StandardAero, Inc.: Form 10-Q for the period ended Sep 30, 2025

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes thereto included in this Quarterly Report and our audited consolidated financial statements and related notes thereto for the year ended December 31, 2024, included in our 2024 Form 10-K. Some of the information included in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties you should review about our business. Our future results and financial condition may differ materially from those we currently anticipate. You should review the “Cautionary Note Regarding Forward-Looking Statements” section of this Quarterly Report and the “Risk Factors” section of our 2024 Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. For purposes of this section, references to the “Company,” “we,” “us,” and “our” refer to StandardAero, Inc. and its subsidiaries.

Overview

We believe that we are the world’s largest independent, pure-play provider of aerospace engine aftermarket services for fixed and rotary wing aircraft, serving the commercial, military and business aviation end markets. We provide a comprehensive suite of critical, value-added aftermarket solutions, including scheduled and unscheduled engine maintenance, repair and overhaul, engine component repair, on-wing and field service support, asset management and engineering solutions. We serve a crucial role in the engine aftermarket value chain, connecting engine OEMs with aircraft operators through our aftermarket services, maintaining longstanding relationships with both. We command a leading reputation that is based upon our strong track record of safety, reliability and operational performance built over our more than 100 years of successful operations in the aerospace aftermarket.

Operating Segments

We manage our business in line with our service offerings with two reportable segments: Engine Services and Component Repair Services.

Our Engine Services segment provides a full suite of aftermarket services, including maintenance, repair and overhaul, on-wing and field service support, asset management, and engineering and related solutions to customers in the commercial aerospace, military and helicopter, and business aviation end markets. Revenue in the Engine Services segment is primarily derived from the repair and overhaul of a wide variety of gas turbine engines and auxiliary power units that power fixed and rotary wing aircraft. We also provide complementary maintenance, repair, upgrade and other related services for airframes and avionics systems in the business aviation and helicopter end markets. Cost of revenue consists primarily of cost of materials, direct labor and overhead.

Our Component Repair Services segment provides engine component and accessory repairs to commercial aerospace, military and other end markets. Revenue in the Component Repair Services segment is derived from the engine piece part and accessory repairs that we perform, repair development engineering and other related services, and some engine new part manufacturing. Cost of revenue consists primarily of cost of materials, direct labor and overhead.

Key Factors and Trends Affecting Our Business

Manufacturer specifications, government regulations and military maintenance regimens generally require that aircraft and engines undergo aftermarket servicing at regular intervals or upon the occurrence of certain events during the serviceable life of each asset. As a result, the aggregate volume of services required for any particular engine platform is a function of four factors: (i) the number of aircraft and engines in operation (the “installed base”), (ii) the age of the installed base, (iii) the reliability of the installed based and (iv) the utilization rate of the installed base.

The number of aircraft in operation and the utilization of those aircraft are generally tied to global air travel over the long-term, which has historically grown in excess of gross domestic product driven by secular tailwinds such as globalization, rising middle class population and wealth, increasing demand for leisure travel, growth in corporate earnings and e-commerce and technological advancements in aviation. The age and utilization of the existing installed base have increased as supply chain issues and regulatory constraints delay the delivery of new aircraft. Engine aftermarket services demand is also expected to further increase through the remainder of the decade due to upcoming shop visits resulting from a large number of engines delivered in the 2010s continuing to age and entering prime maintenance periods. In the military and helicopter end market, ongoing geopolitical tensions continue to drive significant defense investment. In the business aviation end market, this strong fleet growth is expected to drive a continued increase in demand for business jet engine maintenance services.

While the recent supply chain disruptions across our end markets are causing older aircraft and engines to remain in service longer and increasing their maintenance demand, our business also depends on maintaining a sufficient supply of parts, components and raw materials to meet the requirements of our customers. In recent years, we have experienced supply chain delays that impacted the availability of parts and ultimately engine throughput across all of our end markets. Any disruption to our supply chain and business operations, or to our suppliers’ supply chains and business operations, could have adverse effects on our ability to provide aftermarket support to our customers timely and efficiently and may increase our working capital as we wait for parts for the engines we service. Any such disruptions could adversely affect our business, results of operations and financial condition. See “Part I. Item 1A. Risk Factors—Risks Related to Our Business and Industry—We depend on certain component parts and material suppliers for our engine repair and overhaul operations, and any supply chain disruptions or loss of key suppliers could adversely affect our business, results of operations and financial condition” in our 2024 Form 10-K. In addition, the Company continues to closely monitor the implementation of tariffs, which has the potential to disrupt global trade and existing supply chains and impose additional costs on our business. While negotiations regarding tariffs are ongoing, if the resulting environment of retaliatory tariffs or other practices of additional trade restrictions or barriers require us to increase prices for our products or services, this could lead to decreased demand for our products and services, which would negatively impact our results of operations, cash flows, and financial condition. While tariff levels and related trade actions remain fluid, we expect to pass associated cost increases through to customers where possible, though timing delays may impact margins. However, factors such as the Company’s operations and supply chains, which are primarily located in regions where our products are sold, along with the applicability of the United States-Mexico-Canada Agreement, help reduce our exposure to trade disruptions, but there can be no assurance that these factors, or our pricing actions, will be effective mitigants given the uncertain environment. See “Part I, Item 1A. Risk Factors—Risks Related to Our Business and Industry—United States trade policies that restrict imports or increase import tariffs may have a material adverse effect on our business” in our 2024 Form 10-K.

Key Factors Affecting the Comparability of Our Results of Operations

Our results have been affected by, and may in the future be affected by, the following factors, which must be understood in order to assess the comparability of our period-to-period financial performance and condition.

Recent Developments

Initial Public Offering

On October 2, 2024, the Company completed its initial public offering (“IPO”) of ordinary shares at a price to the public of $24.00 per share (“Common Stock”). The offering included 69,000,000 shares of Common Stock, of which, the Company issued and sold 53,250,000 shares and the selling stockholders sold 15,750,000 shares, including 9,000,000 shares issued pursuant to the full exercise of the underwriters’ option to purchase additional shares from the selling stockholders. The shares of Common Stock sold in the IPO were registered under the Securities Act pursuant to a Registration Statement on Form S-1, which was declared effective by the SEC on October 1, 2024. The IPO generated net proceeds from the primary issuance of shares of $1,202.8 million after deducting underwriting discounts and commissions of approximately $67.1 million and estimated offering expenses of $8.1 million.

March Secondary Offering

In March 2025, two of the Company’s stockholders (the “Selling Stockholders”), affiliates of The Carlyle Group Inc. (“Carlyle”) and GIC Private Limited (“GIC”), completed a public offering of an aggregate of 36,000,000 shares of Common Stock at a price to the public of $28.00 per share. The Selling Stockholders received all of the net proceeds from this offering. No shares were sold by the Company.

May Secondary Offering

In May 2025, the Selling Stockholders completed a public offering of an aggregate of 34,500,000 shares of Common Stock (including full exercise by the underwriters of their option to purchase up to an additional 4,500,000 shares) at a price to the public of $28.00 per share. The Selling Stockholders received all of the net proceeds from this offering. No shares were sold by the Company. As of September 30, 2025, Carlyle and GIC own approximately 45.6% and 10.3% of our outstanding Common Stock, respectively.

Business Combinations

To continue to grow our business, we are continually acquiring and investing in companies that share our common goal of providing the market with aftermarket services across multiple engine platforms.

On August 23, 2024, we acquired Aero Turbine, Inc. (“Aero Turbine”), a provider of engine component repair and other value-added engine aftermarket services for U.S. and international customers for an estimated purchase price of approximately $132.0 million, comprising an initial cash purchase price of $116.8 million and $15.2 million representing the estimated fair value of additional consideration contingently payable based upon the achievement of gross profit in excess of certain gross profit targets for the period from January 1, 2024, to December 31, 2026, subject to post-closing adjustments. The maximum contingent consideration payable from the Company to the seller is $21.0 million. The acquisition was funded with borrowings under the Prior ABL Credit Facility, which was repaid on September 6, 2024 with incremental borrowings from the Prior 2024 Term Loan B-1 Facility and the Prior 2024 Term Loan B-2 Facility.

Public Company Expenses

We have incurred, and expect to continue to incur, certain professional fees and other expenses as part of our transition to a public company not recurring in the ordinary course of business. As a public company, we are implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies, for which we expect to incur additional recurring expenses. In particular, our accounting, legal and personnel-related expenses and directors’ and officers’ insurance costs have increased as we establish more comprehensive compliance and governance functions, establish, maintain and review internal control over financial reporting in accordance with the Sarbanes-Oxley Act and prepare and distribute periodic reports in accordance with SEC rules. Our financial statements following the IPO have reflected and will continue to reflect the impact of these expenses. See “Part I. Item 1A. Risk Factors—Risks Related to Management and Employees—The requirements of being a public company may strain our resources, increase our costs, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members” in our 2024 Form 10-K.

Key Performance Indicators and Non-GAAP Financial Measures

We use certain non-GAAP key performance indicators to evaluate our business operations, including Adjusted EBITDA and Adjusted EBITDA Margin.

The non-GAAP financial measures presented in this Quarterly Report are supplemental measures of our performance that we believe help investors understand our financial condition and operating results and assess our future prospects. We believe that presenting these non-GAAP financial measures, in addition to the corresponding GAAP financial measures, are important supplemental measures that exclude non-cash or other items that may not be indicative of or are unrelated to our core operating results and the overall health of our company. We believe that these non-GAAP financial measures provide investors greater transparency to the information used by management for its operational decision-making and allow investors to see our results “through the eyes of management.” We further believe that providing this information assists our investors in understanding our operating performance and the methodology used by management to evaluate and measure such performance. When read in conjunction with our GAAP results, these non-GAAP financial measures provide a baseline for analyzing trends in our underlying businesses and can be used by management as one basis for financial, operational and planning decisions. Finally, these measures are often used by analysts and other interested parties to evaluate companies in our industry.

Management recognizes that these non-GAAP financial measures have limitations, including that they may be calculated differently by other companies or may be used under different circumstances or for different purposes, thereby affecting their comparability from company to company. In order to compensate for these and the other limitations discussed below, management does not consider these measures in isolation from or as alternatives to the comparable financial measures determined in accordance with GAAP. Readers should review the reconciliations below and should not rely on any single financial measure to evaluate our business. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.

Adjusted EBITDA and Adjusted EBITDA Margin

We define Adjusted EBITDA as net income before interest expense, income tax expense, depreciation and amortization, further adjusted for certain non-cash items that we may record each period, as well as items not recurring in the ordinary course of business such as acquisition costs, integration and severance costs, refinancing fees, business transformation costs and other discrete expenses, when applicable. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue. We believe that Adjusted EBITDA and Adjusted EBITDA Margin are important metrics for management and investors as they remove the impact of items that we do not believe are indicative of our core operating results or the overall health of our company and allows for consistent comparison of our operating results over time and relative to our peers.

The following table presents a reconciliation of net income and net income margin to Adjusted EBITDA and Adjusted EBITDA Margin, respectively:

(in thousands, except percentages)

(1) Represents new product industrialization costs with the business transformation of the LEAP 1A/1B engine line in San Antonio, Texas and the expansion of the Company’s CFM56 capabilities into Dallas, Texas.

(2) Represents integration costs incurred, including any facility or platform consolidation associated with the integration of an acquisition that does not meet capitalization criteria and severance related to reduction in workforce or acquisitions. Examples of integration costs may include lease breakage or run-off fees, consulting costs, demolition costs or training costs.

(3) Represents transaction costs incurred in connection with completed acquisitions, including legal and professional fees, debt arrangement fees and other third-party costs.

(4) Represents other costs not recurring in the ordinary course of business including professional fees related to business transformation and quarterly management fees payable to Carlyle Investment Management L.L.C. and Beamer Investment Inc. under consulting services agreements, representation and warranty insurance costs associated with acquisitions, and other non-comparable events to measure operating performance as these events arise outside of the Company’s ordinary course of continuing operations. See Note 13, "Related Party Transactions" to the Company’s condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for descriptions of the consulting services agreements with Carlyle Investment Management L.L.C. and Beamer Investment Inc.

Key Components of Results of Operations

The following discussion provides a brief description of certain items that appear in our consolidated financial statements and the general factors that impact these items.

Revenue

Revenue consists of gross sales principally resulting from the engine and component repair services that we perform for commercial, military and business aviation fixed wing and rotary wing aircraft engines, as well as aeroderivative engines for the land and marine and other markets. Within these end markets, our Engine Services segment primarily provides a variety of value-added services in support of the maintenance, repair, testing and recertification of aerospace and aeroderivative engines. Our Component Repair Services segment supports commercial aerospace, military aerospace, land and marine and other markets with engine piece part repair and accessory repair.

Cost of revenue

Cost of revenue primarily consists of direct costs required to provide our services. These costs include the cost of materials, direct labor for inspection and disassembly, assembly and repair, rental engines, subcontracted services and overhead costs directly related to the performance of aftermarket services. Overhead costs include the cost of our facilities, engineering, quality and production management, including indirect labor supporting production, depreciation of equipment and facilities and amortization of the costs associated with OEM authorizations and licenses. The cost of materials accounts for the largest portion of our cost of revenue.

Selling, general and administrative expense

Selling, general and administrative (“SG&A”) expense primarily consists of expenses related to the selling of our services to our customers and maintaining a global sales support network, including salaries of our direct sales force. General costs to support the administrative requirements of the business such as finance, accounting, information technology, human resources and general management are also included.

Amortization of intangible assets

Intangible assets are amortized over the estimated useful life for customer relationships, trademarks and technology and other assets.

Acquisition costs

Acquisition costs primarily consist of professional service fees and other third-party costs incurred as part of the transaction process. Acquisition costs do not include any costs associated with the issuance of debt as these are capitalized and amortized over the term of the debt.

Interest expense

Interest expense primarily consists of interest on our debt obligations, including the amortization of debt discount and deferred finance charges. Interest expense also includes the portion of the gain or loss on our interest-rate swap and interest-rate cap agreements that is reclassified into earnings.

Refinancing costs

Refinancing costs primarily consists of costs incurred in the prior year for an amendment to the Prior Credit Agreement in March 2024.

Loss on debt extinguishments

Loss on debt extinguishments incurred in the prior year primarily consists of the write-off of unamortized charges related to the extinguished portions of the Prior 2023 Term Loan Facilities and the redeemed portions of the Prior Senior Notes.

Income tax expense

Our provision for income tax expense is based on permanent book/tax differences and statutory tax rates in the various jurisdictions in which we operate. Significant estimates and judgments are required in determining the provision for income taxes.

Results of Operations

Comparison of the Three Months Ended September 30, 2025 and 2024

The following table sets forth our consolidated statements of operations data for the three months ended September 30, 2025 and 2024:

(in thousands, except percentages)

Revenue. Revenue increased $253.3 million, or 20.4%, to $1,498.0 million for the three months ended September 30, 2025 from $1,244.6 million for the three months ended September 30, 2024. The increase was driven by both the Engine Services and Component Repair Services segments, with continued strength across the commercial aerospace and business aviation end markets, which increased 17.8% and 28.0%, respectively, compared to the three months ended September 30, 2024. The military and helicopter end market increased 21.1% compared to the prior year period, including contribution from the acquisition of Aero Turbine on August 23, 2024, during the three months ended September 30, 2025.

Cost of revenue. Cost of revenue increased $216.4 million, or 20.4%, to $1,274.8 million for the three months ended September 30, 2025 from $1058.4 million for the three months ended September 30, 2024. This increase was driven by a growth in volumes, which drove corresponding higher material and direct labor expenses, as well as increased other overhead costs directly related to the performance of aftermarket services, in addition to the cost of revenue attributable to the acquisition of Aero Turbine on August 23, 2024.

The following table sets forth our total cost of revenue for the three months ended September 30, 2025 and 2024:

(in thousands)

Selling, general and administrative expense. SG&A expense was $60.9 million and $62.9 million for the three months ended September 30, 2025 and 2024, respectively, and was 4.1% and 5.1% of revenue for the three months ended September 30, 2025 and 2024, respectively. The $2.0 million decrease in SG&A expense was primarily due to a decline of $5.6 million in professional services fees incurred year over year, in advance of the company’s initial public offering on October 2, 2024, as well as a $3.6 million insurance recovery which was recognized in the current period. Partially offsetting these favorable items was $4.1 million in stock compensation expense with no similar charge incurred in the prior year period, and a $3.3 million increase in personnel costs largely attributable to our transition to a public company.

Amortization of intangible assets. Amortization of intangible assets was $24.9 million and $24.0 million for the three months ended September 30, 2025 and 2024, respectively. The increase of $0.9 million, or 3.8%, was primarily driven by the intangible assets allocated to customer relationships resulting from the Aero Turbine acquisition on August 23, 2024. Due to the timing of the Aero Turbine acquisition, there was lower impact on total amortization expense for the three months ended September 30, 2024, due to the timing of the transaction.

Acquisition costs. Acquisition costs of $1.3 million for the three months ended September 30, 2024 were incurred primarily due to the acquisition of Aero Turbine on August 23, 2024. There have been no acquisitions during the three months ended September 30, 2025.

Interest expense. Interest expense decreased $35.3 million or 44.2% from $79.9 million for the three months ended September 30, 2024 to $44.6 million for the three months ended September 30, 2025. This decrease in interest expense was largely driven by (i) the repayment of the Prior Senior Notes in full on October 3, 2024 concurrent with the Company’s IPO, and (ii) entrance into the New Credit Agreement on October 31, 2024 providing for the New 2024 Term Loan Facilities and the New 2024 Revolving Credit Facility and the use of the proceeds to repay in full amounts outstanding under the Prior Credit Agreement and the Prior ABL Credit Agreement, terminating each of the debt facilities thereunder, and resulting in a weighted average interest rate of borrowings for the three months ended September 30, 2025 of 6.8% compared to 9.0% for the three months ended September 30, 2024. See “—Liquidity and Capital Resources” for further discussion of our debt and financing activities.

Refinancing costs. Refinancing costs of $1.5 million associated with the modified portion of the Prior Credit Agreement amendment were incurred during the three months ended September 30, 2024 with no similar charges in the current year.

Income tax expense. The incremental income tax expense was $24.7 million for the three months ended September 30, 2025, as compared to $0.2 million for the three months ended September 30, 2024. This was an increase of $24.5 million. This increase in tax expense was due primarily to the increase in the three months ended pretax income which was $92.8M at September 30, 2025 compared to $16.6 million at September 30, 2024, which is an increase of $76.2 million. Additionally, for the three months ended September 30, 2024, the tax expense recorded was only $0.2 million. This was due to the estimated annual effective tax rate going from 81.5% in the three months ended June 30, 2024 to 60.4% in the three months ended September 30, 2024 which was driven by the reduction of the forecasted valuation allowance on US interest expense limitation (IRC 163(j)). The tax expense, and corresponding effective tax rates for the three months ended September 30, 2025 and 2024, were higher than the statutory rate of 21.0% primarily due to the Global Intangible Low-taxed Income (“GILTI”) provision which was enacted in 2017 as part of the Tax Cuts and Jobs Act. Further, for the three months ended September 30, 2024, the partial valuation allowance recorded against our interest expense carryforward deferred tax asset under Section 163(j) of the Internal Revenue Code also was a driver of the effective tax rate exceeding the statutory rate.

Comparison of the Nine Months Ended September 30, 2025 and 2024

The following table sets forth our consolidated statements of operations data for the nine months ended September 30, 2025 and 2024:

(in thousands, except percentages)

Revenue. Revenue increased $634.9 million, or 16.6%, to $4,462.5 million for the nine months ended September 30, 2025 from $3,827.5 million for the nine months ended September 30, 2024. The increase was driven by both the Engine Services and Component Repair Services segments, with continued strength across the commercial aerospace and business aviation end markets, which both increased 16.4%, compared to the prior year period. The military and helicopter end market increased 14.1% compared to the prior year period, including contribution from the acquisition of Aero Turbine on August 23, 2024.

Cost of revenue. Cost of revenue increased $510.1 million, or 15.6%, to $3,785.4 million for the nine months ended September 30, 2025 from $3,275.3 million for the nine months ended September 30, 2024. This increase was driven by a growth in volumes, which drove corresponding higher material and direct labor expenses, as well as increased other overhead costs directly related to the performance of aftermarket services, in addition to the cost of revenue attributable to the acquisition of Aero Turbine on August 23, 2024.

The following table sets forth our total cost of revenue for the nine months ended September 30, 2025 and 2024:

(in thousands)

Selling, general and administrative expense. SG&A expense was $201.4 million and $171.7 million for the nine months ended September 30, 2025 and 2024, respectively, and was 4.5% and 4.5% of revenue for the nine months ended September 30, 2025 and 2024, respectively. The $29.7 million increase in SG&A expense was primarily due to $10.0 million in stock compensation expense with no similar charge incurred in the prior year period, a $9.8 million increase in personnel costs largely attributable to our transition to a public company, a $5.8 million increase in incentive compensation expense, and a $2.9 million loss on disposals in the current period with no similar charges incurred in the prior year period.

Amortization of intangible assets. Amortization of intangible assets was $73.8 million and $70.6 million for the nine months ended September 30, 2025 and 2024, respectively. The increase of $3.3 million, or 4.6%, was primarily driven by the intangible assets allocated to customer relationships resulting from the Aero Turbine acquisition on August 23, 2024. During the nine months ended September 30, 2024, the cost base of customer relationships increased due to the Aero Turbine acquisition; however, this had minimal impact on total amortization expense due to the timing of the transaction.

Acquisition costs. Acquisition costs of $1.3 million for the nine months ended September 30, 2024 were incurred primarily due to the Aero Turbine acquisition on August 23, 2024. There have been no acquisitions during the nine months ended September 30, 2025.

Interest expense. Interest expense decreased $103.3 million, or 43.9%, from $235.5 million for the nine months ended September 30, 2024 to $132.2 million for the nine months ended September 30, 2025. This decrease in interest expense was largely driven by (i) the repayment of the Prior Senior Notes in full on October 3, 2024 concurrent with the Company’s IPO, and (ii) entrance into the New Credit Agreement on October 31, 2024 providing for the New 2024 Term Loan Facilities and the New 2024 Revolving Credit Facility and the use of the proceeds to repay in full amounts outstanding under the Prior Credit Agreement and the Prior ABL Credit Agreement, terminating each of the debt facilities thereunder, and, resulting in a weighted average interest rate of borrowings for the nine months ended September 30, 2025 of 6.9% compared to 8.9% for the nine months ended September 30, 2024. See “—Liquidity and Capital Resources” for further discussion of our debt and financing activities.

Refinancing costs. Refinancing costs of $6.4 million associated with the modified portion of the Prior Credit Agreement amendments in March and September 2024 were incurred during the nine months ended September 30, 2024, with no similar charges incurred in the nine months ended September 30, 2025.

Loss on debt extinguishments. A $3.6 million loss on debt extinguishments was recorded during the nine months ended September 30, 2024 due to the write-off of unamortized deferred finance charges and debt discount related to the extinguished portion of the Prior 2023 Term Loan Facilities and redeemed portion of the Prior Senior Notes related to the refinancing activity, with no similar charges incurred in the nine months ended September 30, 2025.

Income tax expense. Income tax expense was $70.9 million for the nine months ended September 30, 2025, as compared to $38.1 million for the nine months ended September 30, 2024. This was an increase of $32.8 million, or 86.1%. This increase in tax expense was due primarily to the increase in the year to date pretax income which was $269.6 million at September 30, 2025 compared to $63.1 million at September 30, 2024, which is an increase of $206.5 million. The tax expense, and corresponding effective tax rates for the nine months ended September 30, 2025 and 2024, were higher than the statutory rate of 21.0% primarily due to the Global Intangible Low-taxed Income (“GILTI”) provision which was enacted in 2017 as part of the Tax Cuts and Jobs Act. Further, for the nine months ended September 30, 2024, the partial valuation allowance recorded against our interest expense carryforward deferred tax asset under Section 163(j) of the Internal Revenue Code also was a driver of the effective tax rate exceeding the statutory rate.

Segment Results

The following table presents revenue by segment, Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin:

(in thousands, except percentages)

For a discussion of Segment Adjusted EBITDA, see Note 19, "Segment Information" to our condensed consolidated financial statements included in this Quarterly Report.

Comparison of the Three Months Ended September 30, 2025 and 2024

Engine Services

Engine Services segment revenue increased $231.9 million, or 21.3%, to $1,322.2 million for the three months ended September 30, 2025, compared to $1,090.3 million for the prior year period. The increase was driven by continued strong commercial aerospace end market growth, underpinned by ramping volumes from our LEAP and CFM56 DFW Center of Excellence investments, as well as growth on our mid-size and super mid-size business aviation platforms and select military transport programs.

Engine Services Segment Adjusted EBITDA increased $18.0 million, or 12.2%, to $165.4 million for the three months ended September 30, 2025, from $147.4 million for the prior year period. The three months ended September 30, 2024 included the positive effect of a one-time liability extinguishment of $9.3 million. Adjusted EBITDA margin of 12.5% compared to 13.5% in the prior year period, was driven by lower margin workscope mix and the effect of ramping volumes on our new LEAP and CFM56 DFW Center of Excellence programs as they work down the learning curve. In addition, adjusted EBITDA Margin for the three months ended September 30, 2024 reflected the positive impact of the one-time liability extinguishment of $9.3 million.

Component Repair Services

Component Repair Services segment revenue increased $21.5 million, or 13.9%, to $175.8 million for the three months ended September 30, 2025, compared to the prior year period. The increase was driven by growth on land and marine platforms and the contribution from the Aero Turbine acquisition, which contributed $15.3 million in incremental year over year revenue, offset by slower growth in commercial aerospace related to input timing of certain customer volumes.

Component Repair Services Segment Adjusted EBITDA increased $13.2 million, or 32.4%, to $54.0 million for the three months ended September 30, 2025, from $40.8 million for the three months ended September 30, 2024. Adjusted EBITDA margin of 30.7% compared to 26.4% in the prior year period, was driven by volume and price growth, favorable mix and margin expansion from the Aero Turbine acquisition.

Comparison of the Nine Months Ended September 30, 2025 and 2024

Engine Services

Engine Services segment revenue increased $542.0 million, or 15.9%, to $3,941.2 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase was driven by continued strong commercial aerospace end market growth, underpinned by ramping volumes from our LEAP and CFM56 DFW Center of Excellence investments, as well as growth on our mid-size and super mid-size business aviation platforms and select military transport programs.

Engine Services Segment Adjusted EBITDA increased $66.8 million, or 14.8%, to $517.9 million for the nine months ended September 30, 2025, from $451.1 million for the nine months ended September 30, 2024. Adjusted EBITDA margin of 13.1% compared to 13.3% in the prior year period, were driven by lower margin workscope mix and the effect of ramping volumes on our new LEAP and CFM56 DFW Center of Excellence programs as they work down the learning curve.

Component Repair Services

Component Repair Services segment revenue increased $92.9 million, or 21.7%, to $521.3 million for the nine months ended September 30, 2025, compared to nine months ended September 30, 2024. The increase was driven by growth on land and marine platforms and the contribution from the Aero Turbine acquisition, which contributed $64.5 million in incremental year over year revenue.

Component Repair Services Segment Adjusted EBITDA increased $41.9 million, or 37.7%, to $153.0 million for the nine months ended September 30, 2025, from $111.1 million for the nine months ended September 30, 2024. Adjusted EBITDA margin of 29.3% compared to 25.9% in the prior year period, was driven by volume and price growth, favorable mix and margin expansion from the Aero Turbine acquisition.

Liquidity and Capital Resources

The following table summarizes select financial data relevant to our liquidity and capital resources as of September 30, 2025 and December 31, 2024:

(in thousands)

(1) Includes unamortized discounts of $20.0 million and $22.5 million as of September 30, 2025 and December 31, 2024, respectively, and unamortized deferred finance charges of $14.0 million and $15.7 million as of September 30, 2025 and December 31, 2024, respectively.

Our principal historical cash requirements have been to fund working capital, capital expenditures and acquisitions and to service our indebtedness. As of September 30, 2025, we had $722.8 million of available liquidity, consisting of $97.5 million cash on hand and, $625.3 million available under the New 2024 Revolving Credit Facility. Based on our current operations, we believe that our current sources of liquidity, including cash on hand and the New 2024 Revolving Credit Facility, are adequate to meet our cash requirements for the foreseeable future. See Note 8, “Long-Term Debt” for further discussion of the New Credit Agreement and New Senior Secured Credit Facilities. However, our ability to make scheduled payments of principal and interest, refinance our debt, comply with the financial covenants under our debt agreements and fund our other liquidity requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Any future acquisitions, joint ventures or other similar transactions may require additional capital and there can be no assurance that any such capital will be available to us on acceptable terms, if at all.

As of September 30, 2025 and December 31, 2024, our debt outstanding consisted of the following:

(in thousands)

As of September 30, 2025, we had the following debt agreements:

• The New 2024 Term Loan Facilities under the New Credit Agreement, under which we had outstanding indebtedness in an aggregate principal amount of $2,233.1 million, maturing on October 31, 2031.
• The $750.0 million New 2024 Revolving Credit Facility under the New Credit Agreement, under which we had outstanding indebtedness of $110.0 million.
• $19.7 million in finance leases and other debt.

New Credit Agreement Covenant Compliance

The New 2024 Revolving Credit Facility is subject to a springing financial covenant, which requires us to maintain a maximum consolidated first lien net leverage ratio that is tested quarterly, at the end of any fiscal quarter, when more than 40% of the New 2024 Revolving Credit Facility (excluding, among other things, all letters of credit incurred under the New 2024 Revolving Credit Facility (whether or not cash collateralized) and adjusted cash and cash equivalents of the Borrowers and their restricted subsidiaries) is utilized on such date. See our 2024 Form 10-K, “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments—New Credit Agreement” for further discussion of the New Credit Agreement and New Senior Secured Credit Facilities.

The New Credit Agreement contains certain financial reporting covenants that require us to present periodic financial metrics to our lenders. One such financial reporting metric is Consolidated EBITDA as defined in the New Credit Agreement. The definition of Consolidated EBITDA utilized for these debt reporting covenants differs from the definition of Adjusted EBITDA presented in this Quarterly Report in that it represents Adjusted EBITDA as further adjusted for certain additional items as defined in the New Credit Agreement. The table below highlights the differences between Adjusted EBITDA presented in this Quarterly Report and Consolidated EBITDA presented to our creditors:

(in thousands)

Compliance with these covenants is essential to our ability to continue to meet our liquidity needs, as a failure to comply under the New Credit Agreement could result in a default under the New Credit Agreement and permit the senior lenders to accelerate the maturity of our indebtedness. Such an acceleration of our indebtedness would have a material adverse effect on our liquidity, including our ability to make payments on our other indebtedness and our ability to operate our business.

As of September 30, 2025, we were in compliance with the covenants in the New Credit Agreement.

Cash Flows

The following table summarizes our cash flows for the nine months ended September 30, 2025 and 2024:

(in thousands)

Nine Months Ended September 30, 2025

Net cash used in operating activities for the nine months ended September 30, 2025 was $6.3 million. The factors affecting our operating cash flows during the period included net income of $198.8 million and non-cash charges of $162.9 million, partially offset by a $367.9 million change in our operating assets and liabilities. The non-cash charges primarily consisted of $145.3 million in depreciation and amortization, $10.0 million in stock compensation expense and $4.9 million in amortization of deferred finance charges and discounts, and $0.6 million of foreign exchange gain, partially offset by a $0.8 million decrease in deferred income taxes. The increase in our net working capital was primarily due to the increase in trade working capital driven by continued growth in the business.

Net cash used in investing activities for the nine months ended September 30, 2025 of $91.1 million primarily consisted of $66.7 million of purchases of property, plant and equipment, rental engines and $30.0 million in payment during the current period of our licensing agreement acquired during the year ended December 2024, partially offset by $4.3 million of proceeds from disposal of property, plant and equipment.

Net cash provided by financing activities for the nine months ended September 30, 2025 of $90.9 million was primarily attributable to the proceeds from long-term debt of $545.0 million, offset by $452.6 million in repayments of long-term debt.

Nine Months Ended September 30, 2024

Net cash used in operating activities for the nine months ended September 30, 2024 was $32.0 million. The factors affecting our operating cash flows during the period included net income of $25.0 million and non-cash charges of $145.2 million, offset by a $202.3 million change in our operating assets and liabilities. The non-cash charges primarily consisted of $140.0 million in depreciation and amortization, $10.0 million in amortization of deferred finance charges and discounts, $3.6 million loss on debt extinguishment and $1.4 million in non-cash lease expense, partially offset by $9.2 million decrease in deferred income taxes.

Net cash used in investing activities for the nine months ended September 30, 2024 of $184.1 million primarily due to cash of $114.1 million paid for the acquisition of Aero Turbine on August 23, 2024, $70.4 million of purchases of property, plant and equipment and rental engines.

Net cash provided by financing activities for the nine months ended September 30, 2024 of $209.1 million was primarily attributable to the proceeds from long-term debt of $765.0 million, of which $400.0 million was issued under the 2024 Term Loan Facilities and $365.0 million was drawn on the ABL Credit Facility, partially offset by $555.0 million in repayments of long-term debt, repayment of long-term agreements of $0.5 million, and the payment of deferred financing charges of $0.4 million.

Critical Accounting Estimates

Our financial statements are prepared in accordance with GAAP in the United States. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, revenue, expenses, and related disclosures during the period. We evaluate our significant estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ significantly from these estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, results of operations, financial condition, and cash flows will be affected.

Our accounting estimates discussed below are important to the presentation of our results of operations and financial condition and require the application of judgment by our management in determining the appropriate assumptions and estimates. These assumptions and estimates are based on our previous experience, trends in the industry, the terms of existing contracts and information available from other outside sources and factors. Adjustments to our financial statements are recorded when our actual experience differs from the expected experience underlying these assumptions. These adjustments could be material if our experience is significantly different from our assumptions and estimates. Below are those policies applied in preparing our financial statements that management believes are the most dependent on the application of estimates and assumptions.

We describe our critical accounting estimates used in the preparation of our consolidated financial statements in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates,” in our 2024 Form 10-K. We consider the following policies to be our most critical accounting policies because they involve critical accounting estimates and a significant degree of management judgment:

• revenue recognition,
• business combinations,
• goodwill,
• inventories, and
• income taxes.

Recent Accounting Pronouncements

See Note 2, "Summary of Significant Accounting Policies" to our consolidated financial statements included elsewhere in this Quarterly Report for a description of recent accounting pronouncements, if any, including the expected dates of adoption and the anticipated impact on our consolidated financial statements.

Interest Rate Risk

The New Credit Agreements are subject to interest rate risk. Borrowings under the New Senior Secured Credit Facilities bear interest at a floating rate per annum which can be, at our option:

(a) a Term Secured Overnight Financing Rate (“SOFR”) based rate for U.S. Dollar denominated loans under the Credit Facilities (subject to a 0.00% floor), plus an applicable margin ranging from (x) 2.00% to 2.25% in the case of the New 2024 Term Loan Facilities, and (y) 1.50% to 2.00% in the case of the New 2024 Revolving Credit Facility;

(b) a EURIBOR based rate for Euro denominated loans under the New 2024 Revolving Credit Facility (subject to a 0.00% floor), plus an applicable margin ranging from 1.50% to 2.00%;

(c) a Term CORRA based rate for Canadian Dollar denominated loans under the New 2024 Revolving Credit Facility (subject to a 0.00% floor), plus an applicable margin ranging from 1.50% to 2.00%;

(d) a SONIA based rate for Pounds Sterling denominated loans under the New 2024 Revolving Credit Facility (subject to a 0.00% floor), plus an applicable margin ranging from 1.50% to 2.00%; and

(e) a base rate for U.S. Dollar denominated loans under the New 2024 Credit Facilities plus an applicable margin ranging from (x) 1.00% to 1.25% in the case of the New 2024 Term Loan Facilities, and (y) 0.50% to 1.00% in the case of the New 2024 Revolving Credit Facility.

The applicable margin for the New Senior Secured Credit Facilities is subject to adjustments based on the Consolidated First Lien Net Leverage Ratio (as defined in the New Credit Agreement) as of the preceding fiscal quarter end, with (x) one 25.0 basis point ratio-based step down, in the case of the New 2024 Term Loan Facilities, and (y) two 25.0 basis point ratio-based step downs, in the case of the New 2024 Revolving Credit Facility.

On March 15, 2023, we entered into an interest rate swap contract, effective March 31, 2023, for a notional amount for $400.0 million. The swap provides an effective fixed SOFR rate of 3.71%, maturing on December 31, 2025. Additionally, we entered into an interest rate cap contract to limit the exposure against the risk of rising interest rates. The interest rate cap contract, effective on March 31, 2023, provides a capped SOFR rate of 4.45% and matured on September 30, 2025. This interest rate cap contract began with a notional amount of $500.0 million, increased to $1,000.0 million on March 31, 2023, and to $1,500.0 million on March 28, 2024. On November 14, 2023, we entered into another interest rate cap contract, effective September 30, 2025, to continue to limit the exposure of the interest rates on our variable term loans to a capped SOFR rate of 5.00% on a notional amount of $1,500.0 million, maturing on December 31, 2026.

Inflation Risk

Inflation generally affects our costs of labor, equipment, raw materials, freight and utilities. We strive to offset these items by price increases, operating improvements and other cost-saving initiatives and through contractual provisions that allow us to pass along material and other cost increases to customers. In certain end markets, implementing price increases may be difficult and there is no assurance that we will be successful. From time to time, we may encounter difficulties in obtaining certain raw materials or components necessary for production due to supply chain constraints and logistical challenges, which may also negatively impact the pricing of materials and components sourced or used in our services.

Currency Risk

Our assets and liabilities in foreign currencies are translated at the period-end rate. Exchange differences arising from this translation are recorded in our consolidated statements of operations. In addition, currency exposures can arise from revenue and purchase transactions denominated in foreign currencies. Generally, transactional currency exposures are naturally hedged (i.e., revenue and expenses are approximately matched), but where appropriate, we use foreign exchange contracts. On April 7, 2025, we entered into a foreign currency contract at a notional value of GBP 39.5 million and CAD 136.5 million maturing on December 31, 2025. Approximately $34.8 million, or 2.3%, and $41.2 million, or 3.2%, of revenue for the three months ended September 30, 2025 and 2024, respectively, and $107.5 million, or 2.5%., and $120.7 million, or 3.3% of revenue for the nine months ended September 30, 2025 and 2024, respectively, was attributable to non-U.S. Dollar currencies. Gains or losses due to transactions in foreign currencies included in our consolidated statements of operations was a $1.1 million gain and a $0.8 million loss for the three months ended September 30, 2025 and 2024, respectively, and a $0.6 million gain and a $0.2 million gain for the nine months ended September 30, 2025 and 2024, respectively. A hypothetical 10% change in the relative value of the U.S. dollar to other currencies during any of the periods presented would not have had a material effect on our consolidated financial statements.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report, the effectiveness of our disclosure controls and procedures (defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2025, our disclosure controls and procedures were not effective at the reasonable assurance level

as a result of the material weaknesses in our internal control over financial reporting described below.

Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. As we have previously been a privately held company, we were not subject to the rules and regulations of the SEC regarding compliance with Section 404 of the Sarbanes-Oxley Act (“Section 404”), to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. As previously reported in our 2024 Form 10-K, in connection with the preparation of our consolidated financial statements for the year ended December 31, 2024, we identified material weaknesses in our internal control over financial reporting. The following are our material weaknesses:

• We did not design and maintain (i) an effective control environment commensurate with our financial reporting requirements, specifically, we did not maintain a sufficient complement of personnel with an appropriate level of internal controls and accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately, (ii) an effective risk assessment process at a sufficiently precise level to identify new and evolving risks of material misstatement in our financial statements and design and implement changes to our controls in response to those risks, (iii) effective monitoring controls to verify the proper and consistent functioning of our internal controls, and (iv) effective information and communication controls between various functions within the company to verify complete and accurate financial reporting. These material weaknesses contributed to the following additional material weaknesses:
• We did not design and maintain adequate written policies and procedures for accounting and financial reporting. Further, we did not design and maintain effective controls related to the period-end financing reporting process and significant account balances, including ensuring that there is adequate documented evidence of a sufficient level of management review or over complex estimates and judgmental areas of accounting and financial reporting.
• We did not design and maintain effective information technology ("IT") general controls over (i) program change management to ensure that program and data changes are identified, tested, authorized and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel; and (iii) computer operations controls to ensure that processing and transfer of data, and data backups and recovery are monitored.

These material weaknesses resulted in immaterial corrections, as well as immaterial unrecorded errors to various accounts and disclosures in the Company's consolidated financial statements for the year ended December 31, 2024 and condensed consolidated financial information for the quarter ended March 31, 2025. These material weaknesses could also result in a misstatement of substantially all of our account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Management’s Remediation Efforts

Management is committed to implementing changes to our internal control over financial reporting to ensure that the control deficiencies that contributed to the material weaknesses are remediated.

During the quarter ended September 30, 2025, we have taken the following remedial actions:

• Conducted internal controls performance and documentation training for all employees;
• Developed a comprehensive risk assessment process to assess and identify existing and developing risks and designed and implemented changes to our controls in response to those risks;
• Developed a cross-functional, quarterly alignment process to ensure all material information is communicated and disclosed, including meetings and certifications of key stakeholders throughout the business;
• Substantially enhanced our policies and procedures;

The actions above were in addition to the remedial actions completed during the previous quarters, which included:

• Hired additional personnel, with experience commensurate with our financial accounting and reporting requirements;
• Engaged external consultants with appropriate internal controls experience to assist us in further analysis of the design and implementation of certain internal controls to address the identified deficiencies;
• Designed and implemented IT general controls over IT systems that are material to the preparation of our financial statements, including change management, user access, and computer operations controls.

The process of implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may take additional actions to address control deficiencies or modify certain of the remediation measures described above.

We believe the above actions will be effective in remediating parts of the material weaknesses described above, and we will continue to devote significant time and attention to these remedial efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.

Changes in Internal Control over Financial Reporting

We are taking actions to remediate the material weaknesses relating to our internal controls over financial reporting, as described above. Except as discussed above, there were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(d) or 15d-15(d) of the Exchange Act), that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed under “Part I, Item 1A. Risk Factors” in our 2024 Form 10-K. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by any forward-looking statements contained in this Quarterly Report. There have been no material changes from the risk factors disclosed under the heading “Risk Factors” in our 2024 Form 10-K.