StandardAero, Inc. (SARO) Q1 2026 Earnings Report, Transcript and Summary

Good afternoon, and welcome to StandardAero's First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Rama Bondada, Senior Vice President of Investor Relations. Please proceed.

Thank you, and good afternoon, everyone. Welcome to StandardAero's First Quarter 2026 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.standardaero.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 today's earnings release and 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, 2025. 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, adjusted net income, adjusted earnings per share, free cash flow and net debt to adjusted EBITDA leverage ratio. 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 at ir.standardaero.com. Non-GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures. And with that out of the way, I would like now to turn the call over to Russ.

Thank you, Rama, and thank you to everyone for joining our call today. I'll begin on Slide 3 of our earnings presentation. StandardAero delivered a solid start to 2026 with double-digit revenue growth across each of our 3 major end markets. We raised our full year revenue, adjusted EBITDA and adjusted EPS guidance, repurchased $60 million of our shares in the first quarter and are today announcing the acquisition of Unified Turbines. Demand across our end markets remain strong. Our growth platforms continue to scale, and our underlying earnings power is improving even faster than the headline numbers suggest. For the first quarter, revenue grew organically by 13.3% year-over-year supported by continued demand across commercial aerospace, business aviation, military and helicopter with all of our major end markets experiencing double-digit growth and expanded backlog. Adjusted EBITDA increased 2.5% year-over-year, and adjusted EPS grew 14%. We benefited from strong execution across our portfolio, but Dan will discuss later. These benefits were partially offset by 4 main factors: First, the ramp of our LEAP and CFM56 DFW growth programs, which are still coming down the learning curve; second, earlier-than-anticipated inventory burn down of existing low-margin pass-through material on the contracts we restructured last year, drawing more of that inventory through the P&L; third, the timing of engine shipments that impacted mix; and fourth, the nonrecurring costs from the closeout of a military program that ended in the quarter. We expect to return to double-digit EBITDA growth beginning in the second quarter with pass-through material elimination, productivity improvements and better mix driving higher margin expansion for the rest of the year. Excluding the impact of these mostly transitory and onetime items, adjusted EBITDA margins in the quarter would have exceeded 14%, and adjusted EBITDA growth year-over-year would have been double digit. Therefore, the underlying business' operating strength, along with the demand we're seeing across our platforms, is what is driving our increase to guidance. Looking at our end markets. Commercial aerospace grew 11% year-over-year in the first quarter as it continued to benefit from robust global aftermarket demand and a very tight MRO capacity environment. We saw strong activity across our platforms, including LEAP, CFM56 and turboprops as well as continued growth from our CF34 business, where demand remains strong, and we're realizing the benefits of the expanded license with the OEM last year. Commercial demand remains robust with no signs of softening. In the first quarter, business aviation grew 20% year-over-year, supported by strong demand on key midsized and super-midsized platforms. This includes the HTF7000, where we are benefiting from the capacity investments we made in Augusta last year. This facility will continue to ramp throughout the year, and we expect business aviation to remain a meaningful contributor to growth in 2026 and beyond. I also want to spend a few minutes on our military and helicopter business, which grew 10% year-over-year and remains an increasingly attractive part of the StandardAero portfolio. When we presented our initial 2026 guidance in February, we had not yet seen a meaningful recovery from the U.S. government shutdown. However, the last few weeks of the quarter saw a very strong rebound with robust activity across several military platforms, including the AE2100 and AE1107, which power the C-130 and the V-22 Osprey, respectively. Looking beyond the fading impact of the U.S. government shutdown, the rising operational tempo and increased defense spending across multiple regions are driving a noticeable acceleration in our military business. We're seeing early signs of increasing activity and strong demand signals on key engines that support transport aircraft, fighters, helicopters and other mission-critical applications. The global environment remains complex, and it's reinforcing the importance of readiness, sustainment and mission availability, areas where StandardAero has deep technical capability, long-standing customer relationships and a differentiated ability to support critical engine programs. While U.S. defense budgets continue to see strong year-over-year growth, the budgets of our NATO allies are also expanding rapidly. We're well positioned to capture this growth through recent awards we've won but not announced due to customer sensitivities. We've been awarded the rights to 80% of all OEM-directed MRO work on both the AE1107 and AE2100 engines globally, including future derivatives, and we are the largest independent MRO provider on these engines for U.S. and NATO allies. These agreements go well into the next decade. The expansion in Winnipeg that we launched in the fourth quarter of 2025 is tied to many of these military awards. CF34 growth in Winnipeg has been so significant that it has expanded into our military facilities. Our expansion, which was supported by the Canadian and Manitoba governments, not only expands our CF34 capacity, it also frees up our military capacity to accommodate growing demand. In addition, we have seen strong signaling from GE, our partner on the F110 engine for a multiyear acceleration on this platform likely beginning in the second half of this year. We believe our military and helicopter exposure gives StandardAero an additional layer of durable growth opportunities this year and for several years to come. This end market enhances the resiliency of our business model, provides access to attractive demand drivers and reinforces the value of our diversified portfolio of engines across all end markets. Turning now to Slide 4. Before speaking to our strategic priorities, I want to spend a few minutes on the broader operating environment, including the conflict in Iran. The situation is dynamic, and we've been monitoring the environment closely. I want to share what we're seeing today and how we are positioned, which gives us confidence in our outlook. Starting with what we have seen to date. Through the first quarter and into April, we have not seen any impact on our commercial business. Bookings momentum remains positive across our portfolio. Induction patterns at our facilities have been consistent with our internal plans, and our customers have not pulled back on work scopes or deferred shop visits. Demand across our end markets remain strong, and our supply chain has continued to perform relatively well. The early indicators we track, shop visit bookings, inductions, part orders and asset trading activity, all remain consistent with the underlying strength with which we entered the year. That said, we're mindful that we are navigating a more complex operating environment with elevated jet fuel prices, selected capacity adjustments announced by a few airlines and global airline profitability under some near-term pressure. We're tracking these factors closely, but we believe the structural dynamics in the market, combined with where we sit in the ecosystem, leaves us well positioned. There are a few reasons for our confidence. First is the structural tightness of the MRO market itself. Demand continues to exceed supply, lead times remain extended, and our customers are highly reluctant to change schedules or release induction slot positions because regaining slot access is difficult. Aircraft retirements remain very low as OEMs continue to struggle to lift production rates against their backlogs. And early durability challenges on certain new generation platforms have increased maintenance costs, offsetting portions of the fuel savings that those platforms were expected to deliver. All of this means engines are staying in service longer, working harder and requiring more MRO support, not less. Second, our portfolio is purposefully diversified across end markets, platforms and geographies. That diversification has historically provided real resilience during periods of macro volatility, and it's doing so again today. A meaningful portion of our revenue comes from end markets such as business aviation, military and helicopter, which are less correlated with fuel prices. I highlighted earlier that our military business is seeing an increasingly powerful tailwind with step-change defense spending across the globe and increased operational tempo, particularly across the platforms we support. Furthermore, our major MRO facilities have been strategically designed to serve multiple end markets, and our labor is mostly flexible across these multiple lines. This means we can reallocate labor and cost rapidly in response to changing market dynamics as we did during COVID. It's this business portfolio diversity and our operationally flexible model that enabled us to outperform our peer group in previous times of macro uncertainty and industry instability. Third, we hold differentiated positions on fuel-efficient new generation platforms. Our position as a LEAP premier MRO is a great example. LEAP is precisely where we've made our largest organic investment, which positions us well if elevated fuel prices accelerate retirements of older, less fuel-efficient aircraft over time. Mature widebody aircraft have historically absorbed the bulk of capacity adjustments during periods of sustained high fuel prices. As a reminder, we're focused on single-aisle aircraft platforms in the commercial market and have limited widebody exposure. Fourth, our supply chain. While industry-wide constraints around parts availability and supplier delivery remain persistent, we've not seen incremental disruption from the conflict at this point. Material flow remains relatively stable. We have close engagement with our suppliers, and we have multiple sourcing strategies and long-term agreements in place on our most critical inputs. This environment continues to favor scaled MRO operators with deep, long-standing OEM relationships where part allocations and material flow are most reliable, and that's exactly where StandardAero sits. It also reinforces the strategic importance of our component repair and asset management businesses to reduce turnaround times and material costs for our customers and to allow us to offer a broader suite of solutions such as used serviceable material and engine exchanges, which help our customers manage through periods of supply tightness. Further, energy costs are a relatively small portion of our cost base, and our pricing structures provide protection against most input cost inflation. The bottom line is that we have not seen a material impact to our business to date from the situation in Iran and demand remains strong. We believe the structural characteristics of our portfolio and operations, combined with the underlying tightness of the global MRO market, position us very well to navigate this environment. We would also note that historically, the lag from an oil price shock to meaningful MRO revenue impact has been measured in years, not quarters, because the engine MRO is driven by the accumulation of flight cycles over multiple years. Further, nearly 100% of what we do in our commercial aerospace engine MRO business is nondiscretionary. We will, of course, remain vigilant, continue to engage actively with our customers and our supply chain and keep you updated as conditions evolve. Turning to Slide 5. I'll speak to our 2026 strategic priorities, which remain consistent with the framework we discussed last quarter. First, on LEAP, our focus remains execution. The program continues to scale with first quarter LEAP revenues growing 4x year-over-year. We also hit the milestone of delivering our first LEAP 1A full overhaul early this quarter, and we're continuing to improve throughput, productivity and component repair capability as we move down the learning curve. We are on track to achieve profitability in the first half of 2026 while pursuing additional long-term customer awards. Second, we're focused on fully leveraging our investments in CFM56 and CF34. On CFM56, our DFW Center of Excellence continues to ramp, and we also expect that program to reach profitability in the first half of the year. On CF34, our expanded authorization from GE and the Winnipeg expansion continue to be key pillars of our growth strategy. The facility expansion is on track for completion in the second half of this year. Demand remains robust with the additional capacity already booked, reinforcing our view that our CF34 leadership position is both durable and differentiated. Third, Component Repair Services remains a strategic engine for value creation. We're continuing to accelerate new repair initiatives with several new wins across both new and existing platforms in the quarter, and we remain focused on in-sourcing capture across the enterprise. The business is also doing a great job optimizing production flow and performance, which can be seen in the strong segment margins we saw in the quarter, overcoming the small facility fire that they had late last year and the impact of the government shutdown on the military components business. Fourth, continuous improvement remains core to how we operate. We're focused on improving productivity across our portfolio and standardizing best practices, which subsequently increases throughput and revenue organically. These continuous improvement initiatives are constantly measured and supported by our incentive programs at all levels of the company and key to supporting margin expansion as volumes continue to grow. Finally, on capital deployment, we remain focused on disciplined value-accretive uses of capital. That includes high-return organic investments, strategic M&A, new platforms, license expansions and opportunistic share repurchases. In the first quarter, we repurchased $60 million of shares under our $450 million repurchase program, and we will continue to look at future repurchase opportunities. We also announced today the acquisition of Unified Turbines, a specialty provider of hot section component repair and overhaul services for a range of Pratt & Whitney and Honeywell engines that power commercial aerospace and business aviation turboprop aircraft. Unified adds critical repair capability on important engines we already serve, including the PT6A and PW100 and supports faster component repair turnaround times for our MRO customers. Unified Turbines is a highly synergistic addition to our Component Repair Services segment and aligns directly with our strategy to expand repair capabilities, increase in-sourcing capture and to use disciplined M&A to strengthen our position on platforms where we already have meaningful scale. As a trusted supplier to StandardAero since 2001, this is a business we know well, and we look forward to welcoming the team to the StandardAero family. This is exactly the type of acquisition we look for, strategically aligned, synergistic with our existing network and capabilities, and supportive of long-term value-accretive growth. With that, I'll turn the call over to Dan to walk through the financial results and outlook in more detail. Dan?

Thank you, Russ. I will begin on Slide 6 with some highlights from our first quarter results. For the first quarter ended March 31, 2026, we generated revenue of $1.63 billion, representing 13.3% growth compared to the prior year period. Growth was broad-based across our end markets, with commercial aerospace up 11% year-over-year, business aviation up 20% year-over-year and military and helicopter up 10% year-over-year. We saw growth in both of our segments with Engine Services revenue increasing 14.1% year-over-year and Component Repair Services revenue increasing 7.4% year-over-year. Adjusted EBITDA increased to $203 million in the quarter, representing a $5 million increase from the prior year period. The increase was driven primarily by higher volumes, offset by the timing of engine shipments that impacted mix in engine services and the onetime costs from the closeout of a military program as we prepare for the next contract. Excluding the impact of these items, adjusted EBITDA year-over-year in the quarter was above 10%. Adjusted EBITDA margin was 12.5% compared to 13.8% in the prior year period. As Russ noted, the year-over-year margin compression reflects a faster-than-expected burn down of existing inventory of pass-through material for restructured commercial contracts, the continued ramp of our LEAP and CFM56 DFW growth platforms, timing of engine shipments and a onetime cost from the contract closeout. The closeout costs, which occurred in March, was anticipated in our full year 2026 guidance, although we were uncertain about the timing. Excluding the effects of these mostly transitory or onetime items, margin in the quarter was above 14%. Net income was $80 million for the quarter compared to $63 million in the prior year period. The year-over-year change was driven by higher operating earnings and lower interest expense. Adjusted EPS of $0.33 came in 14% higher than the year ago period. Free cash flow was a $134 million use, reflecting typical first quarter seasonality and working capital timing as we continue the ramp of our LEAP and CFM56 DFW programs. Now moving to our 2 segments, starting with Engine Services on Slide 7. Engine Services revenue increased 14.1% year-over-year to $1.45 billion. Growth was driven by continued strength in our commercial aerospace platforms, including LEAP, CF34, CFM56 and turboprop as well as continued demand for business aviation or super-midsized engine programs such as the HTF7000 and a strong military ramp late in the quarter as we progressed through the residual impact of the U.S. government shutdown. Engine Services segment adjusted EBITDA increased 3% year-over-year to $179 million. These results were heavily affected by the timing of engine shipments that impacted mix and the contract closeout costs. Excluding these onetime items, segment level adjusted EBITDA grew above 12% year-over-year. Segment adjusted EBITDA margin was 12.3% compared to 13.7% in the prior year period. The drivers of the lower margin rate included the impact of the ramp in LEAP and CFM56 DFW revenues, transitory items such as the earlier-than-anticipated existing inventory burn down of pass-through materials on commercial contracts that we restructured and the previously mentioned onetime costs from a contract expiration, along with the timing of engine shipments. If you strip out those items, Engine Services adjusted EBITDA margin was over 14% this quarter, and we expect margins in this segment to exceed 14% through the remainder of the year. We continue to expect to eliminate $300 million to $400 million of low to no margin material pass-through revenue in 2026, with subsequent margin benefit and revenue impact now coming over the next 3 quarters as implied in our updated guidance. Turning to Component Repair Services on Slide 8. Component Repair Services revenue increased 7% year-over-year to $180 million. Growth was driven by good underlying demand across the portfolio, including strong performance on narrowbody aircraft components, particularly on the CFM56 and GTF, where we've been able to expand repair content. This was partially offset by the impact of the small fire at our Phoenix facility in December that closed the facility during the first few weeks of the quarter. In addition, the segment's military business was also affected by the residual impact from the U.S. government shutdown. As of the end of the first quarter, the Phoenix facility was up and running at full capacity with no impact from the fire expected in the second quarter. While we expect the residual impact of the government shutdown to fade through the second quarter, it is progressing at a slower rate in our CRS business than we previously expected. CRS segment adjusted EBITDA increased 11% year-over-year to $52 million. Segment adjusted EBITDA margin expanded 90 basis points year-over-year to 29.2%, driven by favorable mix and strong productivity performance. Now moving to Slide 9, free cash flow. Free cash flow for the quarter was a $134 million use. This reflected typical first quarter seasonality as well as working capital investment to support continued growth across our ramping platforms. As we have discussed in the past, our business historically has been more heavily weighted towards second half cash generation. As a result, we continue to expect a similar cadence in 2026, but with a heavier first half cash usage in 2026 versus 2025 due to the significant ramp of our growth platforms. Turning to Slide 10, our balance sheet and liquidity. We ended the quarter with net debt to adjusted EBITDA of 2.6x compared to 3.1x in the prior year period. Our leverage remains within our long-term target range of 2 to 3x, and we continue to have significant balance sheet flexibility for shareholder accretive capital deployment, such as the $60 million in shares we repurchased in the first quarter and today's announcement of our acquisition of Unified Turbines. Our priority is to support long-term shareholder returns through a disciplined and balanced approach to capital allocation that includes organic investments, accretive M&A, new platforms, license expansions and opportunistic repurchases, all while maintaining a strong balance sheet. Now turning to our 2026 outlook on Slide 11. We are increasing our full year 2026 guidance for revenue, adjusted EBITDA and adjusted EPS. Specifically, we now expect revenue of $6.325 billion to $6.45 billion, a $38 million increase at the midpoint. On adjusted EBITDA, we are raising guidance by $5 million at the bottom end of the range, which now stands at $875 million to $905 million. Our adjusted EPS guidance increases $0.05 to a range of $1.40 to $1.50, representing 22% year-over-year growth at the midpoint. Finally, we are reiterating our free cash flow guidance of $270 million to $300 million. As a reminder, our revenue growth guidance includes the previously discussed elimination of $300 million to $400 million of low to no margin material pass-through revenue from restructured commercial contracts in Engine Services. Engine Services delivered higher-than-expected first quarter revenue growth, partially because we drew down existing inventory of this pass-through material sooner in the year than anticipated. Again, our new guidance implies that we now expect to achieve margins higher than 14% in the Engine Services segment over the rest of the year. In addition, we are raising our end market growth guidance for military and helicopters from the previous high single-digit growth rate to low double-digit growth year-over-year. We are also raising business aviation end market growth guidance from high single digit to a range of high single-digit to low double-digit percentage growth year-over-year. With that, I'll turn it back over to Russ to wrap up our prepared remarks.

Thank you, Dan. In summary, first quarter results were solid, and we continue to see strong demand across commercial aerospace, business aviation and military and helicopters. These markets are supported by durable demand drivers, rising utilization and the need for trusted technically capable MRO partners. We believe StandardAero is well positioned to capture these opportunities. Our priorities remain clear and consistent: execute on the LEAP and CFM56 DFW ramp; fully leverage our CF34 investments; expand component repair capabilities; drive continuous improvement; and deploy capital with discipline. We are confident in our strategy, confident in our ability to navigate the market backdrop and confident in delivering another year of double-digit earnings growth and strong cash generation. Thank you again for joining us today. Operator, we're now ready to move to Q&A.

[Operator Instructions] And your first question comes from David Strauss with Wells Fargo.

I wanted to touch on cash flow and working capital. Maybe discuss why the working capital outflow was so much worse this quarter than what we typically see in Q1. I know you're -- seasonally, it's typically an outflow in Q1, but we had a much higher outflow here this year. I would have thought maybe with some of the pass-through inventory kind of flowing through that, that would have helped. And what you're assuming for the full year in terms of working capital?

Great question. Thanks, David. No, we're -- I'm satisfied with the free cash flow use of this quarter. It was a build of about $247 million. Let me break that down a little bit. A lot of that was movement into billed accounts receivable, which is really great. That gets -- we've got great collections performance typically within 30 days. And inventory actually dropped in the quarter, a $65 million improvement. Good news there. Where we did increase was primarily on contract assets, and that's on the great performance of our CF34 business. As that business continues to grow and we're expanding our facility in Winnipeg, there is a related build of working capital in that regard. And that makes perfect sense for us, in particular, as it's occurring here in the first quarter, which is typically, for us, a seasonal build. So our cash flow guidance doesn't change for the full year. We do expect working capital to decline in the second half and cash flows to reach the free cash flow conversion rates that we've guided you to.

Your next question comes from Andre Madrid with BTIG.

I think you guys had mentioned last quarter that you were largely filled for your LEAP slots in '26. I mean, is this now fully sold out? And what kind of, I guess, early look could we get into '27?

Our LEAP programs are continuing to pick up steam. We have inducted now more than 70 LEAP engines since we began to induct them. About a dozen of those have been PRSVs, full performance shop visits. So we see our pipeline is robust, and we have plenty of work heading our way. So we're comfortable that our plans for the amount of demand out there are correct, and we are busily coming down the learning curve, which is why we are quadrupling the LEAP revenue over last year.

Yes. No, that's helpful. I guess to stay on that, you mentioned the PRSVs. How should we expect the mix of that to shift over time? I mean, how much of LEAP revenue will flow through this over CTEMs as you look through '26 and into '27?

Yes. We're still heavily biased towards CTEMs just because of the nature of the number of accumulated flying hours on the engines and the customers that we're servicing right now. I suspect it will take more than 12 months before you see a meaningful shift in the balance. We will continue to be more leveraged towards CTEMs for likely the next 2 to 3 years and then PRSV volume will obviously increase during that time.

Your next question comes from Kristine Liwag with Morgan Stanley.

Russ, you were very clear in your prepared remarks that you're not really seeing any change about the demand environment and customer behavior so far. I guess I wanted to follow up on the structural MRO tightness in the industry you called out. Like how much buffer do you think there is in the supply-demand dynamics? And is there a way to quantify that from your seat? Perhaps is it the number of engines already scheduled for induction in 2027 in a given time frame? Just want to understand how to think about if this Iran thing kind of draws out longer.

Yes. Thanks, Kristine. There are some dynamics in the aftermarket that, I think, really give us resilience through some type of a conflict like this. Let me talk about that first, and then I'll talk a little bit about the kind of the route that airlines go through. But right now, historically, what we've seen is that fuel shocks like we're seeing right now, they don't immediately impact maintenance slots, which is our business. Historically, the air traffic demand that's underlying what we're seeing right now is still very strong. The load factors on commercial airlines are very high. And so consequently, if there was some adjustment, the load factors will support that without any real big impacts to equipment changes and things of that nature. Also, airlines have been pretty successful, so far, in passing along these fuel costs, and they really haven't seen any changes. So that, coupled with the fact that MRO capacity still is being outpaced by demand and then you also couple the fact that existing equipment is having to fly longer, that just gives you confidence that the MRO projections that we have, in fact, are correct. Now in addition to those things that I mentioned earlier for the general market, StandardAero has some additional benefits that not everyone in the sector has. That includes, first of all, we're on the right platforms. We're on the single-aisle platforms, both regional and narrowbody. Those are the platforms that tend to be more resilient if there is any type of rebalancing of equipment that goes on. Secondly, because of the way that we are structured, we have a very naturally hedged position by being evenly spread across multiple end markets or subsector areas like military, like business aviation. These things all react differently and have different fuel sensitivity. Commercial airline is more fuel sensitive than military is. So the fact that we have that natural diversification built into our overall company portfolio means that we have the ability to shift resources and capture either upside or mitigate downside. So if you get a surge in military, we can shift and capture that. If you get a downside in commercial, we can mitigate that. So I think the structure of our company is a little bit different than what all other folks in the industry might have, and that gives us the ability to just react faster and more accurately. So the underlying resilience is there. StandardAero has some additional capability that enhances our speed of reaction. And then you couple that with what we are physically seeing. And what we're physically seeing is exactly in line with the plan that we put in place, our annual plan we put in place late last year. We're not seeing any sudden shifts in work scope reduction or deferred slots or anything of that nature. So that tends to follow historically what we would expect. Now there is a normal progression that sometimes if you have a very long period of either demand reduction like COVID or sustained high fuel prices, you're talking about a couple of years. First thing that would happen, which is what you see now, is the airlines would increase prices. That's basically where we're at. Second thing you might see after a year would be some reduction in work scope. Past that, months beyond that, then you might begin to see some deferring of maintenance. And then after that, you're talking for a very long period of time, you might actually see some aircraft retirements, which would result in some canceled events. But we're monitoring all of these things very carefully, front-end indicators. We're not seeing retirements change at all. It's very low. So we have high confidence that beyond this year that this will be a normal or not a normal, but it will be not a super unusual perturbation in airline and commercial traffic that because we react to an accumulation of flight hours over several years, it will get washed out in the future.

And your next question comes from Sheila Kahyaoglu with Jefferies.

This is Eegan McDermott on for Sheila. Wondering, given you've raised the outlook for business aviation and military and helicopter, if you could just unpack the strength behind what's driving the strength behind each of those raises? And maybe specific to the military side, the degree to which this is a function of government shutdown recovery versus some sort of demand step-up?

Yes. No, great. We're really excited about the improvement in our guidance, $38 million at the midpoint. That's occurred primarily or, in large part, at military programs. We talked about our strong position on the fixed-wing programs that support military, and that's as represented by the AE2100 program. That program was -- had extremely strong revenue growth in Q1, and we're seeing that continue throughout the rest of the year. Similarly, with the AE1107, which, of course, flies on the Marine Osprey helicopter program, that was also extremely strong in Q1, and we're seeing that also continue throughout the rest of the year. So it's primarily on those 2 programs where we're seeing strong upsides. Also on the F110, we have a good position there, and that also had strong growth that we're passing on for the full year as well. Those 3 programs primarily are the beneficiary of that.

And your next question comes from Myles Walton with Wolfe Research.

Wondering if you could quantify, if at all, the financials associated with the Unified acquisition, the size, maybe number of employees. Did it have a role in the guidance uplift? Or is it more neutral at this point? Maybe just a little bit of color on that.

Myles, it's Alex. So we see that acquisition as sort of run rate post synergies in the mid-single-digit EBITDA range. We have a synergy plan that's focused on sales growth that should be achievable for the next 18 to 24 months. And so that's right in line with a lot of the acquisitions that we've done in the past in terms of multiple paid. For this year, we expect the impact to fit within the range of our CRS segment guidance to answer that part of your question.

Okay. Got it. And then just maybe one quick one on the CFM56. And how are the parts availability doing on that -- on those overhauls and restorations? And if you look across your supply chain, is that where you're most focused on parts availability getting over the hump of what's in and what's coming out?

Well, the -- thanks, Myles, for the question. Obviously, volume drives attention and concern. CFM56 is one of the big volume programs. CF34 is another big volume program. So we're watching both of those very carefully. And at this point, as I said a little earlier, what we're seeing is that the material supply for those big volume engine programs has not gotten any worse. And we are -- look, it can always get better. But I would say the things that we have done over the last couple of years to help provide paths around any constrained source control parts on engines like that are working. They're being very effective. So our asset management trading business that we spun up is providing good used serviceable material, coupled with the repair development that we've invested in, in our CRS division allows us to take that USM and return it to flight status. And that's really kept the engines moving through our factories. We would love to have unconstrained supplies on some of these highly restricted parts. But that's not the nature of the aerospace business. And so you have to have detours around some of these road blocks. And we've been pretty effective at pulling that off. So we'll continue, obviously, to develop more repairs. We'll continue to source USM, and we continue to work with the OEs. As they work with some of the source control material trying to increase the volume, we'll work with them to provide our resources because what helps them helps us and helps the whole industry. We are all aligned in trying to accomplish that.

Your next question comes from Seth Seifman with JPMorgan.

I wanted to ask about the business transformation costs. We're talking about fairly small numbers here, but they have been trending a tiny bit higher for 2 quarters now. Maybe if you could talk a little bit about how those are trending versus your forecast and still on a path to be at breakeven by the end of this quarter.

Yes. Thanks, Seth. We're actually very pleased with the ramp programs. Both LEAP and CFM56 are looking great. The LEAP revenues are up 4x versus the prior year position. And the business transformation costs are right in line. Plus, I'm happy to report we are absolutely confident that both programs will turn positive margins here in the first half.

[Operator Instructions] Your next question comes from Ronald Epstein with Bank of America.

Russ, could you speak to what you guys are seeing in the portfolio of business jet engines that you work on? What kind of usage you're seeing there? And if there's been any slowdown or speed up to what's going on in the world?

I'm sorry, Ron. Can you repeat what engines? It came through a little muffled.

Yes, apologies. What you're seeing on business jet engines?

Yes, yes, yes. Okay. Yes. Thanks, Ron. Business aviation is doing really well. We're super stoked about that. You saw the note Dan made about 20% growth. What's driving that is a couple of things, but highly tied to decisions that we made a couple of years ago. We knew where the growth in the biz jet market was going to be, and it was going to be in the super midsized aircraft, most of which are powered by HTF7000 engines. And that's why we competed very hard to win the exclusive worldwide heavy maintenance ticket from Honeywell on that particular engine. You couple that with the investment that we made a year ago in our Augusta, Georgia facility, which is where we do the HTF7000 engine rebuilds and also opened up the ability to take in larger aircraft. And that was a very good business decision that is now beginning to pay off in spades and will continue for many years because many of the aircraft that were the midsized aircraft moving to super midsize over the last 20 years were powered by the precursor to the HTF, which was the TFE731. And we built the leading market share on TFE731. And then when we captured the exclusive heavy license on the HTF, that put us in a perfect position to be on the pitching and catching end of that equation. And that's exactly what we see is as the TFEs begin to mature over time and shift towards super midsized aircraft, newer aircraft that all have the HTF power, we're picking up all of that. So it just moves from a more mature engine to a newer engine. We have brand-new facilities to be able to handle that growth. So we are super excited about BizAv in the coming years.

Your next question comes from Gavin Parsons with UBS.

Guys, what are the bottlenecks to CRS growth? And the context of that question being, I think on Engine Services, you only outsource -- or outsource 90% of your repairs and only do 10% in-house. So I mean, is CRS just kind of independent of the end market growth narrative? Or what are your bottlenecks there?

Well, first of all, that 90-10 split continues to change every day as we do more in-sourcing. And you'll see that in-sourcing improved again for the fourth quarter. Actually, fifth quarter in a row, we've grown that. So that 90-10 split is changing. We're in the teens now that is in-sourced for CRS. So I would -- that's certainly not a bottleneck. And secondly, we talked about the 7.4% growth we had this year. That would have been clearly in the double digits were it not for the government shutdown and the fire at the Phoenix facility. Those are sort of short-term impacts. I think you're asking more long term. But that business continues to grow double digit as we expected and continues to be able to generate outsized growth because of that in-sourcing activity. But not only that, it's the -- what we call NPI, or new repair introduction, that we do every day as well, brand-new repairs. Not only for the LEAP, but also on platforms that we don't even service under the MRO side of the house, we continue to grow repairs there as well. And now the addition of Unified Turbines is just another perfect step in the direction of additional repairs and outsized growth. So bottlenecks, if you were to force me to ask that, it's probably around ensuring that we have labor. That has, however, not proven to be an issue for us so far. But -- so we'll continue to drive new repairs and post the growth that we've been showing.

To Myles' question, how dependent is your cash flow for the year on supply chain improvement?

Actually, not at all. We have, I think, appropriately, not had -- not put a lot of optimism in a significantly better supply chain. What we have done is our vendor management or working capital ourselves. And that means really ordering material according to a tight SIOP process and improving our TAT times, which is core to what we do. And that's going to result in sustainable cash flow on an ongoing basis. We're not expecting the supply chain to come to the rescue.

Thank you. And we have reached the end of the Q&A session. I'll now turn the call over to Russell Ford for closing remarks.

Okay. Very good. Thank you, Diego. Thanks, everyone, for joining us for our first quarter call. We appreciate your continued interest and support. StandardAero is looking forward to another strong year for growth, revenue, earnings and cash flow, and we're well on our way to achieve our plans, and we don't see anything that's going to stop us at this point to -- from achieving the goals that we've set out. So thank you again, and we look forward to talking to everyone next quarter.

Thank you. And with that, we conclude today's call. All parties may disconnect. Have a good day.