StandardAero, Inc. Price & Performance (SARO)

Thank you, and good afternoon, everyone. Welcome to Standard Aero's fourth quarter and full year twenty twenty four earnings call. I'm joined today by Russell Ford, Chairman and Chief Executive Officer Kim Ernston, our Chief Operating Officer and Dan Satterfield, our Chief Financial 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, 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 quarterly report on Form 10 Q for the three months ended 09/30/2024, and our annual report on Form 10 ks for the year ended 12/31/2024.

We assume no obligation to update or revise any forward looking statements whether as a result of new information, future events, or otherwise except as required by law. Additionally, during today's call, we will discuss certain non GAAP financial measures such as adjusted EBITDA, adjusted EBITDA margin, free cash flow 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.standardarrow.com. Non GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures. I would now like to turn the call over to Russ. Thank you, Alex, and thank you to everyone for joining our earnings call today. Before discussing our performance, I want to take a moment to recognize Standard Aero's team for their outstanding contributions their tireless effort and customer focused mindset, which led to our results. Their dedication to this company and our collective pursuit of excellence shaped the foundation of our vision for Standard Aero's future, It goes without saying that 2024 was a historic year at Standard Aero and I couldn't be more inspired as the leader of this team about where we're going in 2025 and beyond.

I'll start my remarks on Page three of our earnings presentation by reviewing some of our key highlights from 2024. It was the year for the record books of StandardAero, We continue to deliver outstanding growth and financial performance supported by robust market demand on the engines we service driven by strong execution. Combined, these factors enabled us to grow our adjusted EBITDA by with accelerating growth in Q4 of 37%. The environment remains extremely positive with the commercial aerospace market front to center throughout the year exhibiting 25% growth in 2024 and an even stronger 33% growth in the fourth quarter as demand continues to outpace capacity. We achieved all of this despite a market that is still working through challenges in the supply chain the delayed parts availability and a few one off headwinds like the temporary B-twenty two grounding that impacted one of our key military platforms. In short, it was a terrific year financially speaking. 2024 was also a banner year in terms of making significant progress in executing our strategic plan. During the year, we invested well over $100,000,000 in our major program initiatives that will position us for accelerated growth and success for the future.

Starting with LEAP, our greatest strategic priority going into 2024 was to get this program off to a strong start. And I'm happy to report that we accomplished everything that we had planned on this front. The industrialization of our state of the art LEAP MRO line and our flagship 810,000 square foot facility in San Antonio, Texas remains on track and achieved all milestones we set for 2024. Our facility is up and running and during Q4, we completed correlation of our first test cell for LEAP-1A engines which follows the LEAP-1B correlation in the prior quarter. Correlating our test cells was a major milestone towards opening up our ability to conduct full overhauls on both the LEAP 1A and 1B. To power the next generation A320neo and the Boeing seven thirty seven MAX family. In addition, as of the end of twenty twenty four, we have industrialized over two sixty LEAP component repairs within our CRS segment. We're very excited about these repairs and I think they will be a key differentiator for our LEAP offering going forward. These capabilities will drive strong, high margin growth within our CRS segment as we sell these repairs both internally and to third parties.

These repairs will also provide a competitive advantage by enabling us to better control costs and turn times. The breadth and speed with which we're able to industrialize these repairs speaks to the strong development expertise within our CRS business and the differentiated relationship we have with GE and Saffron. We believe we are actually the first repair business outside of the OEMs the [indiscernible] to industrialize all of the known leap repairs that exist at this point. Because of this, we believe that the OEMs are very happy with our progress in view us as go to partners for continued Importantly, we inducted our first LEAP engines during the year including our first performance restoration shop visit induction in December. We're excited to be able to deliver the same exceptional service to our current and future customers that we've done for over a century. It's still early days in this multi decade program, and we have more to do as we complete our physical industrialization in 2025 ramp capacity and throughput and begin to move down the learning curve but we're very pleased with the progress we've made to date and the long term outlook for this program remains incredibly strong.

We're also seeing the demand side really start to accelerate. Particularly over the medium to long term.

Our pipeline of LEAP opportunities grew significantly this year and our new wins are really starting to build momentum. So far, we signed agreements with nine different customers representing future revenue of over $1,000,000,000 all before we shipped our very first engine. These awards include a five year agreement with Avianca and our most recent announcement, a large fifteen year agreement with a major operator in The Middle East. These awards highlight our reputation, global reach and differentiation in the marketplace as a designated leap premier MRA. It's also worth noting that during Q4, we received maintenance organization authorization on the leap which now opens up another very large and growing market. It's safe to say the outlook for LEAP remains very bright we're excited about the immense opportunity that lies ahead of us on this program as it ramps. We also made significant progress investing to build capacity and further differentiated capability on other high growth platforms. In August, we opened the second building at our Dallas Fort Worth campus which will be home to our dedicated CFM56 Center of Excellence which more than doubles our CFN56 capacity and adds two test cells to strategically position ourselves to capture share in this very large market.

We're excited to bring this capacity to the market in a highly strategic location in Dallas and have already begun inducting engines at that site. Additionally, in April, we began a significant expansion of our Augusta, Georgia facility focused on our business aviation customers will allow us to meaningfully increase our engine shop capacity and throughput. This footprint expansion also allows us to support additional super midsize and large cabin aircraft for airframe and avionics MRO which is a key differentiator in winning work on incremental business aviation engine platforms. We're excited to cut the ribbon on this expanded facility, later this year. In addition to our physical capacity investments, in Q4, we reached an agreement with GE to expand our license and relationship with them on the CF34 narrow body platform. The CF34 has long been a major engine platform at StandardAero. We've now signed a new ten year agreement that includes expanded commercial scope, and will significantly increase our annual earnings on the program. We're excited about this continued partnership with GE and believe this opportunistic investment solidifies the foundation for another decade of outstanding growth on the number one regional jet platform in the world.

As we capitalize on existing market opportunities, we remain committed to maintaining the highest standards of operational excellence and continuous improvement within our business.

We've consistently expanded our enterprise EBITDA margins and this year was no exception where we grew our adjusted EBITDA margins by 90 basis points. A good example of one of these initiatives has been our in sourced component repair content, which we grew by over 40% last year. That's been a big area of focus for us really ramping up our synergies between our engine services and component repair services segments and we think this continues to represent big opportunity to accelerate growth and further enhance our competitive differentiation for the future. [indiscernible] We are also particularly excited to have Kim Ertson on Board as our Chief Operating Officer. She brings deep aerospace expertise coupled with a strong track record of successful results. She will further drive growth through our two segments, continue optimizing our proprietary operating system and standardize its use across the enterprise. On the M and A front, we talked in detail about the Aeroturbine component repair acquisition last quarter and that integration has gone very well. The businesses are sharing best practices and we're already starting to realize our synergy plan. So we remain very pleased with that acquisition. We also further solidified ourselves as a key player in the next generation of commercial flight by expanding our relationship with Boom Supersonic which just completed its XB-one demonstrator program.

The first American civil supersonic jet XB-one successfully broke the sound barrier six times with no audible sonic boom. Finally, we made the landmark decision to take this 100 plus year old company public by completing our IPO in early October. Additionally, after our IPO, we were able to refinance our debt significantly reducing our leverage and improving our credit ratings profile ultimately resulting in over $130,000,000 of annual interest savings. This will further bolster our earnings and cash flow profile as we move forward in 2025 along with creating additional capacity for accretive acquisition opportunities. Overall, reflecting all the past year, I'm quite proud of all these enthusiastic about our position for growth and market success in the coming years. Moving on to Page four, I'll touch on a few market and financial highlights for the year before Dan discusses our results and full year 2025 outlook in more detail. We continue to generate strong revenue growth of 15% in 2024, and 22% in Q4, with excellent performance from both our engine services and component Repair Services segments. We're continuing to see strong demand in the commercial aerospace aftermarket where we saw 25% growth in 2024 and thirty three percent growth in the fourth quarter.

Sales to the business aviation end market grew 8% last year with particular strength on the HDF 7,000 program where we are the worldwide exclusive independent MRO provider of heavy engine overhauls. In our military and helicopter end market, revenue increased slightly compared to the prior year overcoming a headwind related to the volume declines in the AE1107 platform following the temporary grounding of the B22 Osprey between December of 'twenty three and May of 'twenty four. The V-twenty two is returned to run rate operations we continue to see steady demand on other platforms within this end market. Moving to earnings. Adjusted EBITDA increased 23% in 2024 and thirty seven percent in the fourth quarter, reflecting strong growth in both segments leverage on our fixed costs and a favorable mix particularly in our Engine Services segment, where we saw lighter material content work scopes with higher labor content that led to stronger margins on those engines. Adjusted EBITDA margin expanded by 90 basis points year over year.

Now that we've summarized 2024 results, let's move on to Page five and talk about what we expect to accomplish in 2025. We're expecting 2025 to be another great year where we will deliver double digit growth on both the top line and the bottom line. Dan will get further into the details in his section, but to give you a preview of our guidance, we're projecting revenue between $5,800,000,000 dollars and $5,950,000,000 this year underpinned by the continued strong demand we're seeing across our end markets particularly in the commercial aero market, where we're seeing low double digit to mid teens growth for the year. Our 2025 guidance calls for adjusted EBITDA of $770,000,000 to $790,000,000 including continued margin expansion based on our performance excellence initiatives and growth of our high margin CRS business. Let's get into the priorities for the year, which will be familiar as we continue to achieve major milestones on our primary strategic initiatives. At the core of our strategy is to deliver exceptional aerospace services powering our customers' missions worldwide. This means continuously improving our capabilities and ensuring that we are the MRO partner of choice in the industry. To support this, we're focused on growth opportunities and streamlining operations to drive efficiency and enhance profitability in a few areas.

First, on the LEAP program, our priority remains finalizing the build out of our line at San Antonio this year so that we can be in the best position to meet the increasing demand on this platform. We will deliver our first performance restoration shop visit this year a major milestone going from new engine contract to PRSV delivery in just over two years. Plus, we'll continue to pursue additional long term customer programs as a trusted partner to major airlines. Second, we want to make sure we capitalize on our major investments in the CFM56 and CF34 current generation neuro body platforms to leverage capacity at our new Dallas Fort Worth shop and take advantage of strong demand we're seeing in both markets. Third, component repair is a big strategic driver for us and continuing to develop new repairs and accelerate expansion of that business is a top priority. Last year, a lot of focus was on industrialization of the LEAP repairs that I talked about earlier. Looking forward, we will accelerate the pursuit of opportunities to introduce new repairs on other platforms in alignment with our OEM partner. We'll also continue identifying and executing on additional in store [indiscernible] thus capturing profit back into our business and expanding our process intellectual property as well as in enhancing our ability to control cost and turn time.

Finally, we'll continue to pursue accretive M and A opportunities from our pipeline that complement our existing portfolio of engine and component repair offerings. Our priorities are centered on strengthening our long term competitive position and delivering service excellence to our customers, a sustainable company for employees, and consistent and predictable compounding returns for our shareholders. Clearly, we're excited about our performance and our trajectory. With that, I'd like to turn the call over to Dan Satterfield, our Chief Financial Officer to walk through our results and outlook in more detail. Thank you, Russ. I will begin on Page six with some highlights from our fourth quarter results.

For the fourth quarter ended 12/31/2024, we generated revenue of $1,400,000,000 as compared for the fourth quarter last year representing 22% growth or 20% if you fully pro form a for the acquisition of Aeroturbine as if it had occurred at the beginning of twenty twenty three.

That brings 2024 full year revenue growth to 15% versus 2023 or circa 14.5% fully pro form a for ATI. We saw strong growth at both our engine services and component repair service which I will get into in a moment. Adjusted EBITDA increased to $186,200,000 for the fourth quarter of twenty twenty four compared to $135,700,000 for the prior year period representing 37% growth as a result of the revenue growth and higher margins from favorable engine shop visits and work scope mix pricing, productivity improvements and continued growth in our higher margin component repair services segment. Including the acquisition of Aeroturbine. With a strong Q4, adjusted EBITDA for the year was $691,000,000 representing 23% growth over 2023. Moving to net income, we recorded a net loss in Q4 of $14,100,000 primarily due to the impact of non recurring costs. Including $29,000,000 of one time refinancing costs $26,000,000 of IPO related costs, including catch up stock compensation expense tied to our 2019 pre IPO equity plan as well as $18,000,000 of costs related to acquisitions, integration and startup costs in our LEAP program and CFM56 new facility investments.

Full year net income was $11,000,000 including the full year impact of the same non recurring costs noted above.

Free cash flow for the fourth quarter improved to $57,100,000 reflecting solid operating cash generation. And was also offset by several one time items related to the IPO and refinancing activities and additional costs tied to the industrialization of LEAP and CFM programs. On a full year basis, free cash flow was negative $45,000,000 also including one time effects that I will describe in detail further on. I would also note that both net income and cash flow were burdened by higher interest expense associated with our pre IPO capital structure before we delevered with the IPO proceeds and refinanced our remaining debt at lower interest rates.

Now moving on to our two segments, starting with Engine Services. Engine Services revenue increased $595,000,000 dollars in 2024 representing 15% growth compared to 2023. [indiscernible] Revenue from the commercial aerospace end market was up 26% compared to the prior year period, on strong demand across both our narrow body turbofans and our turboprops businesses particularly on the CF34 RB211, and Pratt and Whitney Canada turboprop platforms. I would note that this growth was not meaningfully driven by our LEAP or CFM56 Dallas Center of Excellence businesses, as they are still very early their development.

Moving to 8% driven by a sustained strength across the platforms we service. Particularly the HTF-seven thousand. Offsetting these gains was our military and helicopter end market revenue, which declined 3% compared to the 2023 period primarily from lower inductions on the Rolls Royce AE eleven oh seven engine which powers the V22 Osprey and was impacted by the temporary grounding of that platform earlier in the year.

As Russ mentioned. On the earnings front, Engine Services adjusted EBITDA grew 18% in 2024 driven by the strong revenue growth. Margins were up 33 basis points largely due to work scope mix and lower pass through material content across the platforms we serve. Our component repair service segment saw 2024 revenue increase 15% compared to 2023. To $592,000,000 or 13% fully pro form a for the acquisition of Aeroturbin.

CRS sales to the commercial aero end market grew 17 all of which was organic with our military and other end markets growing 12% or 8% pro form a for ATI.

Over the years, CRS adjusted EBITDA grew 23% which was driven by revenue growth and over 170 basis points of margin expansion to 26% for the year. Driven by operating leverage, productivity improvement initiatives and good performance at ATI.

Now moving to Page nine, I'll dive a little deeper into our free cash flow for the quarter and the full year. We saw positive free cash flow of $57,000,000 for the quarter.

Despite being burdened by a number of non recurring outflows.

Including $26,000,000 of IPO and debt refinancing related costs On a full year basis, our free cash flow was negative $45,000,000 burdened by $27,000,000 of IPO related expenses dollars 24,000,000 of debt refinancing fees and $6,000,000 of acquisition and integration costs.

In addition to these one time expenses related to our IPO, capital structure and M and A activities, we continue to make substantial platform investments which will lay the foundation for growth at Standard Aero in the future.

In fiscal year twenty twenty four, we invested $116,000,000 in major platforms. Including $75,000,000 on LEAP, dollars 20,000,000 for our CFM56 facility at Dallas Fort Worth, and $20,000,000 related to our expanded CF34 license. These values include $43,000,000 of startup costs on LEAP and CFM as we ramp on those platforms in San Antonio and Dallas. As Russ previously mentioned, in addition to our physical capacity investments, we reached an agreement with GE to expand our license and relationship with them on the CF34 platform. The total investment for us will be $50,000,000 with $20,000,000 played in Q4 of last year, and the remaining $30,000,000 in the first half of this year. And we expect with this new arrangement, to generate in excess of $10,000,000 of incremental EBITDA annually beginning in 2025. [indiscernible] Finally, as previously mentioned, we closed on a full refinancing of our capital structure following the IPO. Associated debt pay down and credit ratings upgrade. As a result of this activity, we expect our go forward cash interest savings to be greater than $130,000,000 going forward. It's important to note that many of these discrete cash outflows will not reoccur in 2025. And as a result, we expect to see meaningful improvements in cash flow going forward.

Moving on to our balance sheet liquidity on Page 10. As you know, we completed our IPO on October 2, and used our $1,200,000,000 of net proceeds from primary share sales to pay down debt At the October, we completed a refinancing of our remaining debt putting in place a new term loan facility with an annual interest rate of SOFR plus two twenty five and a new $750,000,000 revolving credit facility with a rate of SOFR plus 2%. These new rates represent 125 basis point reduction in rate from our pre IPO term loans and we expect to save over $130,000,000 annual interest to be realized in 2025.

We are also now significantly delevered to 3.1x, and as a result, we have received a multi notch upgrade in our credit ratings from all three agencies. Putting us solidly in the BB category. While we are pleased with where we sit from a leverage perspective, we are also focused on continuing to delever the business through earnings and cash flow growth and are targeting long term net leverage between two and three times. We believe that level provides ample cushion and flexibility in our balance sheet to invest across our strategic priorities.

We are in an attractive position with multiple avenues where we can allocate our capital to drive strong returns. This includes continued focus on organic investments, winning new engine platforms like we did with the LEAP and accretive and synergistic acquisitions as we did with ATI. Underpinning all of that is a disciplined approach focused on strategic fit return on investment which are key criteria whenever we make a significant investment decision. Now let's review our outlook for fiscal year twenty twenty five as shown on Page 11.

We are answering 2025 with a solid foundation driven by our firmly entrenched positions on key engine fleets, visibility into new wins, and capabilities to expand our portfolio. Our current outlook calls for total revenue in the range of 5,800,000,000.0 to $5,950,000,000 This reflects continued strong demand in our core aftermarket services including low double digit to mid teens growth from our commercial aerospace end market [indiscernible] high single digit growth the business aviation end market and high single digit growth in the military, helicopter end market.

For engine services, we are forecasting revenue in the range of $5,085,000,000 to $5,215,000,000 and for commercial repair services revenue in the range of $715,000,000 to $735,000,000 We are guiding to adjusted EBITDA [indiscernible] In Engine Services, we project adjusted EBITDA margins in the 13% area and in component repair services adjusted EBITDA margins of approximately 27%. Margins in Engine Services are anticipated to be roughly constant year over year. As increased efficiency in our core engine programs, is offset by initially low margins on the LEAP and CFM56 programs as production ramps up.

The part repair services margins are expected to increase year over year with continued operating leverage insourcing and pricing initiatives. Shifting to cash flow, we will generate significantly with a range of $155,000,000 to $175,000,000 This guidance reflects our growth in earnings and our reduced interest expense, as well as $90,000,000 of investments for the final phases in our development of our new LEAP CFM and CF34 platform initiatives, and the expansion of our Augusta facility. Similar to investments in M and A, we believe these major platform investments will create strong returns and enable us to continue to deliver double digit earnings growth.

Over time.

I would note that our guidance does not include any impacts given the significant uncertainties surrounding them at this point. And that we've historically not been materially affected given our industry's exemptions and free trade arrangements. However, of course, we're monitoring it.

And believe we are well prepared to take actions to mitigate any impact to our business as a result of future policy developments.

With that, I'll turn it back over to Russ to wrap things up. Thank you, Dan. Bringing it all together, 2024 was a record year with exceptional growth driven by robust momentum in commercial aerospace, the expansion of repair capabilities within CRS major new business awards and progress on strategic investments in our high growth platforms. As we look ahead, we excited for what's to come we're confident we have the right strategy and positioning in place to capitalize on the strong market demand and the opportunities we are seeing. Thank you again for joining us today. And with that, operator, we're now ready to move to questions and answers.

Thank you. We will now be conducting the question and answer session. We ask that you limit yourself to one question and one follow-up. Thank you. Our first question comes from the line of Seth Seaman with JPMorgan. Please proceed.

Hey, thanks very much and good afternoon. I wanted to kick off asking about the growth in commercial aero the kind of strong low double digits to mid teens, and kind of the contributions there we think about in rough terms we, by imagine, small at this point, but also CFM56 and this new CF34 agreement and then then anything else in kind of the broader environment whether it's more material becoming available or higher demand or pricing or what's kind of driving that robust growth?

Yes. Thanks, Seth. We see really strong growth for as far forward as we can see in the commercial area. And if you look at it by platform, which is how we do our build up, we see CF34, which has been a really strong platform for us for more than a decade, is growing quite [indiscernible] Along with our turboprop segment, which is also quite large and growing very healthy CFM56 is going to be the largest revenue growth in 2025, although it's going to be biased more towards the end of the year And then as you indicated, LEAP is not yet a big revenue driver because this year is really our first PRSVs and we're still industrializing but we'll still see pretty healthy growth there and the pipeline looks really strong.

So on the commercial side, that's what we're seeing including robust demand on attractive CRS component repair work that feeds into the commercial sector is driven by that And then on our business aviation side, we still see increasing volumes on some of the flagship products like the HTF 7,000 where the exclusive heavy provider as well as PW300s and 500s that are powering the the latest super midsize types of aircraft. So overall across the end markets, we're seeing very robust maintenance demand.

Okay, excellent.

And then just as a follow-up, maybe Dan on the cash flow, I know there was some working capital build last year, I think a little over $100,000,000 Can you talk about what sort plugged into the cash flow guide for this year from a a working capital perspective?

Yes, you're right. We did build working capital this year.

In advance of growth. And there'll be some incremental working capital build, For you to think about it going forward, working capital is going to be about 25% of revenue. But next year, there'll be some of that, in particular on the back end sorry, the front end of the year, as it relates to getting ready for the LEAP and CFM56 demand.

Thank you. Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Please proceed.

Good afternoon, guys, and thank you so much [indiscernible] I just wanted to ask maybe something that investors are going to have top of mind some more of the questions we're getting is how do maintenance trends and aftermarket trends work out? If we see airline cutting capacity or seeing consumer confidence weakness? So any thoughts for us as you guys have done this for a very long time on your on the StandardAero business and how it tends to do as we see volatility with the airlines?

Yes. Thank you, Sheila. That's one of the beauties of the part of the the value chain where we operate is there's a dam a operations on the commercial side and military. Most of the work that we do on maintenance is as a result of flight hours that have already occurred. So we don't see an immediate disruption anytime that there's volatile [indiscernible] flight loading or flight frequency or op tempo. So for us, we feel very, very confident about the forward looking plans that we have for 2025 based upon what we can see.

How much of your business is already in the backlog or is through long term contracts would you say?

Yes. I mean, our long term contract that's still about the 77% that we disclosed before. Where we have long term agreements with customers. That's great because it gives us great visibility towards the future. And that number is about going to stay about the same.

Of course, it will increase as we have our lead business.

Right.

And backlog, Sheila, backlog varies by end market. It also varies by platform type. So you'll see things like CF34 that's a more mature program, We have very deep backlog there We have very deep backlog on our military part of the business. And growing backlog on LEAP. Thank you. Our next question comes from the line of Ken Herbert with RBC Capital. Please proceed.

Yes. Hi, good afternoon. [indiscernible] see, you called out you signed up nine customers for LEAP service contracts. How do we think about that progressing through this year And maybe how do we think about that $1,000,000,000 in sort of revenue opportunity growing as we think about continuing to hear a number of airlines that have RFPs out for their sort of [indiscernible] Yes.

Thank you, What we're seeing on LEAP is the pipeline is actually looking better and better. As we go forward because what we're finding is two things. Number one, a lot of the maintenance on these engines is moving to the left. So we're seeing maintenance requirements come in earlier, lighter work scopes like we call them CTIMs, continued time engine maintenance events, So we're seeing more of those but in the near term. But coupled with that, we're seeing airlines who've got large orders for new aircraft, new engines they recognize that they really need to have maintenance slots locked up for these things. And so we are contracting our pipeline has quite a number of RFPs out there that are for events that don't start for another four or five years, but then continue on for So it's not so much of transactional environment like you might see on a more mature platform, because there's limited number of people out there that can do LEAP work and can even more so can do LEAP repairs. So people are locking up, wanting to lock us up early for these long term contracts. So we're actually very excited about the pipeline that that we're engaged in for LEAP I mentioned last quarter that we had a lot of optimism about that.

And now fast forward into the New Year, and the pipeline looks even stronger. So and we're very well positioned with our CBSA license to be able to put forward compelling RFPs around the world. If you look at where the customers are that we've won so far, they are literally around the world. It's not just North America.

That's helpful. Thanks. And you called out the CFM56 is perhaps one of the bigger growth drivers in 2025. Can you talk about where you are today in terms of turnaround times on that engine? What kind of improvement sort of the '25 guide embeds And when do we maybe hear about an initial contract for the 5B on that engine?

Thank you. Yes. Thanks, Ken. Turnaround time continue to come down across all of our platforms, not just CFN56. But we made very good progress. And I think that's driven by some of the work that we've done over the last two years to increase the ability for us to find used serviceable material and bring it to bear. For those parts that have traditionally been long lead time or shortage type parts. We also continue to invest and expand in our component repair business, which gives us access to extending life, repairing, returning to new some of these other components that may be hard to find. So that activity is really paying off so that as the supply chain continues to improve and there is investment there, the OEs are investing a lot of money there, but we want to move faster than that. And so that's why we've all augmented this with USM and with repair development And as a result, we're seeing the benefit of that with our turn times coming down back to where they were in 2019 timeframe.

Thank you. Our next question comes from the line of Gavin Parsons with UBS. Please proceed.

Hey, Gavin. You mentioned the margin a sense of how much dilution you're offsetting this year and whether 2025 is peak headwind?

Yes. I mean, this year, we talk about the investment in LEAP and that of course that includes some startup losses that are really a cash flow item not an earnings item for adjusted EBITDA.

Next year, we're going to of course see the significant growth Our largest single platform that's growing will be CFM56, followed by very closely TPAP program and LEAP.

LEAP will continue to have industrialization losses, which is be a cash headwind, but zero EBITDA but significantly less than than in 2024. CFM56 well, you know, really negligible But of course, that's going to have a little bit higher margins than lead in 2025. But with the growth on those programs and their margins being [indiscernible] low, very low single digit range, that's where the dilutions come from. If you take those two programs out, ES has got nice basis points growth year over year.

Great. That's helpful. And then just any sense of price versus volume in driving revenue growth this year?

Yes. We really don't talk about volume. We don't disclose shop visits volumes. But we are seeing price growth in line with our industry. Component repair market is particularly where we're seeing attractive pricing opportunity and that's an initiative for us going forward.

On the volume side, difficult to call out a shop visit number. I know people would like to, but because we have such diversified shop visit types across our platforms, and variation of work scope mixes that's why we don't call out that specific value. But we are seeing significant volumes, saw it this year and of course next.

Thank you. Our next question comes from the line of Greg Dahlberg with Wolfe Research.

Please proceed.

Hi, good afternoon. I'm on for Myles. One quick one here. So you mentioned M and A as a strategic priority for 2025. I'd imagine CRS is a big focus there. Just curious if you could comment on the pipeline of [indiscernible] and I'd imagine that's a competitive area valuations Hey, Greg, it's Alex. So, I mean, certainly, we've discussed our enthusiasm about CRS acquisitions, given our past success. And just the accretive nature of those types of companies. And our ability to integrate that into our large CRS segment has a [indiscernible] So definitely interested in there.

We're not giving specifics necessarily on things that are in the works, but we are always in the market, of course, and looking at potential deals where we're the right buyer.

For a business.

So we have a tracker. We've got a lot of opportunities in there, some organic, some likely formal processes, Many are actionable between now and the next couple of years and obviously M and A is going to continue to be part of our value creation playbook.

Got it. Thank you.

Thank you. Our next question comes from the line of Doug Humbert Bernstein. Doug, are you there? All right. I'll go to the next question. Our next question comes from the line of Kristen Furrstein Thanks for taking my question. Maybe just a follow-up on the last one there.

As you think about M and A, how do you think about the time to integrate and and how quickly you can do M and A deals?

Yes. So historically, we've been pretty good about keeping pace on formal processes. And those usually are where you really have to to work hard to keep pace with other buyers. On the more organic step, we can take our time a little bit more. But we've been we've done a good job, I think, historically keeping pace with your typical formal process So that the timeline on M and A process. On integration, kind of depends on the deal, right, the size of the deal, the complexity, how many different kind of work streams that that gets touched especially with kind of a highly synergistic opportunity. So I think it ranges from sort of six to twenty four months just depending on size and complexity.

Okay, great. And then just one other question, you touched on it in your prepared remarks about tariffs. And and how you're not typically impacted. But is there anything you're hearing that's maybe a little bit different this time around possibly from your customers or just internally? No, we're not. And Chris adjusted to be clear, we've done a complete contract review. We're carefully monitoring all of the tariff proposals that are out there. You know everyone knows it's a fluid situation. But we are aggressively on top of this for any type of potential impacts. And we are prepared to respond to multiple of different scenarios We are and will continue to be in compliance, which is the most important thing with all of the customers and Historically aircraft engines and components are within the USMCA. Duty free treatment. And we expect that to continue We've got multiple outside experts that are looking at these agreements to make sure that nothing significant obviously, we will keep very close tabs on this.

Great. Thank you. Congrats on the quarter and I'll jump back in the queue.

Good. Thanks, Kristin.

Thank you. There are no further questions at this time. I'd like to pass the call back over to Russell Ford for closing remarks.

Okay. Very good. Thank you, Alicia. Really appreciate everyone joining us today. We also appreciate your investments and support and StandardAero. We will continue to be good stewards of your We look forward to speaking with you again next quarter and continue progress as we move through the year. Thanks everyone.

Thank you for your participation.