. As we stated last quarter, we expect the inputs from these customers to rebound in the second half of this year, and we are already seeing early signs of this. In the quarter, component repair services adjusted EBITDA grew 50% year on year, which was the result of our revenue growth and over 360 basis points year on year margin expansion to 29%. This is a record adjusted EBITDA margin quarter in CRS. This increase reflects strong volume, pricing, and favorable mix, as well as the impact of the aeroturbine acquisition. Now moving to slide eight, I'll discuss our free cash flow for the quarter.

While we are pleased with where we sit from a leverage perspective. We are also focused on continuing to delever the business through organic earnings and cash flow growth and continue to target long term net leverage between two and three times.

Speaker #3: This was somewhat offset by the slower timing of inputs from certain commercial customers. As we stated last quarter, we expect the inputs from these customers to rebound in the second half of this year, and we are already seeing early signs of this.

At our current level, we already have ample balance sheet capacity to conduct accretive and strategic M&A.

Speaker #3: In the quarter, component repair services adjusted EBITDA grew 50 percent year-on-year, which was the result of our revenue growth and over 360 basis points year-on-year margin expansion to 29 percent.

Now to our guidance on slide 10.

We had a strong first half to the year. Despite continued supply chain issues throughout the aerospace industry and the ever changing tariff landscape.

Speaker #3: This is a record adjusted EBITDA margin quarter in CRS. This increase reflects strong volume, pricing, and favorable mix, as well as the impact of the aeroturbine acquisition.

Irrespective of these issues both of our segments continued to deliver on both topline growth and adjusted EBITDA margin expansion.

This is a reflection of our strong operating culture are focused workforce.

Speaker #3: Now moving to slide eight, I'll discuss our free cash flow for the quarter. Free cash flow for the quarter was a $31 million use.

Diversified portfolio and strong demand across our end markets.

Dan Satterfield: Free cash flow for the quarter was a $31 million use. We saw a $108 million build of working capital in Q2. Nearly half of this increase was driven by our growth ramp for the LEAP and CFM 56 Dallas Fort Worth programs. We expect working capital activity to turn to a meaningful tailwind in the second half of 2025, driven by the timing of receivables and as our supply chain activity improves, which we expect to more than offset increased working capital from ramping growth programs. Maintenance CapEx in the quarter was $9 million, which is less than 1% of revenue. Major platform investments in Q2 were $30 million. We paid the remaining $15 million for our CF34 license expansion in the quarter. For LEAP, we spent $7 million, which brings year-to-date investment for that platform to $26 million.

Speaker #3: We saw a 108 million dollar build of working capital in Q2. Nearly half of this increase was driven by our growth ramp for the LEAP and CFM56, Dallas-Fort Worth programs.

As Russ mentioned earlier, we are increasing our revenue and adjusted EBITDA guidance ranges from our May earnings call.

We now expect revenue in 2025 to be between five $8 75 billion and $6 <unk> 5 billion.

Speaker #3: We expect working capital activity to turn to a meaningful tailwind in the second half of 2025, driven by the timing of receivables and as our supply chain activity improves.

This increase in sales expectation is from our engine services segment.

And driven by the <unk> 34 and turboprop business.

Speaker #3: Which we expect to more than offset increased working capital from ramping growth programs. Maintenance CapEx in the quarter was 9 million dollars, which is less than 1 percent of revenue.

This means we now expect sales to grow about 13, 5% year over year at the midpoint of our guidance or about a 100 basis point increase versus our previous guidance.

Speaker #3: Major platform investments in Q2 were 30 million dollars. We paid the remaining 15 million dollars for our CF34 license expansion in the quarter. For LEAP, we spent 7 million dollars, which brings year-to-date investment for that platform to 26 million dollars.

Adjusted EBITDA is now expected in the range of $790 million and $810 million.

This increase was primarily driven by our higher sales guidance and better than expected margins in both of our segments.

It is inclusive of our estimated net tariff impact of 10 million to $15 million.

Speaker #3: For our CFM56 expansion in Dallas-Fort Worth, we spent 8 million dollars, which brings that investment year-to-date to 10 million dollars. We continue to expect 90 million dollars in major platform investments for the full year, of which year-to-date we have completed 66 million.

Dan Satterfield: For our CFM 56 expansion in Dallas Fort Worth, we spent $8 million, which brings that investment year-to-date to $10 million. We continue to expect $90 million in major platform investments for the full year, of which year-to-date we have completed $66 million. Our cash taxes in the quarter included our full-year estimated 2025 tax payments for the US. We continue to expect free cash flow for 2025 to be in the range of $155 million to $175 million. Turning to slide nine, our leverage at the end of the quarter improved to 2.99 times net debt to EBITDA. This compares to 5.4 times at the end of Q2 2024 and 3.14 times at the end of fiscal 2024.

In engine services, we now expect about 13, 3% adjusted EBITDA margins or a 30 basis point increase from our previous guidance.

This is the result of better than expected performance in our core engine platforms outstripping the weight of our ramping leap and CFM 56 programs.

Speaker #3: Our cash taxes in the quarter included our full year estimated 2025 tax payment for the U.S. We continue to expect free cash flow for 2025 to be in the range of 155 million to 175 million dollars.

The engine services segment will see year on year margin expansion in 2025 inclusive of these currently margin dilutive growth programs.

Yes.

Speaker #3: Turning to slide nine, our leverage at the end of the quarter improved to 2.99 times net debt to EBITDA. This compares to 5.4 times at the end of Q2-24, and 3.14 times at the end of fiscal 2024.

For the component repair services segment, we now expect segment adjusted EBITDA margins of about 28, 3%, a 130 basis point increase from our previous guidance and a 220 basis point year on year expansion.

Speaker #3: While we are pleased with where we sit from a leverage perspective, we are also focused on continuing to deleverage the business through organic earnings and cash flow growth.

Dan Satterfield: While we are pleased with where we sit from a leverage perspective, we are also focused on continuing to delever the business through organic earnings and cash flow growth and continue to target long-term net leverage between two and three times. At our current level, we already have ample balance sheet capacity to conduct accretive and strategic M&A. Now to our guidance on slide 10. We had a strong first half to the year despite continued supply chain issues throughout the aerospace industry and the ever-changing tariff landscape. Irrespective of these issues, both of our segments continue to deliver on both top-line growth and adjusted EBITDA margin expansion. This is a reflection of our strong operating culture, our focused workforce, diversified portfolio, and strong demand across our end markets. As Russ mentioned earlier, we are increasing our revenue and adjusted EBITDA guidance ranges from our May earnings call.

Driving the increase in our expectations or the productivity gains in this segment.

Along with the contribution from Aero turbine.

For the company as a whole we now expect an adjusted EBITDA margin of around 13, 4% up from 13, 3%.

Speaker #3: And continue to target long-term net leverage, between 2 and 3 times. At our current level, we already have ample balance sheet capacity to conduct accretive and strategic M&A.

Offsetting some of the segment level of gains in the year are higher corporate expenses, primarily due to upgrades to key operational roles to implement supply chain centralization and working capital optimization.

Speaker #3: Now to our guidance, on slide ten. We had a strong first half to the year despite continued supply chain issues throughout the aerospace industry.

As well as some additional public company related expenses and tariff related service fees.

Speaker #3: And the ever-changing tariff landscape. Irrespective of these issues, both of our segments continue to deliver on both top-line growth and adjusted EBITDA margin expansion.

The increase to our full year 2025 guidance reflects continued strong demand in our core end markets.

We had been expecting low double digit to mid teens growth in our commercial aerospace end market. This year, but we now expect that to be at the top end of that range in the mid teens.

Speaker #3: This is a reflection of our strong operating culture, our focused workforce, diversified portfolio, and strong demand across our end markets. As Russ mentioned earlier, we are our increasing our revenue and adjusted EBITDA guidance ranges from our May earnings call.

We continue to estimate high single digit growth in the business aviation end market and in the military and helicopter at market.

With that I'll turn it back over to Russ to wrap things up.

Speaker #3: We now expect revenue in 2025 to be between $5.875 billion and $6.025 billion. This increase in sales expectation is from our engine services segment.

Dan Satterfield: We now expect revenue in 2025 to be between $5.875 billion and $6.025 billion. This increase in sales expectation is from our engine services segment and driven by the CF34 and TurboProp business. This means we now expect sales to grow about 13.5% year over year at the midpoint of our guidance or about a 100 basis point increase versus our previous guidance. Adjusted EBITDA is now expected in the range of $790 million and $810 million. This increase is primarily driven by our higher sales guidance and better than expected margins in both of our segments and is inclusive of our estimated net tariff impact of $10 million to $15 million. In engine services, we now expect about 13.3% adjusted EBITDA margins or a 30 basis point increase from our previous guidance.

Thank you Dan now to summarize standard Arrow has delivered a strong first half in 2025 as promised and we're not done yet we continue to operate in a difficult supply chain environment and an uncertain macroeconomic times. However, we remain focused on the responsibility that our shareholders place on us.

Speaker #3: And driven by the CF34 and turboprop business, this means we now expect sales to grow about 13.5 percent year over year at the midpoint of our guidance, or about a 100 basis point increase versus our previous guidance.

We continue to see a strong demand environment for our business and remain well positioned to take advantage of this by deploying capital in both a disciplined and strategic manner.

Speaker #3: Adjusted EBITDA is now expected in the range of 790 million and 810 million dollars. This increase is primarily driven by our higher sales guidance and better than expected margins in both of our segments, and is inclusive of our estimated net tariff impact of 10 million to 15 million dollars.

Additionally, we remain committed and on track to deliver a high quality and predictable results this year and well into the future that concludes our remarks for the second quarter and with that operator, we're now ready to move to the Q&A session.

Speaker #3: In engine services, we now expect about 13.3 percent adjusted EBITDA margins, or a 30 basis point increase from our previous guidance. This is the result of better than expected performance in our core engine platforms outstripping the weight of our ramping LEAP and CFM56 programs.

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Dan Satterfield: This is the result of better than expected performance in our core engine platforms, outstripping the weight of our ramping LEAP and CFM 56 programs. The engine services segment will see year-on-year margin expansion in 2025, inclusive of these currently margin-diluted growth programs. For the component repair services segment, we now expect segment-adjusted EBITDA margins of about 28.3%, a 130 basis point increase from our previous guidance, and a 220 basis point year-on-year expansion. Driving the increase in our expectations are the productivity gains in this segment, along with the contribution from aeroturbine. For the company as a whole, we now expect an adjusted EBITDA margin of around 13.4%, up from 13.3%.

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Speaker #3: The engine services segment will see year-on-year margin expansion in 2025, inclusive of these currently margin-dilutive growth programs. For the component repair services segment, we now expect segment-adjusted EBITDA margins of about 28.3 percent, a 130 basis point increase from our previous guidance, and a 220 basis point year-on-year expansion.

<unk> is using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Once again Thats star one to be placed in the question queue and we ask you. Please ask one question one follow up then return to the queue.

Our first question is coming from such statements from Jpmorgan. Your line is now live.

Okay, Thanks, very much and good afternoon.

Speaker #3: Driving the increase in our expectations are the productivity gains in this segment, along with the contribution from aeroturbine. For the company as a whole, we now expect an adjusted EBITDA margin of around 13.4 percent, up from 13.3 percent.

Hey, Seth.

Wanted to start off just thinking about the cadence of the year in engine services have kind of been thinking about revenues kind of growing sequentially through the year.

There was an incremental work on leaf and CFM.

Speaker #3: Offsetting some of the segment-level gains in the year, our higher corporate expenses, primarily due to upgrades to key operational roles, to implement supply chain centralization, and working capital optimization.

Dan Satterfield: Offsetting some of the segment-level gains in the year are higher corporate expenses, primarily due to upgrades to key operational roles to implement supply chain centralization and working capital optimization, as well as some additional public company-related expenses and tariff-related service fees. The increase to our full-year 2025 guidance reflects continued strong demand in our core end markets. We had been expecting low double-digit to mid-teens growth in our commercial aerospace end market this year, but we now expect that to be at the top end of that range in the mid-teens. We continue to estimate high single-digit growth in the business aviation end market and in the military and helicopter end market. With that, I'll turn it back over to Russ to wrap things up.

Revenues were higher than I had expected in the second quarter and then when I look at the rest of the year. It looks like the run rate kind of comes down from the second quarter level.

Should we be thinking differently about that about that cadence.

Speaker #3: As well as some additional public company-related expenses, and tariff-related service fees. The increase to our full year 2025 guidance reflects continued strong demand in our core end markets.

Okay.

Not really I mean.

We've got it up on revenue on the strength of.

<unk> segment, and we called out in particular to see a 34 program.

That continues to.

Speaker #3: We had been expecting low double-digit to mid-teens growth in our commercial aerospace end market this year, but we now expect that to be at the top end of that range, in the mid-teens.

He is a strong driver of growth of the top four drivers of growth remain the same and expectations. There are in line with our with our expert with our earlier expectations in particular lead and I'm really really pleased to see leap tripled our growth quarter over quarter.

Speaker #3: We continue to estimate high single-digit growth in the business aviation end market and in the military and helicopter end market. With that, I'll turn it back over to Russ to wrap things up.

Dallas Fort Worth is also key.

Coming online so we feel good about the second half of the guidance that we've given you there.

Speaker #3: Thank you, Dan. Now to summarize, StandardAero has delivered a strong first half of 2025 as promised, and we're not done yet. We continue to operate in a difficult supply chain environment and in uncertain macroeconomic times.

Russell Ford: Thank you, Dan. Now to summarize, StandardAero has delivered a strong first half in 2025 as promised, and we're not done yet. We continue to operate in a difficult supply chain environment and in uncertain macroeconomic times. However, we remain focused on the responsibility that our shareholders place on us. We continue to see a strong demand environment for our business and remain well positioned to take advantage of this by deploying capital in both a disciplined and strategic manner. Additionally, we remain committed and on track to deliver high-quality and predictable results this year and well into the future. That concludes our remarks for the second quarter, and with that, operator, we're now ready to move to the Q&A session.

Okay, Okay great.

And then maybe following up similar similar topics such as the.

The margin dilution that resulted from the new programs I don't know if theres a way to kind of.

Speaker #3: However, we remain focused on the responsibility that our shareholders place on us. We continue to see a strong demand environment for our business and remain well positioned to take advantage of this by deploying capital in both a disciplined and strategic manner.

Kind of quantify what that was.

Maybe talk about how it evolves going forward.

Yes.

The company.

Expanded margins 80 basis points in the quarter that would have been significantly more excluding the ramp programs, which shows the underlying.

Speaker #3: Additionally, we remain committed and on track to deliver high-quality and predictable results this year and well into the future. That concludes our remarks for the second quarter, and with that, operator, we're now ready to move to the Q&A session.

Growth and margin accretion in our in our core programs and I think you can kind of do the math there.

A lot of the several basis points.

Of multiple of eight basis points higher than than the 80 basis points and all of that's happening within es.

Speaker #2: Thank you. And I'll be conducting a question-and-answer session. If you'd like to be placed into question Q, please press star one on your telephone keypad.

Operator: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to move your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. Once again, that's star one to be placed into question queue, and we ask you to please ask one question and one follow-up, then return to the queue. Our first question is coming from Seth Seidman from JP Morgan. Your line is now live.

So.

If you look at how those programs are developing in total.

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Losses on those programs, which we add back to adjusted EBITDA, but are within cash flow are narrowing significantly. So it's really great to see that.

Speaker #2: For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. Once again, that's star one to be placed into question Q, and we ask that you please ask one question and one follow-up, then return to the queue.

So the same drivers of.

Margin accretion on those programs are what we expected.

Higher revenue to absorb the.

The industrialization costs as well as the learning curve, so youre going to see those programs cracking into profitability sometime late this year early next year and then yes that drag on margins is.

Speaker #2: Our first question is coming from Seth Siegman from JP Morgan. Your line is now live.

Speaker #5: Hey, thanks very much, and good afternoon.

Seth Seidman: Hey, thanks very much, and good afternoon.

Speaker #6: Hey, Seth.

Operator: Hey, Seth.

Speaker #5: Hey. I wanted to start off just, you know, in thinking about the cadence of the year in engine services, had kind of been thinking about revenues kind of growing sequentially through the year.

Seth Seidman: Hey. I wanted to start off just, you know, in thinking about the the cadence of the year in in engine services, I've kind of been thinking about revenues kind of growing sequentially through the year, as there was incremental work on on LEAP and CFM. you know, revenues were higher than I had expected in the second quarter. And then when I look at the rest of the year, it looks like the run rate kind of comes down from the second quarter level. should we be thinking differently about that about that cadence now?

Known and is exactly the way we expected so it's great to see the 80 basis points, including those strong revenue.

Speaker #5: As there was an incremental work on LEAP and CFM, you know, revenues were higher than I had expected in the second quarter, and then when I look at the rest of the year, it looks like the run rate kind of comes down from the second quarter level.

<unk> zero margin platforms.

Great. Thank you very much.

Thank you next question today is coming from Doug Harned from Bernstein. Your line is now live.

Good afternoon, and thank you.

Speaker #5: Should we be thinking differently about that, about that cadence now?

On the growth on particularly those three programs the leap.

Speaker #3: Not really. I mean, you know, we've got it up on revenue, you know, on the strength of the ES segment, and you know, we called out in particular the CF34 program.

Dan Satterfield: Not really. I mean, you know, we've we've got it up on revenue, you know, on the strength of, the EF segment. And, you know, we called out in particular the CF34 program, Seth. You know, that that continues to, you know, be a strong driver of growth. You know, the top four drivers of growth remain the same, and the expectations there are, you know, in line with our with our earlier expectations, in particular LEAP. You know, really, really pleased to see LEAP triple their growth quarter over quarter. and, you know, Dallas Fort Worth is also, you know, coming online. So, you know, we feel good about the second half and the guidance that we've given you there.

CFM 56, and <unk> 34.

How.

How should we look at this because you're <unk>.

Speaker #3: Seth, you know, that continues to be a strong driver of growth. The top four drivers of growth remain the same, and the expectations there are in line with our earlier expectations, in particular LEAP.

<unk> got a certain amount of capacity in DFW and in San Antonio that Youre looking to fill.

Are you seeing the work come in at a faster rate than you had expected and then CF 34.

Speaker #3: You know, I'm really, really pleased to see LEAP triple their growth quarter over quarter. And, you know, Dallas-Fort Worth is also, you know, coming online.

How are you getting that growth there or is that just faster throughput through the shops.

Thanks, Doug for the question it depends on the program that you are talking about so I'll try and walk through the different dynamics on some of the programs.

Speaker #3: So, you know, we feel good about the second half and the guidance that we've given you there.

Speaker #5: Okay. Okay. Great. And then maybe following up, a similar topic, but just the margin dilution that resulted from the new programs. I don't know if there's a way to kind of, you know, quantify what that was and, you know, maybe talk about how it evolves going forward.

Seth Seidman: Okay. Okay. Great. And then maybe following up a similar similar topic, but just the, the margin dilution that resulted from from the new programs. I don't know if there's a way to kind of, you know, kind of quantify what that was and, and, you know, maybe talk about how it evolves going forward.

If you start first of all with leap recognizing that this is a brand new engine not only for us but for the world in general.

We're very carefully expanding our throughput at San Antonio because at this stage of the program, we want to make sure that that precision and process creation.

Speaker #3: Yeah, you know, so the company expanded margins by 80 basis points in the quarter. That would have been significantly more excluding the ramp programs, which shows the underlying growth and margin accretion in our core programs.

Dan Satterfield: Yeah, you know, so the company, you know, expanded margins 80 basis points in the quarter. That would have been, you know, significantly more, excluding the the ramp programs, which shows the underlying, you know, growth and, you know, and margin accretion in our in our core programs. And, you know, I think you can kind of do the math there. It's, it's, you know, a lot of the several basis points, multiple basis points higher than than the 80 basis points and all that's happening within EF. So, you know, those, if you look at the how those programs are developing in total, you know, the the losses on those programs, which, you know, we add back to adjusted EBITDA that are within cash flow, are narrowing significantly. so it's really great to see that.

Take that.

Front and center stage.

More important to get the processes rolled incorrectly or precisely than it is for speed. The bookings are very robust that's not the issue, but again, we're going to be building. These engines for the next 40 years, we want to make sure that we get the processes tightly controlled.

Speaker #3: And, you know, I think, if you kind of do the math there, it's a lot of several basis points or multiple basis points higher than the 80 basis points. And all that's happening within ES.

As we start to ramp up <unk> 56 is a little bit different case, because it's an engine that we know well we've done more than a 1000 of these engines at our facility in Winnipeg.

Speaker #3: So, you know, if you look at how those programs are developing in total, you know, the losses on those programs, which we add back to adjusted EBITDA but are within cash flow, are narrowing significantly.

So as we continue to build the pipeline there.

Speaker #3: So it's really great to see that. You know, so the same drivers of, you know, margin accretion on those programs are what we expected.

Dan Satterfield: you know, so the same drivers of, you know, margin accretion on those programs are what we expected. higher revenue, to absorb the, the the industrialization costs, as well as the learning curve. So you're going to see those programs, you know, cracking into profitability, you know, sometime, you know, late this year or early next year. And then, yes, that drag on on margins is was is known and is exactly the way we're expected. So, you know, it's great to see the 80 basis points, including those strong revenue, growths on zero margin, platforms.

What we're doing is we do have a new facility here for CFM 56, but we can transport a lot of the process knowledge by.

Speaker #3: Higher revenue is needed to absorb the industrialization costs as well as the learning curve. So, you're going to see those programs cracking into profitability sometime late this year or early next year.

By using some of our people in Winnipeg to accelerate the industrialization of CFM 56, which is why we believe we're going to be able to see pretty strong throughput capacity on full heavy work scopes in the second half of the year on CFM 56, and then see if 34 is.

Speaker #3: And then, yes, that drag on margins is known, and is exactly the way we're expected. So, you know, it's great to see the 80 basis points, including those strong revenue growths on zero-margin platforms.

It is a different situation because of the maturity of that program.

Speaker #5: Great. Thank you very much.

If you look at the.

Seth Seidman: Great. Thank you very much.

The number of engines that were put into service for a fee of 34.

Speaker #2: Thank you. Next question today is coming from Doug Harnett from Burr Senior Line, who is now live.

Operator: Thank you. Next question today is coming from Doug Harnett from BERS Senior. Line is now live.

There was a surge of deliveries of those programs in the 2015 to 2019 timeframe. So that means that 10 years in between now and 2029.

Speaker #6: Good afternoon. Thank you. You know, on the growth, particularly regarding those three programs: the LEAP, CFM56, and CF34, how should we look at this?

Doug Harnett: Good afternoon. Thank you. You know, on the growth, on particularly those three programs, the LEAP, CFM 56, and CF34, how should we look at this? Because you've got a certain amount of capacity at DFW and in San Antonio that you're looking to fill. Are you seeing the work come in at a faster rate than you had expected? And on CF34, how are you getting that growth there? Is that just faster throughput through the shops?

Youre going to see a lot of those engines Zen coming due for their first major overhauls and then as you move into the 2030 timeframe to early 2030 there'll be coming in for a second third overhauls because there really is no.

Speaker #6: Because you've got a certain amount of capacity at DFW and in San Antonio that you're looking to fill, are you seeing the work come in at a faster rate than you had expected?

No replacement in general alternative for the CF 34 in the applications in which it. It works. So we're kind of at the beginning of an increased flow of <unk> 34 work over the next four to five years just based upon the age at which those engines were introduced into service.

Speaker #6: And on CF34, how are you getting that growth there? Is that just faster throughput through the shops?

Speaker #3: Thanks, Doug, for the question. It depends on the program that you're talking about, so I'll try and walk through the different dynamics on some of the programs.

Russell Ford: Thanks, Doug, for the question. It depends on the program that you're talking about. So I'll try and walk through the different dynamics on some of the programs. If you start, first of all, with LEAP, recognizing that this is a brand new engine, not only for us, but for the world in general. We're very carefully expanding our throughput at San Antonio because at this stage of the program, we want to make sure that that precision and process creation, takes the front and center, stage. It's more important to get the processes rolled in correctly and precisely than it is for speed. The bookings are very robust. That's not the issue. But again, we're going to be building these engines for the next 40 years. We want to make sure that we get the processes tightly controlled, as we start to ramp up.

Speaker #3: If you start, first of all, with LEAP, recognizing that this is a brand new engine, not only for us, but for the world in general.

Okay, and then as a follow up you mentioned the incident exchange approach can you describe what you are trying to do with the Ensign exchange strategy does this involve keeping in inventory at all of engines or modules. How are you approaching that.

Speaker #3: We're very carefully expanding our throughput at San Antonio because, at this stage of the program, we want to make sure that precision and process creation take front and center stage.

Yes, great question and thanks for asking we're pretty excited about it.

And it really underlies our asset light structure. So no we're not stocking up a ton of parks.

Speaker #3: It's more important to get the processes rolled in correctly and precisely than it is for speed. The bookings are very robust; that's not the issue.

What it really what it really represents is a one time investment for an exchange engine, which gets swapped out for a return to engender fault and then through our MRO process.

Speaker #3: But again, we're going to be building these engines for the next 40 years. We want to make sure that we get the processes tightly controlled as we start to ramp up.

We overhauled that engine that we swap it again and swap it again its swap it again so.

Speaker #3: CFM56 is a little bit different case because it's an engine that we know well. We've done more than a thousand of these engines at our facility in Winnipeg. As we continue to build the pipeline there, what we're doing is, you know, we do have a new facility here for CFM56, but we can transport a lot of the process knowledge by using some of our people in Winnipeg to accelerate the industrialization of CFM56, which is why we believe we're going to be able to see pretty strong throughput capacity on full heavy work scopes in the second half of the year on CFM56.

Russell Ford: CFM 56 is a little bit different case because it's an engine that we know well. We've done more than a thousand of these engines at our facility in Winnipeg. So as we continue to build the pipeline there, what we're doing is, you know, we do have a new facility here for CFM 56, but we can transport a lot of the process knowledge, by using some of our people in Winnipeg to accelerate the industrialization of CFM 56, which is why we believe we're going to be able to see pretty strong throughput capacity on full heavy work scopes in the second half of the year on CFM 56. And then CF34 is a is a different situation because of the maturity of that program.

It's a pretty light asset light investment on a initial CFM 56 engine that we then offer to customers what we really like about the program is the natural synergies that we have within standard arrow.

That exchange Samsung comes into our shops and because of our Crs.

Component repair.

Opportunities for capability, we're able to do that at low cost and at Hy Tech time high speed. So this engine exchange program can really.

<unk> accelerates.

As those engines pass through our system.

So no it's not a big investment.

It is a another menu item that makes our CFM pitches ex capabilities that much more exciting for customers and.

Speaker #3: And then CF34 is a different situation because of the maturity of that program. If you look at the number of engines that were put into service for CF34, there was a surge of deliveries of those engines in the 2015 to 2019 timeframe. So, that means that ten years in, between now and 2029, you're going to see a lot of those engines then coming due for their first major overhauls. As you move into the 2030 timeframe, the early 2030s, they'll be coming in for second and third overhauls because there really is no replacement engine or alternative for the CF34 and the applications in which it works.

As this ball rolls youre able to compound.

Russell Ford: If you look at the, the the number of engines that were put into service for CF34, there was a surge of deliveries of those programs in the 2015 to 2019 timeframe. So that means that 10 years in, between now and 2029, you're going to see a lot of those engines then coming due for their first, major overhauls. And then as you move into the 2030 timeframe, the early 2030s, they'll be coming in for second, third overhauls because there really is, no replacement engine or alternative for the CF34 and the applications in which it, it, it works. So we're kind of at the beginning of an increased flow of CF34 work over the next four to five years, just based upon the age at which those engines were introduced into service.

The investment and the exchange program engines, they will compound over time.

Okay very good thank you.

Yes.

Thank you next question is coming from Myles Walton from Wolfe Research. Your line is now live.

Thanks, I just wanted to clarify on that last point, if I could Dan.

I think that you are leasing and then sub leasing and youre not actually owning those assets are you able to to do the maintenance on those assets from a controls perspective or those owned assets and managed by someone else and you're just.

A party to the lease.

Speaker #3: So we're kind of at the beginning of an increased flow of CF34 work over the next four to five years, just based upon the age at which those engines were introduced into service.

Thanks for the follow up we are buying this initial engine. This is a owned Amgen bi standard Arrow that we will then resell back to the customer in exchange for his or her exchanged asset.

The leasing option Thats one of the menu items that we provide we can connect customers with.

Speaker #6: Okay. And then, as a follow-up, you mentioned the engine exchange approach. Can you describe what you're trying to do with the engine exchange strategy?

Doug Harnett: Okay. And then as a follow-up, you mentioned the engine exchange approach. Can you describe what you're trying to do with the engine exchange strategy? Does this involve keeping an inventory at all of engines or modules? How are you approaching this?

Preferred lessors, but this engine exchange program, our owned assets by standard Arrow.

Speaker #6: Does this involve keeping an inventory at all of engines or modules? How are you approaching this?

Okay should we expect that pool to be a drag on foreign investment cash flow into next year and the following years does CFM, 56% no no as a matter of fact.

Speaker #3: Yeah, great question. Thanks for asking. We're pretty excited about it. You know, and it really underlines our asset-light structure. So, no, we're not stocking up a ton of parts.

Dan Satterfield: Yeah, great question. Thanks for asking. We're pretty excited about it. You know, you know, it, it, and it really underlies our asset light structure. So no, we're not stocking up a ton of parts. what it really, what it really represents is in a one-time investment for an exchange engine, which gets swapped out for a returned engine that falls into our MRO process. We overhaul that engine and we swap it again and swap it again and swap it again. So it's a pretty light asset light investment on an initial CFM 56 engine that we then offer to customers. What we really like about the program is the natural synergies that we have within StandardAero.

Sorry, if I didn't make that clear, it's a onetime investment in really single digit millions of dollars to get the ball rolling and as it is as we move these engines through the system, we're able to get more and more of them, but it's not a significant drag on working capital it will be for the first time, it's just a.

Speaker #3: What it really represents is, in a one-time investment for an exchange engine, which gets swapped out for a returned engine that then falls into our MRO process.

Speaker #3: We overhaul that engine, and we swap it again. And swap it again, and swap it again. So, it's a pretty light asset-light investment on an initial CFM56 engine that we then offer to customers.

Single engine and then the program kind of feeds itself funds itself. So it is not.

Tens of millions of dollars and a big investment and a big rollout. It is a self funding engine exchange program that can gain over time, yeah, just just to be clear.

Speaker #3: What we really like about the program is the natural synergies that we have within StandardAero. So, that exchange engine comes into our shops, and because of our CRS component repair opportunities and capability, we're able to do that at low cost and with high tack time and high speed.

Dan Satterfield: So, that exchange engine comes into our shops, and because of our CRS, component repair, opportunities and capability, we're able to do that at low cost and at high takt time, high speed. So this engine exchange program can really, you know, accelerate, as as it, as those engines pass through our system. So no, it's not a, a big investment. it is a, another menu item that makes our CFM 56 capabilities that much more, exciting for customers. And, we, as this, as this ball rolls, you're able to compound, you know, the, the, investment and the exchange program engines. They will compound over time.

And we're talking about top tier customers that bring us an engine that they may want to trade in because it has an event or a section of the engine that may be approaching an exploration on its maintenance limits. So many times. These engines have been OEM maintaining that they don't have PMA parts in them.

Speaker #3: So, this engine exchange program can really accelerate as those engines pass through our system. So, no, it's not a big investment. It is another menu item that makes our CFM56 capabilities that much more exciting for customers, and as this ball rolls, you're able to compound the investment and the exchange program engines.

They're coming off of some type of a power by the hour program.

They have parts and materials in them that have aerospace great traceability, but for various reasons. They don't want to spend the money on that engine to provide a full performance restoration to give it another 18 to 20000 cycles. They may only need four or five cycles. So they can.

Speaker #3: They will compound over time.

They can bring that engine to us we will purchase another engine, we will rebuild that engine to the specs that they need swap it out for the engine that they bring US and then we can take that engine and we have options for that we can rebuild there we can reduce it.

Speaker #6: Okay. Very good. Thank you.

Operator: Okay. Very good. Thank you.

Speaker #2: Thank you. Next question is coming from Miles Walton from Wolf Research. Your line is now live.

Doug Harnett: Thank you.

Operator: Next question is coming from Miles Woffin from Wolf Research. Your line is now live.

Speaker #7: Thanks. I just wanted to clarify on that last point, if I could, Dan. I think that you're leasing and then subleasing, and you're not actually owning those assets.

Miles Woffin: Thanks. I just wanted to clarify on that last point, if I could, Dan. I think that you're leasing and then sub-leasing, and you're not actually owning those assets. Are you able to to do the maintenance of those assets from a controlled perspective, or are those owned assets and managed by someone else, and you're just, you know, a party to the lease?

So we are not building a pool.

Speaker #7: Are you able to do the maintenance of those assets from a controlled perspective, or are those owned assets and managed by someone else, and you're just, you know, a party to the lease?

Rotable engines.

Got it got it thanks for the clarification I think Thats that is crystal clear and then Dan on the cash flow second half implied to be $250 million of free cash flow EBITDA. It looks about the same. So obviously its all working capital taxes and Capex can you sort of give us to work on working capital in particular I get the taxes in the second half.

Speaker #3: Yeah. No, no, thanks for the follow-up. No, we are buying this initial engine. This is an owned engine by StandardAero that we will then resell back to the customer in exchange for his or her exchange asset.

Dan Satterfield: Yeah. No, thanks for the follow-up. No, we are buying this initial engine. This is an owned engine by StandardAero that we will then resell back to the customer in exchange for his or her exchange asset. We do have the leasing option. That's one of the menu items that we provide. We can connect customers with preferred lessors. But this engine exchange program are owned assets by StandardAero.

Speaker #3: We do have the leasing option. That's one of the menu items that we provide. We can connect customers with a preferred lessor. But this engine exchange program involves our owned assets by StandardAero.

Yes, it makes the guidance.

Yes, we do see an unwinding of our working capital position in the second half it really has to do with our cash conversion cycle.

So first of all the $108 million build of working capital in the second quarter half of that is funding lead very happy to do that get that program off the ground.

Speaker #7: Ok. Should we expect that pool to be a drag on or an investment of cash flow into next year and the following year as those CFM56 and those programs?

Miles Woffin: Okay. Should we expect that pool to be a drag on or an investment of cash flow into next year and the following year as those CFM 56 and those programs?

And then the rest is is these.

Speaker #3: No, as a matter of fact, sorry I didn't make that clear. It's a one-time investment, and you know, really, you know, single-digit millions of dollars to get the ball rolling.

Dan Satterfield: No, as a matter of fact, that, and sorry that I didn't make that clear. It's a one-time investment and, you know, really, you know, single-digit millions of dollars to get the ball rolling. And as it is, as we move these engines through the system, we're able to get more and more of them, but it's not a significant drag on working capital. It will be for the first time. It's just, you know, a single engine, and then the program kind of feeds itself, funds itself. So it's not, you know, tens of millions of dollars in a big investment and a big rollout. It is a self-funding engine exchange program that can gain over time.

We have 34 engines and others, where we have huge backlog huge demand. These engines are moving through our MRO process.

Speaker #3: And as it is, as we move these engines through the system, we're able to get more and more of them, but it's not a significant drag on working capital.

Windup in contract assets and what we expect to see in the second half is that the constrained parts come in and these engines will be <unk>.

Speaker #3: It will be for the first time. It's just, you know, a single engine, and then the program kind of feeds itself, funds itself. So it's not, you know, tens of millions of dollars in a big investment, in a big rollout.

<unk> and liberated out of working capital.

These are pretty much known.

Block of engines coming through some of our significant facilities that'll unwind, so I'm pretty confident about the second half.

Speaker #3: It is a self-funding engine exchange program that can gain over time.

On working capital and then of course the.

Speaker #6: Yeah, just to be clear,

Russell Ford: Yeah, just to be clear, we're talking about top-tier customers that bring us an engine that they may want to trade in because it has an event or a section of the engine that may be approaching an expiration on its maintenance limits. So many times these engines have been OEM maintained. They don't have PMA parts in them. They're coming off of some type of a power by the hour program. They have parts and materials in them that have aerospace-grade traceability. But for various reasons, they don't want to spend the money on that engine to provide a full performance restoration to give it another 18 to 20,000 cycles. They may only need four or 5,000 cycles. So they can, they can bring that engine to us. We will purchase another engine.

We spent $66 million of our $90 million capital investments. So there's only a little bit more to go on that.

Speaker #3: We're talking about top-tier customers that bring us an engine they may want to trade in because it has an event or a section of the engine that may be approaching an expiration on its maintenance limits. So many times, these engines have been OEM maintained.

Platform expansion programs, so that will be lower.

Overall spend cash taxes will be.

Somewhat lower in the second half so we feel really good about the second half guidance and by the way, it's I think it's $260 million of.

Speaker #3: They don't have PMA parts in them. They're coming off of some type of a power-by-the-hour program. They have parts and materials in them that have aerospace-grade traceability.

The planned second half cash flow.

I was rounding.

I appreciate it.

Okay.

Thanks, Bob.

Thank you. Our next question today is coming from Ken Herbert from RBC capital markets. Your line is now live.

Speaker #3: But for various reasons, they don't want to spend the money on that engine to provide a full performance restoration to give it another 18,000 to 20,000 cycles.

Hey, good afternoon everybody.

Hey, you called out wanting to have $1 5 billion is the backlog on the belief in terms of bookings can you specifically say what was that in the second quarter and of these bookings whats the timeframe, we should expect that to sort of convert to revenues.

Speaker #3: They may only need 4,000 or 5,000 cycles. So, they can bring that engine to us. We will purchase another engine, rebuild that engine to the specs that they need, swap it out for the engine that they bring us, and then we can take that engine, and we have options for that.

Russell Ford: We will rebuild that engine to the specs that they need, swap it out for the engine that they bring us, and then we can take that engine, and we have options for that. We can rebuild it or we can reduce it to parts. So we are not building a pool of rotable engines.

Speaker #3: We can rebuild it, or we can reduce it to parts. So, we are not building a pool of rotable engines.

Thank you Ken for the question the bookings in fact continue to be very strong for the second quarter.

In our last earnings call.

Speaker #7: Got it. No, thanks for the clarification. I think that's crystal clear. And then, Dan, on the cash flow, the second half is implied to be $250 million of free cash flow.

Miles Woffin: Got it. No, thanks for the clarification. I think that's crystal clear. And then, Dan, on the cash flow, second half implied to be $250 million of free cash flow. EBITDA looks about the same. So obviously, it's all working capital taxes and CapEx. Can you sort of give us the walk on working capital in particular? I get the taxes.

First quarter, we said that the bookings were approaching $1 billion. So we are.

Now at about one 5 billion subsequent to that call and we're happy with the win rates that we're seeing we're happy with the implied returns that we're seeing on these interim programs coming to it we're happy to see the diversity of the customer base.

Speaker #7: EBITDA looks about the same, so obviously it's all working capital, taxes, and CapEx. Can you sort of give us the walk on working capital in particular?

Speaker #7: I get the taxes.

Speaker #3: In the second half?

Dan Satterfield: In the second half?

Speaker #7: Yeah. To

Speaker #3: Yeah.

Miles Woffin: Yeah. Yeah, to make the guidance.

Speaker #7: To make the guidance.

Speaker #3: Yeah, we do see an unwinding of our working capital position in the second half. You know, it really has to do with our cash conversion cycle.

Dan Satterfield: Yeah, we do see an unwinding of our working capital position in the second half. You know, it really has to do with our cash conversion cycle. You know, so first of all, you know, the $108 million build of working capital in the second quarter, half of that is funding LEAP, very half.Happy

Not dependent on just one program or just one region. So it's materializing as we expect the range of those engine programs some of them are.

Speaker #3: You know, so first of all, the $108 million build of working capital in the second quarter, half of that is funding LEAP.

Speaker #3: Very happy to do that, get that program off the ground. And then the rest is these CF34 engines and others where we have a huge backlog and huge demand. These engines are moving through our MRO process; they wind up in contract assets. What we expect to see in the second half is that the constrained parts come in, and these engines will be shipped and liberated out of working capital.

They are life work scope.

Operator: to do that, get that program off the ground. And then the rest is these, you know, CF34 engines and others where we have huge backlog, huge demand. These engines are moving through our MRO process. They wind up in contract assets. And what we expect to see in the second half is that the constrained parts come in and these engines will be shipped and liberated out of working capital. And these are pretty much known, you know, a block of engines coming through some of our significant facilities that'll unwind. So I'm pretty confident about the second half on working capital. And then, of course, you know, we spent $66 million of our $90 million capital investment. So there's only a little bit more to go on the big platform expansion programs. So that will be a lower overall spend.

<unk> types of events that we're going to be working on initially for the first couple of years that will make up the bulk of the work and then the heavier work scopes youll start seeing that.

Two years down the road as we enter into some of the the bigger longer term contracts there will be some prs fees that will flow through but again the bulk for the first two years are likely to be seed Tim events. As we move into then the longer contract at five and 10 year kinds of periods for some of the air.

Speaker #3: And these are pretty much known, you know, blocks of engines coming through some of our significant facilities that will unwind. So I'm pretty confident about the second half.

<unk>.

Speaker #3: On working capital and then, of course, you know, the we spent 66 million dollars of our 90 million dollar capital investments, so there's only a little bit more to go on the platform expansion programs.

Great. Thanks, Dan.

Im sorry, Ross and as we look at the.

Really strong Crs margins in the second quarter was there anything unusual were sort of one time that impacted segment margins in the Crs business.

No no.

Operator: Cash taxes will be somewhat lower in the second half. So we feel pretty good about the second half guidance. And by the way, I think it's $260 million of implied second half cash flow.

We called out the contribution from ACI that there continues to be a great investment for the company.

And having a good impact on the business and.

The land and marine growth is quite accretive.

Conference Specialist: I was rounding, but thanks. I appreciate it.

The segment.

As well the commercial narrow body engines that we grew on which include the 2500 GTS CF 34, Thats all great business.

Alex Trapp: Thanks, Lyle.

Conference Specialist: Thank you. Our next question today is coming from Ken Herbert from RBC Capital Markets. Your line is now live.

Alex Trapp: Yeah, hey, good afternoon, everybody. Hey, you called out one and a half billion as the backlog on the leaps in terms of bookings. Can you specifically say what was that in the second quarter? And of these bookings, what's the timeframe we should expect that to sort of convert to revenues?

Nothing unusual in there just a great mix.

Yes, yes, despite the ATR contribution or do you look at the underlying part of the business. It was a very healthy 25% organic growth that includes some of the in sourcing activities that we have going on to make a broader use of our growing repair catalog. So thats a continuing ella.

Operator: Thank you, Ken, for the question. The bookings, in fact, continue to be very strong for the second quarter. In our last earnings call for our first quarter, we said that the bookings were approaching a billion dollars. So, you know, we are now at about one and a half billion dollars subsequent to that call. And we're happy with the win rates that we're seeing. We're happy with the implied returns that we're seeing on these engine programs coming to it. We're happy to see the diversity of the customer base. We're not dependent on just one program or just one region. So it's materializing as we expect. The range of those engine programs, some of them are light work scope, CTEM types of events that we're going to be working on initially for the first couple of years. That'll make up the bulk of the work.

<unk>.

Great. Thanks, Brian.

Thank you. Your next question is coming from Sheila <unk> from Jefferies. Your line is now live.

Good afternoon, guys and thank you so much.

I wanted to maybe start off with a follow up on milestones on that question about that.

This is ex exchange program can you maybe talk about how many modules you have capacity for.

How do you think about the engine margin contribution of those versus your standard work and do you do that on any other engine.

So this is standard work what we're doing is providing an exchange program for somebody who wants to turn their engine to get.

In exchange for an engine with greater Green time, right and then that exchange engine comes into our so we sell it to them at a margin good margins and then we'd bring them that mark that engine into our shop and good old standard Aero MRO. So we'll run that through the shop.

Operator: And then the heavier work scopes, you'll start seeing that, you know, two years down the road as we enter into some of the bigger, longer-term contracts. There will be some PRSDs that will flow through, but again, the bulk for the first two years are likely to be CTEM events as we move into then the longer contracted, five and ten-year kinds of periods for some of the airlines.

<unk> will deploy <unk> and Youll have normal expected margins on CFM 56.

MRO side.

What's different is that it.

At a very low investment starting off with an exchange engine.

<unk>.

The engine that comes into my shop, I overhaul and then I offer that to the next guy. So the next customer and I saw that to him or her at good margins and then their engine comes in it gets overhaul. So theres nothing unusual about this and it just fits into the.

Alex Trapp: Great, thanks, Dan. And I'm sorry, Ross. And as we look at the really strong CRS margins in the second quarter, was there anything unusual or sort of one-time that impacted segment margins in the CRS business?

Our normal capacity for.

Engine exchanges and engine overhaul work in.

Operator: No, no. They, you know, we called out the contribution from ATI that continues to be, you know, a great investment for the company and, you know, having a good impact on the business. And, you know, the land and marine growth is, you know, quite accretive, you know, to the segment as well. The, you know, the commercial narrowbody engines that we grew on, which include the V2500, GTF, CF34, that's all great business. Nothing unusual in there, just a great mix in CRS. Yeah.

In Dallas Fort worth in Winnipeg.

Go ahead Sheila.

Yes.

Sorry, Sheila this is Alex we do do this on other engine programs at similar points in their product lifecycle just to confirm the last part of your question.

So we're pretty picky.

And then.

Maybe another question on the $120 million investment that MTO announcing the leach facility in Dallas with Mark.

You think about the billion dollar annual target by 2031.

Alex Trapp: Despite the ATI contribution, if you look at the underlying part of the business, it was a very healthy 25% organic growth that includes some of the insourcing activities that we have going on to make a broader use of our growing repair catalog. So that's a continuing element.

When your capacity.

And then can you I don't think you that impact you at all but how do you think about <unk>.

Partner.

It's goodness actually because the market needs. It the amount of installed base there the growing number of events.

This is right in line with what CFM intended both GE and Safran is a develop this engine right over time, they want to they said they wanted to double the amount of work that's going into the MRO network and then double it again, so that means you got to have.

Operator: Great. Thanks, Ross.

Conference Specialist: Thank you. Next question is coming from Sheila Caligo from Jeffrey. Your line is now live.

Operator: Good afternoon, guys, and thank you so much. I want to maybe start off with a follow-up on Miles's and Doug's question about the CFM 56 Exchange program. Can you maybe talk about how many modules you have capacity for, how you think about the engine margin contribution of those versus your standard work, and do you do that on any other engine type?

Additional capacity and capabilities. So I think this is goodness for the industry. It's a goodness for the airlines that there will be capacity to be able to respond, especially as the engine goes through its initial.

Operator: So this is standard work. What we're doing is providing an exchange program for somebody who, you know, wants to turn in their engine to get, you know, an exchange for an engine with greater green time, right? And then that exchange engine comes into our shop. So we sell it to them at a margin, you know, good margins. And then we bring that that engine into our shop and it's, you know, good old StandardAero MRO. So we'll run that through the shop. We'll deploy USM. And you'll have, you know, normal expected margins on CFM 56 on the MRO side. What's different is that, you know, at a very low investment, I'm, you know, starting off with an exchange engine. That engine that comes into my shop, I overhaul, and then I offer that to the next guy, to the next customer.

Robustness growing pains over the first few years.

Great. Thank you.

Thanks Sheila.

Thank you next question is coming from Jordan <unk> from Bank of America. Your line is now live.

Hey, good afternoon, thanks for taking the question.

On the M&A pipeline.

Being so could you guys give us any more color on what youre looking.

Right now anything that's actionable and if the engine exchange program that Youll setup opens aperture at all.

<unk>.

Hi, Yes, Hey, Jordan, it's Alex.

The M&A pipeline is similar story.

Very.

Robust pipeline.

Operator: And I sell that to him or her at good margins. And then their engine comes in and gets overhauled. So there's nothing unusual about this. And, you know, it just fits into the, you know, our normal capacity for engine exchanges and engine overhaul work in Dallas, Fort Worth, and Winnipeg.

And we continue to look at things that makes sense.

We're kind of where our goal is to be.

Patient and disciplined in the way that we are deploying capital in general and M&A is just one of those ways that we deploy capital so.

Very similar story as its been the last couple of quarters just.

Alex Trapp: Great. Sheila, this is Alex.

Close to the action studying the market.

Conference Specialist: Sorry, Sheila, this is Alex. We do do this on other engine programs at similar points in their product lifecycle, just to confirm the last part of your question. So we're pretty good.

In processes and.

Just waiting for the right thing to go after.

Operator: I had a few more. And then maybe another question on the $120 million investment that MTU announced in the leap facility in Dallas, Fort Worth. Ross, how do you think about the billion-dollar annual target for LEAP by 2030 and, you know, what your capacity is? And does MTU, I don't think it impacts you at all, but how do you think about them being added as a CBSA partner?

Got it thank you.

Thank you. Your next question is coming from Christopher <unk> from CIBC. Your line is now live.

Hi, Thank you maybe if I can just follow on that last question there.

As you think about.

The organic growth opportunities versus.

M&A are you prioritizing one over the other at this time.

Yes, Great question listen we've got a lot of outstanding opportunities for capital allocation and if you look at them. They are well defined by what we've done so on the organic side.

Operator: You know, it's goodness, actually, because the market needs it. The amount of installed base there, the growing number of events, this is right in line with what CFM intended, both GE and Safran, as they developed this engine, right? Over time, they want to, they said it, they want to double the amount of work that's going into the MRO network and then double it again. So that means you've got to have additional capacity and capability. So I think this is goodness for the industry. It's goodness for the airlines that there will be capacity to be able to respond, especially as the engine goes through its initial robustness, growing pains over the first few years.

A lot of excitement a lot of opportunity with the Dallas Fort worth expansion.

We consider that a great organic investment the Augusta facility that Russ mentioned earlier really excited about that we're going to be cutting cutting the ribbon on that and in August.

Provides not only fantastic airframe work on the larger airframes, but also additional capacity for our engine shops on the ACF 7000 program for example, which is a wonderful program.

Additional capacity and capabilities. So I think this is goodness for the industry. It's goodness for the airlines that there will be capacity to be able to respond, especially as the engine goes through its initial.

Another organic investment.

We talked about as part of our platform investments was that expanded relationship we have with general electric.

Robustness growing pains over the first few years.

It's showing up on our CF 34 program.

Operator: Great. Thank you.

Great. Thank you.

Expanding the commercial agreements with them.

Operator: Thanks, Sheila.

Thanks Sheila.

Conference Specialist: Thank you. Next question is coming from Jordan Leonis from Bank of America. Your line is now live.

Thank you next question is coming from Jordan <unk> from Bank of America. Your line is now live.

And it's really turning into a great margin enhancer.

Another.

Opportunity for capital allocation of course, our new platforms.

Rama Bondada: Hey, good afternoon. Thanks for taking the question. on the M&A pipeline, being full, could you guys give us any more color on what you're looking at right now, anything that's actionable, and if the engine exchange program, that you'll set up, opens the aperture at all?

Hey, good afternoon, thanks for taking the question.

On the M&A pipeline.

Best example of that is the lead platform that has a $60 billion entitlement over the next 30 years. So platforms are also another.

Being fall could you guys give us any more color on what you are looking.

Right now anything that's actionable and if the engine exchange program that Youll setup opens aperture at all.

The type of investments sort of quasi organic and then M&A right Hei has been a great acquisition and it really contributing to.

Yes.

Growth and margin expansion in Crs, which we love to do and all of this really they're all return base.

Russell Ford: Hi, yeah. Hey, Jordan. It's Alex. so, you know, the M&A pipeline is a similar story, you know, very robust pipeline. and, and, you know, we continue to look at things that that make sense. you know, we're we're kind of, our goal is to be, patient and disciplined in the way that we're deploying capital in general. And M&A is just one of those ways that we deploy capital. So, very similar story as it's been the last couple of quarters, just, you know, close to the action, studying the market, in processes, and, and, you know, just waiting for the right thing to, to go after.

Hi, Yes, Hey, Jordan, it's Alex.

The M&A pipeline is similar story.

Reviews, all of these opportunities of which there are many are all return based.

Very.

Robust pipeline.

And we continue to look at things that makes sense.

Look at the <unk> exchange program that we're putting in place that we're really excited about very low investment.

We're kind of where our goal is to be.

And a really great opportunity not only for our customers, but also.

Patient and disciplined in the way that we are deploying capital in general and M&A is just one of those ways that we deploy capital so.

Improved margins and flow through our factories so.

We're really excited about deploying our strong free cash flow and our asset life business, we have lots of opportunities to do that.

Very similar story as its been the last couple of quarters just.

Close to the action studying the market.

Okay great.

If I can just follow up on one of the earlier questions around the free cash flow.

In processes and.

And just waiting for the right thing to us to go after.

Is there anything that we should be mindful off just as we're thinking about the cadence of free cash flow through Q3 and Q4 this year.

Rama Bondada: Got it. Thank you.

Got it thank you.

Conference Specialist: Thank you. Next question is coming from Krista Friesen from CIBC. Your line is now live.

Thank you. Your next question is coming from Christopher <unk> from CIBC. Your line is now live.

Yes also a great question. So clearly as we discussed earlier today, we've got strong free cash flow implied free cash flow of $260 million.

Dan Satterfield: Hi, thank you. And maybe if I can just follow on that last question there. as you think about, the organic growth opportunities versus, M&A, are you prioritizing one over the other at this time?

Alright, thank you.

If I can just follow on that last question there.

As you think about Dr.

The organic growth opportunities versus.

In the second half.

So two factors underlie that there is some seasonality in our business. So if you look at our quarterly results.

M&A are you prioritizing one over the other at this time.

Operator: Yeah, great question. Listen, we've got a lot of, outstanding opportunities for capital allocation. And if you look at them, you know, they're well defined by what we've done. So on the organic side, you know, we're a lot of excitement and a lot of opportunity with the Dallas Fort Worth expansion. You could say we consider that a great organic investment. You know, the Augusta facility that Russ mentioned earlier, really excited about that. We're going to be cutting, you know, cutting the ribbon on that in, in, in August. that that provides not only, fantastic, you know, airframe, work on on the larger, airframes, but also additional capacity for our engine shops on the HDF 7,000 program, for example, which is a wonderful program.

Yes, Great question listen we've got a lot of outstanding opportunities for capital allocation and if you look at them. They are well defined by what we've done so on the organic side.

Prior periods, there's stronger cash flow in the back half of the year, what's happening. This year again is this really outstanding demand we've seen in the first half on CF 34 leap CFM 56, our turboprop suite of engines strong demand that requires working capital right to satisfy that demand and we.

A lot of excitement and a lot of opportunity with the Dallas Fort worth expansion, considering we consider that a great organic investment the Augusta facility that Russ mentioned earlier really excited about that we're going to be cutting cutting the ribbon on that and in August.

See these engines a lot of them an outsized piece of them really getting liberated from working capital and shipping in the second half, which is going to generate that really strong free cash flow that we're excited about so.

Provides not only a fantastic airframe work on the larger airframes, but also additional capacity for our engine shops on the ACF 7000 program for example, which is a wonderful program.

I am quite confident in our free cash flow guidance for the second half.

And it is driven by that.

Cash conversion cycle.

Operator: And, you know, another organic investment that we, you know, that we talked about as part of our platform investments was, you know, that expanded relationship we have with General Electric that's showing up on our CF34 program, you know, expanding the commercial agreements with them. And it's really turning into a great margin enhancer. If, you know, another, you know, opportunity for capital allocation, of course, are new platforms. You know, the best example of that is, you know, the LEAP platform that, you know, has a $60 billion entitlement over the next 30 years. So platforms are also another, you know, type of investment, sort of quasi-organic. And then M&A, right? ATI has been a great acquisition, you know, really contributing to, you know, growth and margin expansion at CRS, which we love to do. And all of this really, they're all return-based, you know, reviews.

Another organic investment.

Feed the machine with inventory work in process, they become contract assets through our percentage of completion method of accounting.

We talked about as part of our platform investments was that expanded relationship we have with general electric.

Showing up on our CF 34 program.

The accrual on the balance sheet and as the engines are completed.

Spanning the commercial agreements with them and it's really turning into a great margin enhancer.

And tested and ships then they're released by the way collections have been great.

Another.

Opportunity for capital allocation of course, our new platforms.

Recently centralized our collections team and we're seeing really strong performance out of that so all of that is going to contribute to.

Best example of that is the lead platform.

It has a $60 billion entitlement over the next 30 years. So platforms are also another.

The good cash flow in this in the second half.

Okay, great. Thanks for that I'll pass the line.

What type of investment sort of quasi organic and then M&A right Hei has been a great acquisition and are really contributing to.

Thank you next question is coming from Cristina <unk> from Morgan Stanley. Your line is now live.

Hey, good evening, everyone I want to follow up on the.

Growth and margin expansion in Crs, which we love to do and all of this really they're all return base.

And in exchange for the CFM 56, I mean.

<unk> this is a topic of conversation.

Reviews, all of these opportunities of which there are many are all return base.

Operator: All of these opportunities, of which there are many, are all return-based. You know, look at the engine exchange program that we're putting in place that we're really excited about. Very low investment, you know, and a really great opportunity not only for our customers, but also, improved margins and flow through our factories. So, we're really excited about, you know, deploying our strong free cash flow and our asset-light business. We have lots of opportunities to do that.

The only question I have is when you look at the duration in which customers would have to wait for their engine does this exchange program lowered the duration weight.

We've got the <unk> exchange program that we're putting in place that we're really excited about very low investment.

And a really great opportunity not only for our customers, but also.

Or.

What is the value add for the customer to do that and the question is really stemming from you've got a competitor who's built the CFM 56 engine module when they do have a pool of inventory assets ready to go with a shorter duration time I'm just trying to understand how similar or different approaches on the business because it seems like that kind of inventory pool.

Improved margins and flow through our factories so.

We're really excited about deploying our strong free cash flow and our asset life business, we have lots of opportunities to do that.

Dan Satterfield: Okay, great. And if I can just follow up on one of the earlier questions around the free cash flow, is there anything that we should be mindful of just as we're thinking about the cadence of free cash flow through Q3 and Q4 this year?

Okay, great and if I can just follow up on one of the earlier questions around the free cash flow.

Is there anything that we should be mindful of just as we're thinking about the cadence of free cash flow through Q3 and Q4 this year.

Model to get you to 35% to 40% EBITA margin. So trying to understand what your approach is how similar or different to what they're doing.

Operator: Yeah, also a great question. So, you know, clearly, you know, as we discussed earlier today, you know, we've got strong free cash flow, you know, implied free cash flow of $260 million in the second half. So, you know, two factors underlie that. There is some seasonality in our business. So if you look at our, you know, our quarterly results and, you know, in prior periods, there's stronger cash flow in the back half of the year. What's happening this year, again, is this really outstanding demand we've seen in the first half on CF34, LEAP, CFM 56, our turboprop suite of engines, strong demand. That requires working capital, right, to satisfy that demand.

Yes also a great question. So clearly as we discussed earlier today, we've got strong free cash flow implied free cash flow of $260 million.

Thanks Christine.

There's a couple of advantages that you might get on CFM 56, as with other engines platforms that we do this type of work on the purchase as you mentioned is in fact, a lot of times, you're talking about smaller work scopes faster work scopes. So the turn time.

In the second half.

So two factors underlie that there is some seasonality in our business. So if you look at our quarterly results.

Prior periods, there's stronger cash flow in the back half of the year, what's happening. This year again is this really outstanding demand we've seen in the first half on CF 34 leap CFM 56, our turboprop suite of engines strong demand that requires working capital right to satisfy that demand and we.

Should be increased you have the ability to apply U S M.

In many cases, so there could be.

Cost advantages as well as the timing advantage.

The difference between us and for instance in <unk> tied.

Is much broader than that and we have the ability.

Operator: And we see these engines, a lot of them, you know, an outsized piece of them, really getting liberated from working capital and shipping in the second half, which is going to generate that really strong free cash flow that we're excited about. So, I'm quite confident in our free cash flow guidance for the second half. And it is driven by, you know, that that that cash conversion cycle. You know, feed the feed the machine with inventory, work in process. They become contract assets through our percentage of completion method of accounting. They they they accrue on the balance sheet. And as the engines are completed, and tested and shipped, then then they're released. by the way, collections have been great. we recently, you know, centralized our our collections team and are seeing really strong performance out of that.

See these engines a lot of them an outsized piece of them really getting liberated from working capital and shipping in the second half, which is going to generate that really strong free cash flow that we're excited about so.

Also I should say, we have the ability to provide an engine solution that is more closely matched to what the customer actually needs in their particular operating environment right because not everyone needs an engine for Prs <unk>.

I'm quite confident in our free cash flow guidance for the second half.

And it is driven by that.

Cash conversion cycle.

The feed a machine with inventory work in process they become contract assets through our percentage of completion method of accounting.

They may be operating in an environment, where they have other considerations that they need something less than that so we can we can do it faster we can match, what they need and give them a more cost effective maintenance solution than just hey, your only choice is a brand new engine.

The accrual on the balance sheet and as the engines are completed and tested and ship than Theyre released by the way collections have been great.

Now relative to F type again, we offer a much broader suite of actions other than just swapping modules. Many times, which you need to do is get down inside the module and do work.

We recently centralized our collections team and we're seeing really strong performance out of that so all of that is going to contribute to the.

Operator: So all of that is going to contribute to, the good cash flow in the second half.

The good cash flow on this in the second half.

Dan Satterfield: Okay, great. Thanks for that. I'll pass the line.

Okay, great. Thanks for that I'll pass the line.

<unk>, which we have the ability and the authorizations to do and then you also have.

Conference Specialist: Thank you. Next question is coming from Christine LeWitt from Morgan Stanley. Your line is now live.

Thank you next question is coming from Cristina <unk> from Morgan Stanley. Your line is now live.

For US you have economies of scale breadth of knowledge because we do this work on multiple engine platforms and we also have the ability to work across different in.

Operator: Hey, good evening, everyone. I want to follow up on the engine exchange for the CFM 56. I mean, no surprise, this is a topic of the conversation. My question I have is, when you look at the duration in which customers would have to wait for their engines, does this exchange program lower the duration wait? Or what's the value add for the customer to do this? And the question is really stemming from you've got a competitor who built a CFM 56 engine module where they do have a pool of inventoried assets ready to go with a shorter duration time. I'm just trying to understand how similar or different your approach is on the business because it seems like that kind of inventory pool model could get you 35 to 40% EBITDA margin.

Hey, good evening, everyone I want to follow up on the <unk>.

And in exchange for the CFM 56, I mean, no surprise this is a topic of conversation.

The only question I have is when you look at the duration in which our customers would have to wait for their engine does this exchange program lowered the duration weight.

And customers different market segments different Oems were not limited to just one engine from essentially one customer.

Sure.

What's the value add for the customer to do that and the question is really stemming from you've got a competitor who's built the CFM 56 engine module when they do have a pool of inventory assets ready to go with a shorter duration time I'm just trying to understand how similar or different approaches on the business because it seems like that kind of inventory pool.

That's super helpful. And then regarding the economics of its Ross I mean, this NGL exchange program seems to be pretty interesting what kind of margin can you earn on a program like this versus a regular restoration visit where a customer comes in the regular way without that is changing.

Yes.

The normal margins that we have on CFM 56 work are also evident in this program.

Model to get you to 35% to 40% EBITA margin. So trying to understand what your approach is how similar or different it is to what they're doing.

Operator: So trying to understand what your approach is, how similar or different it is to what they're doing.

Of course, where we have the ability to deploy <unk>, alright, thats Snyder to margin.

Operator: Thanks, Christine. Look, there's a couple of advantages that you might get on CFM 56 as with other engines platforms that we do this type of work on. The first that you mentioned is, in fact, a lot of times you're talking about smaller work scopes, faster work scopes, so the turn time should be increased. You have the ability to apply USM in many cases. So there could be a cost advantage as well as a timing advantage. But the difference between us and, for instance, an F-type is much broader than that. And we have the ability, I also should say, we have the ability to provide an engine solution that is more closely matched to what the customer actually needs in their particular operating environment, right? Because not everyone needs an engine for a full PRSV.

Thanks Christine.

We were able to do more work in house with our Crs capabilities.

There's a couple of advantages that you might get on CFM 56, as with other engines platforms that we do this type of work on the purchase as you mentioned is in fact, a lot of times, you're talking about smaller work scopes faster work scopes. So the turn time.

Capabilities that accrete margin. These are all levers that we already have the engine exchange program is really a great option for customers.

Should be increased you have the ability to apply U S M.

Who want an immediate engine in exchange for the one they are turning in the other thing that this should do is it should increase our access to a to a broader pool of U S. M.

In many cases, so there could be.

Cost advantages as well as the timing advantage.

The difference between us and for instance in <unk> tied.

Alright, and then another follow up on that.

You mentioned that you don't expect to have a pool of inventory of this so in order to have an engine ready for a customer are you just planning to do like a one for one type event or will you have multiples of the CFM, 56% and Darius.

Is much broader than that and we have the ability.

Also I should say, we have the ability to provide an engine solution that is more closely matched to what the customer actually needs in their particular operating environment right because not everyone needs an engine for Prs <unk>.

Work scopes ready to go I, just wanted to understand and match that with the inventory comment you had mentioned.

Yes, so it's a onetime investment in mid single digit millions of dollars to get the program started.

Operator: They may be operating in an environment where they have other considerations that they need something less than that. So we can, you know, we can do it faster. We can match what they need and give them a more cost-effective maintenance solution than just, hey, your only choice is a brand new engine. Now, relative to F-type, again, we offer a much broader suite of actions other than just swapping modules. Many times, what you need to do is get down inside the module and do work module, which we have the ability and the authorizations to do. And then you also have, for us, you have economies of scale, breadth of knowledge because we do this work on multiple engine platforms. And we also have the ability to work across different end customers, different market segments, different OEMs.

They may be operating in an environment, where they have other considerations that they need something less than that so we can we can do it faster we can match, what they need and give them a more cost effective maintenance solution than just hey, your only choice is a brand new engine.

<unk>.

As that continues.

<unk> the program becomes self funding.

So we're not doing.

A big suite of pool of engine investments otherwise my cash flow forecast, we are probably looks different and it doesn't right.

Now relative to F tied again, we offer a much broader suite of actions other than just swapping modules. Many times, which you need to do is get down inside the module and do work.

So no it's a modest investment to get at the program Rolling and once it rolls it.

It generates additional margins that we can do it again and do it again and again is more of a one for one Christine.

<unk>, which we have the ability and the authorizations to do and then you also have.

Great. Thank you.

Thank you next question is coming from Gavin Parsons from UBS. Your line is now live.

For US you have economies of scale and breadth of knowledge because we do this work on multiple engine platforms and we also have the ability to work across different.

Thanks, guys good evening.

Hey, Kevin.

On the engine services margin in the second half.

Lamp ramping leap CFM 56, but guided suppliers were stable from the second quarter or are we at peak dilution there or does that step up again next year.

Customers different market segments different Oems were not limited to just one engine from essentially one customer.

Operator: We're not limited to just one engine from essentially one customer.

Operator: That's super helpful. And then regarding the economics of this, Ross, I mean, this engine exchange program seems to be pretty interesting. What kind of margin could you earn on a program like this versus a regular, you know, restoration visit where a customer comes in the regular way without the exchange?

Yes, I mean, so the dilutive impact of course grows as the revenue on these grows and you can see youre right my implied margins in the second half on Es.

That's super helpful. And then regarding the economics of this Ross I mean, this NGL exchange program seems to be pretty interesting what kind of margin could you earn on a program like this versus a regular restoration visit where a customer comes on the regular way without the exchanges.

14 months right so right in line so we.

And we expect to continue this ability to offset the dilutive margins on this great ramping programs with the activities that we've got on our core engine platforms and so it is quite indicative that the guidance is exactly what we expected to do.

Operator: Yeah, I mean, you know, the normal margins that we have on CFM 56 work are also evident in this program. Of course, where we have the ability to deploy USM, right? That's an additive margin, you know, where we're able to, you know, do more work in-house with our CRS capabilities that, you know, accretes margin. These are all levers that we already have. The engine exchange program is really, you know, a great option for customers who want, you know, an immediate engine in exchange for the one they're turning in. The other thing that this should do is it should increase our access to a broader pool of USM.

Yes.

Sure.

Normal margins that we have.

The CFM 56 work are also evident in this program.

Of course, where we have the ability to deploy ASM alright, thats a matter of the margin.

The core business is offsetting the important investments of this ramp programs. There is a convergence of the curve. So as the volume builds on the newer engines, where the productivity and the efficiency is not as good.

We were able to do more work in house with our Crs.

Capabilities that accrete margin. These are all levers that we already have the engine exchange program is really a great option for customers.

That has a dilutive effect, but as we come down the learning curve and that will offset the volume and eventually these two lines will cross.

Who want an immediate engine in exchange for the one they are turning in the other thing that this should do is it should increase our access to a to a broader pool of USF.

Okay great.

And then on.

Yes repairs done internally that youre still at 10% what determines how quickly you can ramp up that mix and where can you take that as a percent overtime.

Operator: Sorry, and another follow-up on this. You guys mentioned that you don't expect to have a pool of inventory of this. So in order to have an engine ready for a customer, are you just planning to do like a one-for-one type event, or will you have multiples of these CFM 56s in various work scopes ready to go? I just want to understand and match that with the inventory comment you had mentioned.

Alright, and then another follow up on that you guys mentioned that you don't expect to have a pool of inventory of this so in order to have an engine ready for a customer or are you just planning to do like a one for one type event or will you have multiples of the CFM 56 days and Darius.

Yes.

It would be in sourcing if thats, what youre referring to.

That activity is strongly up versus the prior year.

Most 40%.

Work scopes ready to go I, just wanted to understand and match that with the inventory comment you had mentioned.

And that's obviously great for variety of reasons right, we're growing Crs.

And we're getting the in house repairs done at our cost so as we continue to do this it's all good news for margins. It's good news for turn times, because we keep the work in house, we're typically able to do it faster than sending it out.

Operator: Yeah, so it's a one-time investment in mid-single-digit millions of dollars to get the program started. Then, as that continues, the program becomes self-funding. So we're not doing, you know, a big suite of pool of engine investments. Otherwise, my cash flow forecast would probably look different, and it doesn't, right? So no, it's a modest investment to get the program rolling. And once it rolls, it generates, you know, additional margins that we can, you know, do it again and do it again and do it again. It's more of a one-for-one, Christine.

Yes, so it's a one time investment and mid single digit millions of dollars to get the program started.

Then.

As that continues the program becomes self funding.

So we're not doing.

A big suite of pool of engine investments otherwise my cash flow forecast would probably looks different and it doesn't right.

So we.

It's a margin accretive activity what drives this.

Gavin is two things number one the repair development work that we continue to do right. We have an entire engineering staff that focuses on developing new repairs and every time, we add one of those repairs to our portfolio. That's work that is being done outside of our company that we can bring.

So no it's a modest investment to get if the program rolling and once it rolls it.

It generates additional margins that we can do it again and do it again and again is more of a one for one Christine.

Operator: Great, thank you.

Great. Thank you.

Conference Specialist: Thank you. Next question is coming from Gavin Parsons from UBS. Your line is now live.

Thank you next question is coming from Gavin Parsons from UBS. Your line is now live.

In and run through this repair cycle and then the other thing that has essentially the same impact as the acquisitions that we've done.

Russell Ford: Thanks, guys. Good evening.

Thanks, guys good evening.

Russell Ford: Hey, Gavin.

Hey, Kevin.

Russell Ford: On the engine services margin in the second half, it's still ramping LEAP and CFM 56, but again, it implies we're stable from the second quarter. So are we at peak dilution there, or does that step up again next year?

On the engine services margin in the second half.

Growing the repair catalog for our Crs group. So both of those things are essentially having the same effect, which is to expand your catalog.

Lamp ramping leap and CFM 56, but guidance implies were stable from the second quarter or are we or are we at peak dilution. There does that step up again next year.

For authorized repairs and as soon as that happens then all of that work that we're having to take outside we'll come back to US. In addition to the ability to sell those to the third parties.

Operator: Yeah, I mean, so, you know, the dilutive impact, of course, you know, grows as the revenue on these grows. And you can see, yeah, you're right. My implied margins in the second half on ES are 13 ones, right? So, you know, right in line. So we, and you know, we expect to continue this ability to offset the dilutive margins on these great ramping programs with the activities that we've got on our core engine platforms. And so it's quite indicative. The guidance is exactly what we expect it to do. The core business is offsetting the important investments in these ramp programs.

Yes, I mean, so the dilutive impact of course grows as the revenue on these grows and you can see youre right my implied margins in the second half on Es or 13 months right. So right in line. So we.

Parties to the outside market.

To be able to have those additional repairs as well.

Got it thank you.

And we expect to continue this ability to offset the dilutive margins on this great ramping programs with the activities that we've got on our core engine platforms and so it is quite indicative that the guidance is exactly what we expected to do.

Thank you next question is a follow up from Myles Walton from Wolfe Research. Your line is now live.

Alright, thanks for the follow up.

Russ on Ge's investor update they pointed to 30%.

<unk> sharpness thats being done externally by 2030.

<unk> core businesses offsetting the important investments of these ramp programs. There is a convergence occur so as the volume builds on the newer engines, where the productivity and the efficiency is not as good.

Alright, previously pointed pointed to about 40% have you seen any change in customer behaviors or the ability of the MRO network to take on more of a load of the external sources.

Alex Trapp: There's a convergence occur. So as the volume builds on the newer engines where the productivity and the efficiency is not as good, that has a dilutive effect. But as we come down the learning curve, then that will offset the volume and eventually these two lines will cross.

That has a dilutive effect, but as we come down the learning curve and that will offset the volume and eventually these two lines will cross.

We've seen no change to the pipeline for Rfps or the interest from from the Airlines.

Russell Ford: Okay, great. And then on ES repairs done internally, like you're still at 10%, what determines how quickly you can ramp up that mix and where can you take that as a percent over time?

Great.

The OE Safran GE they've got.

And then on <unk>.

Yes repairs done internally like Youre still at 10% what determines how quickly you can ramp up that mix and where can you take that as a percent overtime.

A limited amount of shop capacity to apply to MRO work Theyre focused on new production.

Okay.

Operator: Yeah, I mean, you know, the insourcing, if that's what you're referring to, you know, that activity is, you know, strongly up versus the prior year, you know, almost 40%. And, you know, that's obviously, you know, great for a variety of reasons, right? We're growing CRS and we're getting the in-house repairs, you know, done at our cost. So as we continue to do this, it's all good news for margins. It's good news for turn times because we keep the work in-house. We're typically able to do it faster than sending it out. And so it's a margin-accretive activity.

These engines will be for a number of years. So they are unlikely to be expanding.

Yes.

It would be in sourcing if thats, what youre referring to.

That activity is strongly up versus the prior year.

What they need is they need the network to expand like ups.

Most 40%.

And so I think that.

And that's obviously great for variety of reasons right, we're growing Crs and were getting the in house repairs done at our cost.

That's that's all goodness, but what it does in effect.

What we are seeing is the airlines are pushing harder to get longer term contracts put in place sooner than they might have on <unk>.

As we continue to do this it's all good news for margins. It's good news for turn times, because we keep the work in house, we're typically able to do it faster than sending it out and so.

Other engines in the past because they know that that MRO capacity is going to get allocated and they want to make sure that they've got spots.

So.

It's a margin accretive activity what drives this gavin.

Alex Trapp: What drives this, Gavin, is two things. Number one, the repair development work that we continue to do, right? We have an entire engineering staff that focuses on developing new repairs. And every time we add one of those repairs to our portfolio, that's work that is being done outside of our company that we can bring in and run through this repair cycle. And then the other thing that has essentially the same impact is the acquisitions that we've done, growing the repair catalog for our CRS group. So both of those things are essentially having the same effect, which is to expand your catalog, for authorized repairs.

That's actually good for us, it's pushing the contracts towards us earlier and.

Gavin is two things number one the repair development work that we continue to do right. We have an entire engineering staff that focuses on developing new repairs and every time, we add one of those repairs to our portfolio. That's work that is being done outside of our company that we can bring.

It gives us more bargaining power.

Okay. Thanks again.

Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further closing comments.

Okay very good thanks, everyone. We appreciate you joining us today for the earnings call. We also appreciate your continuing support for standard Arrow and we look forward to talking to everybody again soon so with that we will in the call. Thank you.

In and run through this repair cycle and then the other thing that has essentially the same impact as the acquisitions that we've done.

Growing the repair catalog for our Crs group. So both of those things are essentially having the same effect, which is to expand your catalog.

Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.

For authorized repairs and as soon as that happens then all of that work that we're having to take outside we'll come back to US. In addition to the ability to sell those to the third parties.

Alex Trapp: And as soon as that happens, then all of that work that we're having to take outside will come back to us in addition to the ability to sell those to the third, parties or to the outside market, to be able to have those additional repairs as well.

Parties to the outside market.

To be able to have those additional repairs as well.

Russell Ford: Got it. Thank you.

Got it thank you.

Conference Specialist: Thank you. Next question is a follow-up from Miles Wilson from Wolf Research. Your line is now live.

Thank you next question is a follow up from Myles Walton from Wolfe Research. Your line is now live.

Russell Ford: Great. Thanks for the follow-up. Russ, on GE's investor update, they pointed to 30% of LEAP shop visits being done externally by 2030. They had previously pointed to about 40%. Have you seen any change in customer behaviors or the ability of the MRO network to take on more of the load of the external shop visits?

Alright, thanks for the follow up.

Russ on Ge's investor update they pointed to 30%.

<unk> sharpness thats being done externally by 2030.

Alright, previously pointed pointed to about 40% have you seen any change in customer behaviors or the ability of the MRO network to take on more of a load of the external shop visits.

Alex Trapp: We've seen no change to the pipeline for RFPs or the interest from the airlines. You know, the OE, Safran, GE, they've got a limited amount of shop capacity to apply to MRO work. They're focused on new production of these engines and will be for a number of years. So they're unlikely to be expanding. What they need is they need the network to expand like us. And so I think that, you know, that's all goodness. But what it does in effect is that it's what we are seeing is the airlines are pushing harder to get longer-term contracts put in place sooner than they might have on other engines in the past because they know that that MRO capacity is going to get allocated and they want to make sure that they've got spots. So that's actually good for us.

We've seen no change to the pipeline for Rfps or the interest from from the Airlines.

The.

The OE Safran GE they've got.

A limited amount of shop capacity to apply to MRO work Theyre focused on new production.

These engines will be for a number of years. So they are unlikely to be expanding.

What they need is they need the network to expand like ups.

And so I think that.

That's that's all goodness, but what it does in effect.

What we are seeing is the airlines are pushing harder to get longer term contracts put in place sooner than they might have on <unk>.

Other engines in the past because they know that that MRO capacity is going to get allocated and they want to make sure that they've got spots.

That's actually good for us is pushing the contracts towards us earlier and.

Alex Trapp: It's pushing the contracts towards us earlier and, you know, gives us more bargaining power.

It gives us more bargaining power.

Russell Ford: Okay. Thanks again.

Okay. Thanks again.

Conference Specialist: Thank you. We reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further closing comments.

Operator: Okay, very good. Thanks, everyone. We appreciate you joining us today for the earnings call. We also appreciate your continuing support for StandardAero, and we'll look forward to talking to everybody again soon. So with that, we'll end the call. Thank you.

Okay very good thanks, everyone. We appreciate you joining us today for the earnings call. We also appreciate your continuing support for standard Arrow and we'll look forward to talking to everybody again soon so with that we will in the call. Thank you.

Conference Specialist: Thank you. That does conclude today's teleconferencing webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.