Great. Wonderful. Hey, good afternoon, everyone. It's me again, your friendly aerospace defense analyst here at Morgan Stanley. I'm Christine Lehwald. I'm very delighted to host our next session with StandardAero, and I'm very delighted to have Russell Ford, CEO of StandardAero, and also Dan Satterfield, CFO. Welcome, gentlemen. Thank you. Good. Thank you, Christine. Appreciate you having us here and allowing us to participate with the esteemed group of colleagues that are represented here across the aerospace industry as well as others. This is our largest conference this year, glad we can all be part of it. Thank you for coming. Maybe, Russ, to start off, you've been now the public company CEO of StandardAero for just under a year. At this point, what's been the biggest surprise, positive or negative, that you've encountered so far? Yeah, thanks, Christine. One of the things I would say in the roughly one year that we've been operating in the public environment is I don't think it's well understood, the entire breadth of the ecosystem of the aerospace industry and how we fit into that. I think that it's not intuitively obvious about more than just the commercial side of the aerospace industry. That's a big piece of it, and that's what people are, the general population, the investment community, are exposed to, their experiences on commercial airlines. There's the whole other aspects of the military piece of the business, the private side of the business for private jets, helicopters. StandardAero is a little bit of a unique creature because we not only operate in the commercial area, but we operate across many of the other subsectors. We have a very deep experience in the aerospace industry. We're entering our 115th year of continuous operation. We not only understand all of the dynamics around the aerospace industry, we actually help create many of those dynamics across our history. The thing that really, I think, stands out, we are a constant compounder within the industry, but because we're a little bit unique in the breadth and the reach that we have across the industry, we're not really well understood quite yet. I feel like in the zoo of the aerospace industry, people are used to seeing giraffes and elephants, but we're a tiger, and nobody's seen a tiger before, and they don't quite know where to put us because there's not a very direct comparable. Yeah, I think that's fair. It's hard when you're a tiger in that environment. Maybe touching base on that, look, the MRO demand seems to be, I mean, unprecedented, right? It's across all parts of your portfolio: commercial aerospace, defense, business aircraft. One, can you provide some context regarding the strength that you're seeing? Have you seen this in previous cycles before? How is this cycle different or similar to what you've seen either in its shape, its trajectory, and the variable drivers of that growth? If I think about, you know, at least my own personal experience in the history of aerospace over the last 45 years, typically, you have to think about the area we operate, which is maintenance, is different and has different drivers and different dynamics than the forward-fit side of the business where the OEMs are producing brand new engines, brand new aircraft. The maintenance side of the business is driven by not only the, in the commercial side, not only by the level of passenger flights, but also by the different types of environments and the different operating profiles that aircraft are going to encounter. Obviously, aircraft that fly in saltwater areas over oceans will have corrosive elements that would require a different type of a maintenance plan than an airline that flies mostly in desert regions that are eating a lot of sand, for instance. I think if you look across the industry, there are very different maintenance profiles that are required more than just the level of flying. The level of flying does, in fact, accelerate achievement or reaching maintenance intervals. In my own lifetime, if you think about when there has been a surge of passenger flying that increased the number of cycles, that happened in the late 1980s, right after the deregulation of the commercial airline industry and specifically in 1984 when the Civil Aeronautics Board was dissolved. You saw pricing come down, you saw a surge of people flying, and suddenly you saw a lot of flight hours going on. As a result, the maintenance requirements went up dramatically. You're seeing a similar type of effect now post-COVID. I think people stayed home during COVID. There's a lot of flying activity going on post-COVID, as well as just the general long-term growth of the aerospace industry at 5% to 7% per year. That's not likely to slow down anytime soon because there is no option. Thirty years ago, people would hop in a car and drive across the country. They're not going to do that today. They're going to get on an airplane, and three hours later, they're where they need to be. I don't see that the general population is going to reverse that trend as long as the prices are kept in check and there's no unusual economic perturbation. Yeah, very helpful context. I mean, look, we had RTX earlier today with Chris Cailliau. He highlighted, look, only one out of five of the world's population has flown once. I mean, it's a pretty, we're still definitely in a growth industry. Going back to the MRO demand, we also just had AirCAP in the previous panel right before this one where they've talked about MRO availability and slots, and some airlines struggle with getting their engines into the shop. In this environment where you've got so much demand for MRO, and you guys are the MRO guys, so you're part of the solution, how does that change your intake contracts? Are airlines more willing to have some sort of longer-term agreement to secure a slot? How does that change your pricing dynamics and the economics of what you could offer? You know, we are seeing some changes there as the appetite for flying continues to increase, and the fact that the fleet itself is aging at the highest level it's ever been. As a result of the continued growth in flight requirements, the airframe OEMs cannot produce airplanes fast enough to satisfy the growing demand. Consequently, all the airplanes that are flying today are needed and then some. As new airplanes do come off the production line and they get introduced into service, their capacity does not replace existing aircraft. It's an additive to the existing aircraft fleet. That is good for the MRO business because that just increases the embedded base of engines that need work performed. We don't see that trend changing anytime soon. If you look forward, the long-range passenger flying requirements continue to increase, and it will take quite a while for the airframe OEMs to be able to produce enough aircraft to catch up with the embedded demand. That is good news for us. We see only upside. We have invested ahead of that expected increase with capacity for several of the large embedded engine platforms. We were able to do that because we were very good stewards of our cash position during COVID when many other MROs and other aerospace companies could not make the investments. It's not that people didn't see this coming, but they were in positions where they just didn't have the ability to make investments. Because we were very good managers of our cash, we were able to get ahead of that and open up some new facilities. Now we are prepared to be able to take on additional work for the engine platforms, the big ones that are growing. We should be able to help satisfy the need for demand for MRO in the coming years. Great. As a follow-on to that, Russ, are you seeing changes in contract structure in how airlines want to secure those slots? Compared to what we've seen, for instance, over the last 15 to 20 years, what we're seeing is that airlines are, that the list of proposal requests are very robust right now on the commercial side of the business. They're coming to us earlier than what we had seen in the past, where in the past you might see airlines that have maintenance contracts or some type of a contractual relationship in place would come to you a year or so before the contract expired to begin to negotiate an extension. We're right in the middle of that because 80% of our revenue comes from long-term contracts, which gives us a very stable forward outlook that we can match our business to. Now what we're seeing on some of the newer programs, we have airlines coming to us today wanting to sign contracts for work that won't begin until 2030. Wow. That is good news for everyone, I think, that the appetite is there. That gives us the ability, again, to do even more optimal planning of what capacity we're going to need, when we need to bring that capacity online, with adequate time to make sure we hire and train and license the people that we need to work on the engines. I mean, 2030, that's pretty far out. That's a lot of visibility for your business. Yep. In terms of the capacity shortage, you guys have invested a lot in capacity additions, and also you didn't fire labor during COVID. You're also set up quite nicely for having experienced labor to do this work. How are you thinking about that capacity addition and utilization as we go through the year? You've touched on before how turnaround times have been improving to get the throughput improvement get better. Can you talk about what are the bottlenecks of getting turnaround times even faster? What are the key bottlenecks in that market? How do we think about overall capacity expansion? Yeah, look, the fastest capacity to bring online and the cheapest capacity to bring online is capacity you already have. The way you get to that is reduced turn times because you're unlocking capacity that you already have. You don't have to build any new buildings to do that, obviously. One of the things that we've done to improve turn time on the engines is, this is not new, for a number of years, we have been increasing our verticalization through our component repair business. You know, I love that business. Yes, we do too because we initially entered that business for exactly the reason that you mentioned, which was it gave us control over all of the work that's done on engine components that go into the rebuild of an engine. You lose a lot of time when you send parts for outside processing. If you can do that work in-house, you can significantly shorten the turn time. You know, you send stuff for outside processing, you're adding about two weeks to a part repair that you can do internally in three days. It's a big impactor if you can do that work internally, improves the turn time. The turn time of components is on the critical path of the turn time for the whole engine. That's why we started. What we found out was it was an even better investment for us to grow that business because secondly, in supply chain constrained environments, it gives us the ability to repair certain components that may be some of the constrained components, get those things back to airworthiness specs, and reintroduce them into the engine to get the engine flying even faster, reduce time back to the airline customers, which is very important to them because when you can reduce the turn time, that decreases the size of the engine spares pool that they have to keep on hand. The final thing is we like that business because it is a high margin business. As we grow that business, it helps the overall health of StandardAero. The reason that it's a high margin business is because that's where a lot of the intellectual property is tied up in an aircraft engine is with the specialized coatings that go inside of the hot section of a jet engine. Those are the reasons that we've been expanding that part of the business. Started out as turn time, turned out to give us a lot of other benefits, and we will continue to grow that part of our business. Great. This business is very exciting. You had very strong organic growth in the component repair business in the quarter, 25%. Margins have also been stepping up quite nicely. This quarter was up 360 basis points. I had to make sure to reread my notes and check my model, but it's 360 basis points. Yeah, you're missing a decimal point there. That's what you were wondering. Year over year. Can you provide more details about that business? I mean, what core capabilities there are? How fragmented or what's the environment like for deals? Because also, you know, you've bought a lot of these businesses for relatively cheap, right? It's not like you're paying super top dollar for them, and you're getting these kinds of returns. Can you talk about what the opportunity set is and how that landscape looks like? Yeah, thanks. I would say, first of all, the component repair segment within the aerospace industry is a highly fragmented market segment. There are literally dozens and dozens of smaller, very entrepreneurial types of businesses that have some unique process that's been certified into an engine, or they have some unique IP that they control. It's not an area that we're going to exhaust. We've done 11 acquisitions in the last eight years, most of those in the component repair area. It's a good place for us to go to increase our capability as well as capacity. When we look at the component repair area, we don't look to add existing capacity of processes that we currently do. We're looking to add new processes, likely those that have intellectual property, so that then we can take our entire book of business and run it through that new process. That gives us overall margin accretion for the base business. It also gives us something to take to the marketplace where we can then offer that process repair to the OEMs. We can offer it to even some of our competitors that don't have that capability. We have a real broad array, more than 20,000 authorized repairs on various engine and engine components, all of them authorized by the OEM. We're very allegiance to our relationships with the OEM, and that's one of the things that has allowed us to be able to continue to grow. CRS is an integral part of our strategy to expand the business and the margins and reduce turn times. Are there particular processes that you're looking to bolt on to your capabilities? Sure. We like thermal coatings. We like other unique metallic processes. We do a lot of very sophisticated machining already. There are more composite parts that are now being introduced into the cold section of jet engines, and there's a whole series of composite repair processes that we're looking to develop. We have a very strong group of engineers that are full-time dedicated to developing new processes, and we generally take the lead from the OEMs. We work closely with the five engine OEMs as to what parts they find are failing and which parts are most constrained from their sole supply sources, and those are the ones we develop repairs for first. We don't just go alphabetical order or pick our favorites. We actually depend on the OEM to say, "Hey, if you really want to help us, these parts tend to fail more often, or these parts are the ones that are constrained. Please help us develop repair processes for those. Another unique opportunity that's come with the growth of CRS through acquisition and NPI is the insourcing opportunity. When we started this, 90% of our CRS segment's revenues were with third parties. Only 10% was internal. What we've taken advantage of is with this 20,000 repair capability, we can pull a lot more repairs that are being done third party with the sister engine services divisions into CRS. That grows CRS through a known opportunity with the engine services, and now we're getting those repairs done at cost. The whole strategy of growing CRS is uncovering more and more opportunities for growth and margin accretion. I'm going to push you guys on CRS a little bit because it's such an attractive area. I mean, how big could CRS be in terms of annual revenue when you think about, you know, you've got, you know, you generate positive free cash flow, you're under-levered, and you know, this is an area you've been focused on deals. With the tailwinds that we have in the industry, it sounds like you've kind of found a pretty interesting outsized roar. If you were to be able to mature what else you're doing now and fast forward three to five years, how big could CRS be? I wouldn't put a number on it, but if you look at CRS and the growth drivers, right? Rama is looking at us. Yeah, he's going to throw a bottle at me. You know, it's going to benefit from the LEAP repairs, right? Of course, being one of only six CFM Branded Service Agreement license holders, the engine services segment has that great entitlement that we like to talk about. It's a $60 billion entitlement of revenue over the next 30 years. Our Component Repair Services business is going to do those repairs for the engine services side. Talk about the other major platform investment, CFM56 in Dallas, where we've doubled our capacity. All of those repairs are also being done at home. These are outsized growth opportunities. Don't forget that not only will we do it for ourselves, but we're also already doing LEAP repairs for third parties, and in some cases, competitors. Same with CFM56. You know, I would also add to that, if you think about our CRS business, past performance is a good predictor of future performance, I've found. It was just a few years ago that this business was a $100 million a year business. We've grown at 600% in just a few years. It appears to be something that still has a lot of strong growth potential, and we've done that consciously. What we're finding, the other interesting thing about component repair is, gas turbine engines are not only used for aircraft. Gas turbine engines, there are aeroderivatives of aircraft jet engines that are used for distributed power generation. What we're finding is we're seeing more and more growth coming to our component repair division for gas turbine engines that are placed in these distributed power applications because as much as an aircraft engine hanging on a wing will, you know, eat an occasional bird or a rock and have to be repaired out of cycle, you take one of these things and put them on the ground and let them eat dirt and grass and tumbleweeds and everything else, and they need even more maintenance. Guess what the application for that is? It's providing power to data centers. Thank you, AI, for increasing the demand for data centers, and these data centers many times are put in locations where there's not transmission lines to provide them the power they need. You bring in a distributed power set that you can set right next to these data centers. Interesting dynamic going on that we will capture. Yeah, I didn't realize you guys were an AI place. We are thinking about AI from a different angle. Wow, you know, these fireside chats are very revealing. I'm glad we're hosting them. Maybe let's shift gears back to Aero. CFM56, with your Dallas facility and expansion, can you walk us through how's the utilization, how's the capacity expansion going, and how's been the outlook for that facility? Yeah, it's going exactly as planned. We've doubled our capacity for CFM56. We did that consciously because we saw, as everyone did in the industry, if you look at a program like CFM56, you know, the engine has been in production for more than 30 years. During that time, the same number of engines were not produced each year. As you approached the 2015 to 2019 timeframe, the numbers of CFM56 engines that were being introduced, new ones, dramatically increased. That's important because what that means is roughly 40% of all the CFM56 engines that are out there, and this is the largest commercial aerospace engine program in the history of the world, 40% of those, because of their newer production date, have not yet reached their very first major shop maintenance event. These things will receive three or four complete maintenance events before their life is extinguished. You've got all of that demand that's just now beginning to release itself and will continue to do so for a long time. We got in front of that by making this investment, as I mentioned, because we were able to in the 2023-2024 timeframe. We've opened that facility now, and the facility is filling up nicely. We do also see CFM56 work at one of our other locations in Canada. We've been able to take some of those employees and bring them down to the Dallas Fort Worth area to cross-subsidize the knowledge of our workforce in Dallas to move them down the learning curve even faster. We're finding that all the major airlines are very excited that we have brought this new capacity online. It is truly new capacity. It's not just refurbishment of existing capacity. This is entirely new capacity at a scale that no other MRO has brought to bear for the CFM56. Yeah, it was great to see you, Dallas. Maybe on that note, with the CRS, the repair processes that you've done, can you give us some sort of context or dollars regarding if you were to do, you know, first engine visit for CFM56, how much of that you can repair now versus before, when you were before you went on your M&A activity for CRS? Kind of like how much dollars you're capturing more considering you've got this more extensive repair capability today? I wouldn't put a number on it, but definitely if you look at CRS, you know, now we're guiding you to, you know, almost a $700 million business. The capabilities for CRS to do more repairs are significantly more than in the past, and the ability to do the repairs now in-house. Of course, previously CFM56 being done up in Winnipeg, a lot of those repairs were done with third parties. The number of repairs as a result of our capabilities has increased. I think the dynamic is that we're now doing them at cost. Great. We will see that in the margins too. Just see it in margins. Yep. You know, CFM with your CFM Branded Service Agreement, that was a pretty incredible milestone you guys have signed. Can you walk us through with the LEAP engine, with the orders that you've received? What's the outlook for that business? For the customers, the economics for those first initial engine visits, because these would be kind of like the earlier LEAP customers, are there differences in economics versus these guys that are coming in versus contracts you may have a year or two later? Yeah, look, the LEAP engine is still a fairly new engine in terms of understanding the maintenance requirements for the engine and the overall robustness of the design. That's not apparently obvious in the first two or three years that an engine goes into service generally. There's a lot of simulation that's done during the design, but you can't completely simulate the environment that an aircraft engine is going to see when it goes into service. What we did was we looked at the CFM very carefully when we were developing our expected maintenance offerings on LEAP because it's, you know, it's an earlier generation type of engine. Now, the LEAP engine will operate at higher pressures, at higher temperatures in order to generate higher efficiency. There will be maintenance ramifications to those operating parameters that we will understand as we do more of that work. The CFM engine, you know, has been around long enough. We've got a lot of experience, more than a thousand of those that we have repaired, put back into service. We have a pretty good idea of what the replacement factors are, what the areas of that engine are that wear, and we have applied that to our proposals and our expected contracts that we're putting together with some of the airlines that are contracting LEAP work with us. are a couple of dynamics as LEAP ramps, right? The early shop visits are going to be what we call CTEMs, Continuous Time Engine Maintenance Events. These are typically lower work scopes, lower material content. At the same time, as the LEAP technicians get more advanced on the engine and the work scopes become heavier, you'll see margin accretion on the efficiency side. You'll see the CTEM events becoming PRSVs as we near the end of the decade and towards, you know, our ultimate goal of mature revenues. Very helpful context. Thank you. On growth, you raised your commercial aerospace outlook this year to the mid-teens range. Can you give us a little bit more color on what drove that? Were you seeing better throughput? Were you seeing better than expected customer demand? Or were you just sandbagging? How do you separate those buckets? We would never sandbag. We are seeing really strong demand. We've talked famously about the four big drivers. There are 40 platforms that we do business on. We have the number one or number two market position on 80% of our portfolio. However, in 2025, the demand is coming really from four key platforms. I'll throw a fifth in just for fun. One of them obviously is LEAP. We talked about that. LEAP revenues tripled quarter over quarter. Fantastic. Dallas Fort Worth, CFM56, winning new customers every day. I was just there. The gantries are full. Platform number two. Platform number three is CF34. We don't talk a lot about CF34. That's a fantastic program that we're running out of the Winnipeg facility, and that is on the regional 76-seat aircraft. Big demand there as well, and it's one of our bigger platforms with really attractive margins. Fourthly is the turboprop engines, our suite of engines that have strong demand and backlog. It's just about getting it through because the backlog is almost limitless. For fun, the fourth one is the HDF7000 program, which Russ just opened up that facility just a couple of weeks ago in Augusta. We've now expanded not only our hangar space for airframe work, but also a great way, the HDF7000 engine shop. That's having very strong demand from operators, fleet operators, and individuals. Those five platforms are really a lot of the reason that we were able to continue to guide towards higher revenues in engine services. I also like a little sandbagging. You do. We come from the private equity world where that's not allowed. We set aggressive goals, and then we find a way to hit them. We exceed them. Depending on how aggressive it is, sometimes hitting them is almost impossible. We have been very, look, all kidding aside, we take, I think, a very realistic view and a very thoughtful view of what the growth parameters are for the company. We have many levers that we can pull so that if things don't go exactly as planned, we have backup procedures that allow us to be consistently as advertised. We think that's really important. It's part of our DNA with our customers, being the kind of company that you can rely on and you can depend on. The airlines want that. The military wants that. We have to be dependable and reliable. That extends into our projections that we give to our investors. We have to be dependable and reliable. We also lean forward. You've seen the growth numbers, and these growth numbers are not just the result of what's happened in the last 12 months. If you look back over, you know, a decade prior to COVID, we were growing at these same types of numbers. It's a trend, and it's not by accident. It's very consciously purposeful. Great. We probably have time for one question from the audience. If there's anyone, raise your hand. We'll bring it back to you. Sorry, the mic's coming. Thank you. Question about CRS. You talk about the IP and specialized alloys, particularly for the really hot parts of the engine. If you talk to the very few producers of these specialized alloys, they'll tell you that they're very, very constrained on the supply that they can bring online. Can that limit volume growth for CRS to a point that pricing cannot make up for it? I'll tell you my own personal experience is in the time that I've been in the aerospace industry since the mid-1980s, the number of times that part constraint has not been an issue is never. This is a part of the aerospace industry, especially when you're dealing with things like the engine. The reason for that is because there's not too many materials that live at the temperatures that the hot section of a jet engine operates at. They can be close to 3,000 degrees during takeoff conditions. Pretty much everything in a jet engine, by the way, melts below that temperature. Creating a jet engine to begin with is not an insignificant engineering task. The way that's done is through some very exotic material, alloys, cooling processes, and coatings. These alloys that are used in the hot section of a jet engine, they're not used for anything else. You're not going to find those in common products in your iPhone or in furniture or even in the medical industry. These are alloys that are only used in specialized aerospace applications. They were created by the aerospace industry. Consequently, there's not a large available resource, and there never will be. These materials are not built to sit on the shelf and wait until they're needed like paper products are. I believe that the capacity is driven by the demand and that the capacity will always lag the demand. It's the nature of dealing with very unique and unusual superalloy engine components that go into an engine. There are ways around being constrained, and that's why we have invested in Component Repair Services (CRS) because for those particular parts that are made from these alloys, if there is a constraint, instead of just waiting for more capacity to be brought online, if it ever will, we have the ability to repair these parts and get them back into service as a flight-worthy, capable part in the engine. It's a purposeful design for us to have built a detour around the log jam of waiting for these very specialized materials. Again, my own experience is some of these materials and supply sources will always be constraints, and you can't let that roadblock you from advancing your business. You have to find alternate methods around that, which we have done. Thank you, Russ. Maybe last question for me before we wrap up the session. You and Dan, you guys have talked about, look, demand is very strong. Your capacity additions are going well. The programs you're on are all improving. What are you spending, where are you spending most of your energy? What are you focused on? What should we look out for in the next 12 months? The thing that we will always worry about are source-controlled parts because of, you know, just what I indicated. Other things, you know, the normal things that you worry about, we're not concerned about capacity. We've got plenty of capacity. We're not worried about test cell capacity, which is a normal constraint. That's a very long lead time. We're in very good shape there. We're not worried about our employee and labor situation. We have our own StandardAero University that helps train and certify employees in addition to the ones that we draw from industry. We have no labor issues. We have no environmental concerns. We have no demand concerns. I mean, honestly, this is about as clean of a position as you can find yourself in in any industry. I'm very excited about the forward prospects of our company and of the industry in general. Dan, you got anything to say? Yeah, I mean, I look forward to our capital deployment strategy. What was fantastic about the IPO is that we took $1 billion of proceeds, put them all against our long-term debt, and lowered our interest burden by over $130 million a year. Cash flow improves, right? With improved cash flow, we can continue to exercise our capital deployment opportunities, which include organic investment like we've done in Dallas, which includes the new platform like we did with LEAP, which includes new license agreements that are accretive to the business like CF34, and obviously M&A, as we did with ATI, which is a great CRS acquisition. Where we're spending our time is making sure that these ramp programs are going according to plan, and we've done that. We've put the costs in place and the full teams in place to make sure these are successful programs and finding new opportunities for our investment across our deployment strategy. Thank you very much, Dan. Thank you very much, Russ. This concludes your.