StandardAero, Inc.

NOTE 1: NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Business

StandardAero, Inc. (the “Company”) was incorporated on September 5, 2018, in the state of Delaware and is an independent provider of aftermarket services for fixed and rotary wing aircraft gas turbine engines and auxiliary power units (“APUs”) to the commercial, business and military aircraft markets. The Company also provides aftermarket and upgrade services for business aviation and helicopter airframes and avionics, providing customers within those markets with comprehensive value-added solutions.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of StandardAero, Inc. (formerly Dynasty Parent Co., Inc.) and its subsidiaries.

Authorized Shares

On September 20, 2024, the Company amended its certificate of incorporation to increase the number of authorized voting common stock from 5,000,000 to 3,500,000,000 and authorized non-voting common stock from 100,000 to 70,000,000. Accordingly, the authorized share amounts disclosed in the consolidated balance sheets have been adjusted to retroactively reflect this change.

Corporate Restructuring and Restructuring Transactions

In connection with and prior to the completion of the Company’s initial public offering (the “IPO”) of its shares of common stock, $0.01 par value per share (“Common Stock”), the Company effected certain restructuring transactions. These restructuring transactions consisted of (i) the 103-for-one forward stock split of our Common Stock effected on September 20, 2024, (ii) the distribution to former holders of Class A-1 Units and Class A-2 Units of Dynasty Parent Holdings, L.P. an aggregate of 275,053,375 shares of our Common Stock (of which 8,157 were restricted shares), and to holders of Class B Units of Dynasty Parent Holdings, L.P. an aggregate of 6,158,255 shares of our Common Stock (of which 6,028,394 were restricted shares) and (iii) the liquidation and dissolution of Dynasty Parent Holdings, L.P. Immediately following these restructuring transactions,281,211,630 shares of our Common Stock were issued and outstanding.

Initial Public Offering

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

Secondary Public Offering

On March 26, 2025, two of the Company’s stockholders (the “Selling Stockholders”), affiliates of The Carlyle Group Inc. and GIC Private Limited, completed a public offering of an aggregate of 36,000,000 shares of Common Stock at a price to the public of $28.00 per share. The Selling Stockholders received all of the net proceeds from this offering. No shares were sold by the Company. As of March 31, 2025 Carlyle and GIC own approximately 54.1% and 12.2% of our outstanding common stock, respectively.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

New Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, “Income Statement (Topic 220): Disaggregation of Income Statement Expenses” which requires additional disclosures of certain amounts included in the expense captions presented on the Statement of Operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company is currently evaluating the impacts of adopting this guidance on its consolidated financial statement disclosures.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures primarily related to the tax rate reconciliation and income taxes paid information. For public companies the amendments in this ASU are effective for annual periods beginning after December 15, 2024 and for all other entities the amendments are effective for annual periods beginning after December 15, 2025. The amendments should be applied on a prospective basis. Early adoption and retrospective application are permitted. The Company is currently evaluating the impacts of adopting this guidance on its financial statement disclosures.

Other new pronouncements issued, but not effective until after March 31, 2025, are not expected to have a significant impact on the Company’s results of operations, financial condition, or liquidity.

NOTE 3: REVENUE RECOGNITION

Disaggregated revenue

The following table summarizes total revenue by the Company’s segments:

The following table presents revenues from customers that contributed to more than 10% of revenues:

The following table presents revenues from external customers by end market:

Contract assets and liabilities

Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing or reimbursable costs related to a specific contract. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. The following table provides information about contract assets and contract liabilities from contracts with customers:

Changes in contract assets and contract liabilities primarily result from the timing difference between our performance of services and payments from customers. The Company recognized revenue that was included in the beginning of period contract liability balance of approximately $400.0 million three months ended March 31, 2025 and $355.7 million for thethree months ended March 31, 2024.

Remaining performance obligations

As of March 31, 2025, the Company had approximately$1.9 billion of remaining performance obligations, which primarily relates to the Company’s engine utilization contracts that are satisfied over multiple years. Of this amount, the Company expects approximately 30% to be satisfied over the nexttwo years and the remainder thereafter. The expected timing of the satisfaction of performance obligations is dependent on the timing of the customer’s maintenance requirements and as such, the timing of the revenue recognition is subject to estimation uncertainty. The Company excludes from its remaining performance obligation balance the value of remaining performance obligations for its fixed price and time & material contracts, as the performance obligations for these contracts generally have an original expected duration of one year or less.

NOTE 4: EARNINGS PER SHARE

As a result of the 103-for-one stock split and the restructuring transactions, the 281,211,630 shares of the Company’s Common Stock held were distributed to former holders of Class A-1 Units and Class A-2 Units of Dynasty Parent Holdings, L.P. in an aggregate of 275,053,375 shares of Common Stock (of which 8,157 were restricted shares), and also to holders of Class B Units of Dynasty Parent Holdings, L.P. in an aggregate of 6,158,255 shares of Common Stock (of which 6,028,394 were restricted shares). For purposes of the computation of earnings (loss) per share this distribution represented a net 100.79-for-one stock split ofthe Company’s Common Stock which is retroactively adjusted for all periods presented.

The following table summarize the computation of basic and diluted net income per share attributable to the stockholders:

The Company has contingently issuable shares of 6,306,550 issuable upon the Company’s completion of a liquidity event which has not occurred as of March 31, 2025. These shares are excluded from weighted average common shares - basic but included in calculation of the dilutive effect of stock options and restricted stock awards. See our 2024 Form 10-K, Note 19, Stock Based Compensation for further information.

NOTE 5: ACQUISITIONS

Aero Turbine, Inc.

On August 23, 2024, the Company acquired 100% of the shares of Aero Turbine, Inc. (“Aero Turbine”) for a purchase price of approximately $132.0 million, subject to post-closing adjustments, comprised of an initial cash purchase price of $116.8 million and $15.2 million representing the estimated fair value of additional consideration contingently payable based upon the achievement of gross profit in excess of certain gross profit targets for the period from January 1, 2024, to December 31, 2026. The maximum contingent consideration payable from the Company to the seller is $21.0 million. The current portion of the contingent consideration liability is recorded in Accrued and other current liabilities and the non-current portion is recorded in Other non-current liabilities. Aero Turbine is a provider of engine component repair, overhaul services and other engineering services for U.S. and foreign military customers.

The results of operations of Aero Turbine have been included in the consolidated financial statements of the Company from August 23, 2024, the closing date of the acquisition. Aero Turbine is reported within the Component Repair Services segment.

The Company has provisionally allocated the purchase price based on the fair values of the assets acquired and liabilities assumed at the Aero Turbine acquisition date as follows:

The fair values presented were estimated by management. During the three months ended March 31, 2025, the Company recorded measurement period adjustments related to estimate refinement of a $0.8 million decrease in accrued and other current liabilities, resulting in a corresponding decrease in goodwill. The fair value of the assets acquired includes accounts receivable of $4.1 million, of which all is expected to be collectible. The excess of the cost of acquisition over the fair value of the net tangible assets acquired of $127.7 million has been allocated as $75.0 million of customer relationships and $52.7 million of goodwill. The goodwill recognized is attributable to Aero Turbine’s workforce, market position, quality, customized repairs and reliable turnaround times. Goodwill will not be amortized but will be reviewed annually for impairment. None of the goodwill is expected to be deductible for income tax purposes. Customer relationships are expected to be amortized over 15 years. The consideration paid and final valuation and related allocation of the purchase price is subject to change as additional information is received and will be completed no later than 12 months after the closing date.

Acquisition related costs of $1.4 million were incurred for theyear ended December 31, 2024. These costs are reported in the Consolidated Statements of Operations as “Acquisition costs”. Such expenses include professional fees and other third-party costs.

NOTE 6: INVENTORIES

Inventories consist of the following:

Inventory balances were net of reserves for slow moving, excess or obsolete engine and aircraft parts inventory of$113.4 million and$110.2 million as of March 31, 2025 and December 31, 2024, respectively.

NOTE 7: GOODWILL

The changes in the carrying amount of goodwill for the periods ended March 31, 2025 and 2024, are as follows:

Goodwill Impairment Testing

The Company reviews goodwill at least annually for potential impairment, as of October 1, and more frequently, if events or changes in circumstances suggest that impairment may exist. The Company performed its annual goodwill impairment testing as of October 1, 2024, and determined that no adjustments to the carrying value of goodwill were necessary as it was more likely than not that the fair values of our reporting units are above their carrying values and thatno impairment had occurred. We have assessed the changes in events and circumstances through the quarter ended March 31, 2025, and have concluded that no triggering events have occurred that would require interim testing.

NOTE 8: LONG-TERM DEBT

Long-term debt consists of the following:

New Credit Agreement

On October 31, 2024, the Company entered into the New Credit Agreement providing for the New 2024 Term Loan Facilities due October 31, 2031, in an aggregate principal amount of $2,250.0 million, and the New 2024 Revolving Credit Facility due October 31, 2029, in an aggregate principal amount of up to $750.0 million. Concurrent with the closing of the New Credit Agreement, the Company used the proceeds of the New 2024 Term Loan Facilities and approximately $95.0 million of the proceeds of the New 2024 Revolving Credit Facility to repay in full amounts outstanding under (i) the Prior Credit Agreement and (ii) the Prior ABL Credit Agreement, terminating each of the debt facilities thereunder. The Company expensed $23.7 million related to new third party fees that did not meet the criteria for deferral as refinancing costs on the Consolidated Income Statement during the year ended December 31, 2024, of which $5.7 million related to the New Credit Agreement, $11.6 million related to the New 2024 Term Loan Facilities, $1.5 million related to the September 6, 2024 amendment to the Prior Credit Agreement and $4.9 million related to the March 25, 2024 Prior Credit Agreement.

New 2024 Term Loan Facilities

The New Credit Agreement provided for (i) a senior secured dollar term loan B facility, incurred by the U.S. Borrower in an aggregate principal amount of $1,630.0 million (the “New 2024 Term Loan B-1 Facility”), (ii) a senior secured dollar term loan B facility incurred by the Canadian Borrower in an aggregate principal amount of $620.0 million (the “New 2024 Term Loan B-2 Facility” and, together with the New 2024 Term Loan B-1 Facility, the “New 2024 Term Loan Facilities”). The New 2024 Term Loan Facilities were fully drawn on October 31, 2024, in an aggregate principal amount of $2,250.0 million, bearing interest at a Secured Overnight Financing Rate (“SOFR”) +2.25% with provision for a rate step-down to 2.00% based on achieving a consolidated First Lien Net Leverage Ratio (as defined in the New Credit Agreement) of less than 3.00x, and will mature on October 31, 2031. The Company incurred new third party fees of $13.2 million related to the New 2024 Term Loan Facilities of which $11.6 million were expensed as refinancing costs on the Consolidated Income Statement during the year ended December 31, 2024, and $1.6 million of deferred finance charges were recorded as a reduction of long-term debt on the Consolidated Balance Sheets as of December 31, 2024 and will be amortized on a straight-line basis over the term of the credit facility. As of March 31, 2025, the effective interest rate on the New 2024 Term Loan Facilities was SOFR+2.00%.

New 2024 Revolving Credit Facility

The New Credit Agreement provided for a senior secured multicurrency revolving credit facility available to the Company in an aggregate principal amount of up to $750.0 million (of which up to $150.0 million is available for the issuance of letters of credit) (the “New 2024 Revolving Credit Facility” and, together with the New 2024 Term Loan Facilities, the “New Senior Secured Credit Facilities”). The New 2024 Term Loan Facilities will mature on October 31, 2031, and the New 2024 Revolving Credit Facility will mature on October 31, 2029. As of December 31, 2024, the New 2024 Revolving Credit Facility hadno outstanding borrowings. Borrowings bear interest at SOFR +2.00% with provision for step-down to 1.75% and 1.5% based on a achieving a consolidated First Lien Net Leverage Ratio of less than 3.25x and 2.75x, respectively. As of March 31, 2025, we had $624.1 million of available borrowing capacity under the New 2024 Revolving Credit Facility. The Company incurred new lender fees of $3.8 million related to the New 2024 Revolving Credit Facility, which are recorded as an other long-term asset on the Consolidated Balance Sheets as of December 31, 2024, and will be amortized on a straight-line basis over the term of the facility. As of March 31, 2025, the effective interest rate on the New 2024 Revolving Credit Facility was SOFR +1.75%.

Prior Credit Agreement

On October 31, 2024, concurrent with the closing of the New Credit Agreement, the Company used the proceeds of the New 2024 Term Loan Facilities and the New 2024 Revolving Credit Facility to repay in full amounts outstanding under the Prior Credit Agreement terminating each of the debt facilities thereunder, which resulted in a loss on extinguishment of debt of $4.7 million recognized in the year ended December 31, 2024, $0.7 million related to the March 25, 2024 amendment of the Prior Credit Agreement, $3.6 million upon the commencement of the New Credit Agreement on October 31, 2024 representing the write off unamortized discounts and deferred financing charges related to the extinguished portions of the Prior Term Loan facilities and $0.4 million related to the extinguishment of the Prior 2023 Revolving Credit Facility.

Prior 2023 and Prior 2024 Term Loan Facilities

On August 24, 2023, the Company amended the Prior Credit Agreement to combine the 2019 Term Loan Facilities and the 2021 Term Loan Facility into the Prior 2023 Term Loan Facilities in the amount of $2,575.0 million less a 1.0% discount. The Prior 2023 Term Loan Facilities were comprised of two tranches, referred to as the Prior 2023 Term Loan B-1 Facility and the Prior Term Loan B-2 Facility, with identical terms that were entered into by subsidiaries of the Company. The Prior 2023 Term Loan Facilities incurred interest at the Term SOFR Rate plus 3.75% to 4.00% or the Base Prime Rate plus 2.75% to 3.00% and were scheduled to mature on August 24, 2028. As a result of the amendment, both a debt modification and a debt extinguishment arose. The Company recognized $0.8 million in deferred charges related to the Prior 2023 Term Loan Facilities which are recorded as a reduction of long-term debt on the Consolidated Balance Sheets. The Company also recognized a loss on the extinguishment of debt of $6.2 million, representing the write-off of the unamortized deferred finance charges and original issue discount related to the extinguished portion of the 2019 Term Loan Facilities and 2021 Term Loan Facility, while $22.8 million of the unamortized deferred finance charges and original issue discount relating to the modified debt continued to be deferred. In addition, $19.9 million in third party fees related to the modified portion of the 2019 Term Loan Facilities were expensed as refinancing costs on the Consolidated Income Statement during the year ended December 31, 2023, as these costs did not meet the criteria for deferral.

On March 25, 2024, the Company amended its Prior Credit Agreement, dated as of April 4, 2019 (as amended, restated, modified and/or supplemented from time to time, the “Credit Agreement”), among Dynasty Acquisition Co., Inc. as the U.S. borrower (the “U.S. Borrower”), Standard Aero Limited, as the Canadian borrower (the “Canadian Borrower”), Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and certain other parties thereto, to refinance the $2,562.1 million existing senior secured term loans then-outstanding thereunder (the “Prior 2023 Term Loans”) and provide the Company with an incremental $200.0 million as additional term loans (together with the refinanced 2023 Term Loans, the “Prior 2024 Term Loans” and the facilities in respect thereof, the “Prior 2024 Term Loan Facilities”). In addition, the amendment reduced the applicable interest rate to the Term SOFR Rate plus 3.25% to 3.50% or the Base Prime Rate plus 2.25% to 2.50%. All other terms of the Credit Agreement remained unchanged. The incremental proceeds from the Prior 2024 Term Loans were used toward the partial redemption of the Prior Senior Notes. As a result of the amendment, the Company recognized a loss on the extinguishment of debt of $0.7 million in the year ended December 31, 2024, representing the write-off of the unamortized deferred finance charges related to the extinguished portion of the Prior 2023 Term Loans. In addition, $4.9 million in third party fees related to the modified portion of the Term Loans were expensed as refinancing costs on the Consolidated Income Statement during the year ended December 31, 2024, as these costs did not meet the criteria for deferral. The Company recognized $0.1 million in deferred charges which are recorded as a reduction of long-term debt on the Consolidated Balance Sheets. The original issue discount and deferred charges were amortized over the term of the Credit Agreement using the straight-line method, which approximates the effective interest rate method.

On September 6, 2024, the Company amended the Prior Credit Agreement to incur additional 2024 Term Loans in a principal amount of $200.0 million which were, in part, used to paydown a portion of the advances under the Company’s Prior ABL Credit Facility used to fund the acquisition of Aero Turbine. There were no other substantive changes made to the Prior Credit Agreement. As a result of the amendment, $1.5 million in third party fees related to the modified portion of the Term Loans were expensed as refinancing costs on the Consolidated Income Statement during the year ended December 31, 2024, as these costs did not meet the criteria for deferral. The original issue discount and deferred charges were amortized over the term of the Prior Credit Agreement using the straight-line method, which approximates the effective interest rate method.

On October 31, 2024 concurrent withthe New Credit Agreement, we recognized a $3.6 million loss on extinguishment of debt representing the write off unamortized discounts and deferred financing charges related to the extinguished portions of the Prior Term Loan facilities

Prior 2023 Revolving Credit Facility

The Prior 2023 Revolving Credit Facility was a senior secured multicurrency cash flow revolving credit facility available under the Prior Credit Agreement, with a capacity of $150.0 million (of which up to $75.0 millionwas available for the issuance of letters of credit)and was scheduled to mature on May 1, 2028. The Prior 2023 Revolving Credit Facility bore interest at the Adjusted Term SOFR rate plus 3.125% to 3.50%. The applicable rates on borrowing under the credit agreement were based on the Consolidated First Lien Net Leverage Ratio. The 2023 Revolving Credit Facility was subject to a maximum Consolidated First Lien Net Leverage Ratio that was tested at the end of any fiscal quarter if the total revolving credit loans outstanding under the Prior 2023 Revolving Credit Facility on such date exceed 35.0% of the aggregate amount of all commitments in respect of the Prior 2023 Revolving Credit Facility.

On October 31, 2024, concurrent with the closing of the New Credit Agreement, the Company terminated the Prior 2023 Revolving Credit Facility which hadno outstanding loans under it, resulting in a loss on extinguishment of debt of $0.4 million recognized in the year ended December 31, 2024.

Prior ABL Credit Facility

On October 31, 2024, concurrent with the closing of the New Credit Agreement, the Company used the proceeds of the New 2024 Term Loan Facilities and the New 2024 Revolving Credit Facility to repay in full amounts outstanding under the ABL Credit Agreement, terminating the debt facility thereunder. The extinguishment of the Prior ABL Credit Facility resulted in a loss on extinguishment of debt of $2.0 million recognized in the year ended December 31, 2024.

The Prior ABL Credit Facility had a capacity of $400.0 million, was repayable in U.S. dollars and was scheduled to mature on May 1, 2028. At the Company’s discretion, the borrowings under the ABL Credit Facility bore interest at the Adjusted Term SOFR rate plus 1.50% to 2.00%, Prime Lending Rate plus 0.50% to 1.00%, or the Base Rate on Canadian borrowings plus 0.50% to 1.00%, with the spread dependent on the amount of the borrowing and was subject to certain financial covenants. The ABL Credit Facility had an annual commitment fee of 0.250% to 0.375% based on excess availability. The ABL Credit Facility contained financial covenants which were required to be calculated immediately prior to or during the continuance of a trigger period. The trigger period was a period where borrowing availability was less than the greater of 10% of the line cap and $30.0 million.

Prior Senior Notes

The Prior Senior Notes bore an interest rate of 10.0% and were scheduled to mature on April 4, 2027. On March 25, 2024, the Company partially redeemed $200.0 million of the Prior Senior Notes. As a result of the redemption, the Company recognized a loss on extinguishment of debt of $2.9 million in the year ended December 31, 2024, representing the write-off of the unamortized deferred finance charges related to the redeemed portion of the Prior Senior Notes. On October 3, 2024, the Company used the proceeds from the initial public offering to repay the full outstanding principal and accrued interest on the Prior Senior Notes, totaling $487.5 million. The extinguishment of the Prior Senior Notes resulted in a loss on extinguishment of debt of $5.7 million recognized in the year ended December 31, 2024.

The Company’s weighted average interest rate of borrowings under its senior credit agreements was 6.6% for the three months ended March 31, 2025, and 9.5% for the three months ended March 31, 2024.

Certain of these agreements contain non-financial covenants that limit both the Company’s ability to raise additional financings in the future and the Company’s ability to pay dividends subject to select amounts and incurrence ratios.

As of March 31, 2025, the amounts of the long-term debt payable for the years ending on December 31 are as follows:

NOTE 9: LEASES

Lease costs consist of the following:

The impact of leasing on the Consolidated Balance Sheets consists of the following:

Supplemental cash flow information related to leases consisted of the following:

Future minimum operating lease payments consist of the following for the twelve months ending December 31:

Weighted average remaining lease term and borrowing rate consisted of the following:

NOTE 10: INCOME TAXES

The Company’s estimated annual effective tax rate for the three months ended March 31, 2025 was 26.1%. The difference between this and the U.S. statutory rate of 21.0% is primarily due to non-deductible expenses, Global Intangible Low-Taxed Income (GILTI), which was enacted under the Tax Cuts and Jobs Act of 2017, and state and foreign tax rates.

The Company’s estimated annual effective tax rate for the three months ended March 31, 2024 was 84.6%. The difference between this and the U.S. statutory rate of 21.0% is primarily due to the mix of earnings between U.S. and foreign jurisdictions, as well as the Company increasing its valuation allowance in connection with the deferred tax asset related to the interest limitation under Section 163(j) of the Internal Revenue Code. Other factors impacting the rate include non-deductible expenses, and GILTI, which was enacted under the Tax Cuts and Jobs Act of 2017.

The Company did not record any significant changes in its unrecognized tax benefits or total interest and penalties for tax years remaining open to examination during the three months ended March 31, 2025 and 2024. Currently, there are not any ongoing audits or examinations with any tax jurisdictions.

In 2021, the Organization for Economic Cooperation and Development (“OECD”) released Pillar Two Global Anti-Base Erosion model rules (“Pillar Two Rules”), designed to ensure large corporations are taxed at a minimum rate of 15.0% in all countries of operation. On June 20, 2024, as part of Bill C-69, Canada enacted its Pillar Two legislation effective January 1, 2024. Canada Bill C-59 was also enacted on June 20, 2024 and included the excessive interest and financing expenses limitation (“EIFEL”) regime effective for tax years beginning on or after December 31, 2023. The Company has performed a quantitative and qualitative assessment and determined the effects are not materially significant to the Company’s financial statements for thethree months ended March 31, 2025 and March 31,

2024 respectively. StandardAero will continue to evaluate Pillar Two and EIFEL for their potential impact on future periods as further legislation is proposed or enacted.

NOTE 11: COMMITMENTS AND CONTINGENCIES

Commitments

The Company has future contractual commitments of$27.2 million as of March 31, 2025, and had$30.6 million as of December 31, 2024, for capital commitments.

The Company entered into a building lease agreement that has not yet commenced as of March 31, 2025. The lease is for 30 years with future lease payments estimated to total approximately $72.9 million.

Contingent liabilities

The Company is involved, from time to time, in legal actions and claims arising in the ordinary course of business. Although predicting the outcome of legal actions and claims is difficult, based on current knowledge and consultation with legal counsel, the Company does not expect the outcome of these matters, either individually or in aggregate, to have a material adverse effect on the Company’s consolidated financial position.

From time to time, the Company enters into contracts that contain liquidated damage provisions, which provide for the payment of damages to the Company’s customers in the event of non-compliance with certain contractually-specified terms and conditions. The Company evaluates its exposure to these provisions on a contract-by-contract basis, and records provisions for such contractual provisions when it has been determined that a loss is probable and estimable. As of March 31, 2025 and December 31, 2024 the provision is nominal.

The Company has facilities that are located on land that has been used for industrial purposes for an extended period of time. The Company has not been named as a defendant in any environmental suit. Management believes that the Company is currently in substantial compliance with environmental laws. The Company incurs capital and operating costs relating to environmental compliance on an ongoing basis. The Company does not believe it will be required under existing environmental laws to expend amounts that would have a material adverse effect on its financial position or results of operations as a whole.

NOTE 12: GUARANTEES

The Company issues letters of credit, performance bonds, bid bonds or guarantees in the ordinary course of business. These instruments are generally issued in conjunction with contracts or other business requirements. The total of these instruments outstanding was approximately$25.7 million and$20.6 million as of March 31, 2025 and December 31, 2024, respectively.

NOTE 13: RELATED PARTY TRANSACTIONS

In connection with the Acquisition, on April 4, 2019, Dynasty Acquisition entered into a consulting services agreement (the “Carlyle Services Agreement”) with Carlyle Investment Management L.L.C. (“CIM”), pursuant to which Dynasty Acquisition paid CIM a one-time fee of approximately $24.5 million for strategic advisory and consulting services provided to Dynasty Acquisition in connection with the Acquisition. Pursuant to the Carlyle Services Agreement, and subject to certain conditions, Dynasty Acquisition also pays to CIM an annual fee of approximately $2.4 million, payable in quarterly installments in advance, for the advisory, consulting and other services provided by CIM pursuant to the Carlyle Services Agreement. Dynasty Acquisition also reimburses CIM’s reasonable out-of-pocket expenses incurred in connection with services provided pursuant to the Carlyle Services Agreement, and Dynasty Acquisition may pay CIM additional fees associated with other future transactions or in consideration of any additional services provided under the Carlyle Services Agreement. In connection with the IPO, the Carlyle Services Agreement was amended and restated, and will continue in full force and effect until the earlier of the second anniversary of the consummation of the IPO, which is October 3, 2026, and the date on which CIM and its affiliates collectively and beneficially own, directly or indirectly, less than 10% of our outstanding voting common stock. For thethree months ended March 31, 2025, we paid CIM approximately $0.6 million pursuant to the Carlyle Services Agreement.

In connection with the Acquisition, on April 4, 2019, Dynasty Acquisition entered into a consulting service agreement (the “Beamer Services Agreement”) with Beamer Investment Inc., an affiliate of GIC, pursuant to which Dynasty Acquisition paid Beamer Investment Inc. a one-time fee of approximately $5.5 million for strategic advisory and consulting, services provided to Dynasty Acquisition in connection with the Acquisition. Pursuant to the Beamer Services Agreement, and subject to certain conditions, Dynasty Acquisition also pays to Beamer Investment Inc. an annual fee of approximately $0.6 million, payable in quarterly installments in advance, for the advisory, consulting and other services provided by Beamer Investment Inc. pursuant to the Beamer Services Agreement. Dynasty Acquisition also reimburses Beamer Investment Inc.’s reasonable out-of-pocket expenses incurred in connection with services provided pursuant to the Beamer Services Agreement, and Dynasty Acquisition may pay Beamer Investment Inc. additional fees associated with other future transactions or in consideration of any additional services provided under the Beamer Services Agreement. In connection with the IPO, the Beamer Services Agreement was amended and restated, and will continue in full force and effect until the earlier of the second anniversary of the consummation of the IPO and the date on which Beamer Investment Inc. and its affiliates collectively and beneficially own, directly or indirectly, less than 50% of our outstanding voting common stock that they owned on the date of the closing of the IPO, prior to giving effect to the sale of shares by Beamer Investment Inc. or an affiliate of Beamer Investment Inc. in the IPO. For thethree months ended March 31, 2025, we paid Beamer Investment Inc. approximately $0.1 million pursuant to the Beamer Services Agreement.

The Company expensed$0.8 million for the three months ended March 31, 2025 and 2024, foradvisory and consulting services as outlined above, as well as an additional $1.2 million during thethree months ended March 31, 2024 for arrangement fees paid in connection with the amendment to the Prior Credit Agreement.

CFGI, a portfolio company of a fund affiliated with Carlyle, provides the Company with accounting advisory and consulting services. For the three months ended March 31, 2025, the Company expensed$0.7 million and paid $0.2 million to CFGI for accounting advisory and consulting services. For the three months ended March 31, 2024, the Company expensed and paid CFGI$0.2 million.

NOTE 14: EMPLOYEE BENEFIT PLANS

Defined contribution pension plans

The Company has several defined contribution plans covering substantially all of its employees. Costs for the defined contribution plans were$5.2 million and$5.8 million for the three months ended March 31, 2025 and 2024, respectively.

Defined benefit pension plans

The Company maintains defined benefit plans for certain employees in the United Kingdom and France.

In the United Kingdom, the Company maintainstwo defined benefit schemes which provide both pensions in retirement and death benefits to members. Pension benefits are related to the member’s final salary at retirement (or their career average revalued salary) and their length of service. The main scheme is the Vector Aerospace International Limited Pension Scheme (the “Scheme”). The other defined benefit scheme is the Vector Aerospace 1998 Pension Plan (the “Plan”). The Scheme and Plan are generally closed for new members, who participate in a separate defined contribution plan.

In France, the defined benefit plan is a government-mandated defined obligation that provides employees with retirement indemnities in the form of lump sums on the basis of the length of service and employee compensation levels. The plan is unfunded and benefits are paid when amounts become due, commencing when participants retire. Actuarial gains and losses of the year for long service awards are immediately recognized in the Consolidated Statements of Operations.

Costs for the defined benefit plans were$0.1 million for the three months ended March 31, 2025 and 2024.

NOTE 15: FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value into the following hierarchy are determined as follows:

For cash and cash equivalents, accounts receivable, income taxes receivable and accounts payable, the fair value approximates the carrying value due to the short maturity periods of these financial instruments. For long-term borrowings, the fair value is measured using Level 2 market values.

The interest rate swaps, interest rate caps and foreign exchange contracts are carried at fair value in the Consolidated Balance Sheets. The fair value measurement is classified within Level 2 of the fair value hierarchy, as the inputs to the derivative pricing model are generally observable and do not contain a high level of subjectivity. The fair value of the interest rate agreements is estimated using industry standard valuation models using market-based observable inputs.

Valuation of Contingent Consideration Liability

The fair value of earnout consideration was estimated based on applying a Monte Carlo simulation method to forecast achievement of the gross profit targets. This method involves many possible value outcomes which are evaluated to establish an estimated value. Key inputs in the valuation include volatility and discount rates. Due to the significant unobservable inputs used in the valuations, these liabilities are categorized within Level 3 of the fair value hierarchy.

The Company determined the initial value for the contingent consideration liability of $15.2 million using the Level 3 inputs as of the issuance date on August 23, 2024. No changes in fair value of contingent consideration liability were recorded during the three months ended March 31, 2025, in the consolidated statements of operations and comprehensive loss as the initial fair value approximates the fair value as of March 31, 2025.

The following table represents the significant inputs used in calculating the fair value of the contingent consideration liability on the issuance date and as of March 31, 2025:

The following table summarizes the carrying amounts and fair values of financial instruments:

(1)

The carrying amount of debt instruments is presented net of the debt issuance costs, premium and discount. Refer to Note 8, “Long-Term Debt”, for gross carrying amounts

The gains (losses) on the Company’s derivative instruments were as follows:

NOTE 16: DERIVATIVES AND HEDGING

The Company is exposed to, among other things, the impact of changes in interest rates and foreign currency exchanges rates in the normal course of business. The Company’s objective in risk management is to utilize interest rate derivatives to add stability to interest expense and manage its exposure to interest rate movements and utilize foreign exchange rate derivatives to add stability to foreign exchange expense and manage its exposure to exchange rate movements. To accomplish this objective, the Company primarily uses (i) interest-rate swaps and interest-rate caps as part of its interest rate risk management strategy and (ii) foreign currency forward contracts to protect against the foreign currency exchange rate risk inherent on forecasted transactions.

The Company uses derivative financial instruments only to the extent necessary to hedge identified business risks and does not enter into such transactions for trading purposes.

Interest-rate swap and interest-rate cap agreements

Interest-rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest-rate caps designated as cash flow hedges involve payment of a fixed premium to a counterparty in exchange for the company receiving a SOFR cap over the life of the agreement without exchange of the underlying notional amount.

During the three months ended March 31, 2025 and 2024, such derivatives were used to hedge the variable cash flows associated with its long-term debt agreements.

The tables below summarize the key terms of the interest-rate swap and interest-rate cap agreements:

Interest-rate swap agreements:

Interest-rate cap agreements:

(1)

The original interest-rate swap agreement, dated November 30, 2022, has an initial notional amount of $1,000.0 million, decreasing to $750.0 million on March 31, 2022, and to $500.0 million on March 31, 2023.

(2)

The interest rate was amended on June 29, 2023 from LIBOR (2.47%) to SOFR (2.41%).

(3)

The original interest-rate cap agreement, dated November 30, 2022, has an initial notional amount of $500.0 million, increasing to $1,000.0 million on March 31, 2023, and increasing to $1,500.0 million on March 28, 2024.

(4)

The interest rate was amended on June 29, 2023 from LIBOR (4.50%) to SOFR (4.45%).

The amounts shown in the table below represent the gross amounts of recognized assets and liabilities, the amounts offset in the Consolidated Balance Sheets and the net amounts of assets and liabilities presented therein:

For the interest-rate swaps, differences between the hedged interest rate and the fixed rate are recorded as interest expense in the Consolidated Statements of Operations in the same period that the related interest is recorded for the Company’s long-term debt agreements.

For the interest-rate caps, monthly premiums and differences received between the hedged interest rate and the interest rate cap are recorded to interest expense in the Consolidated Statements of Operations in the same period that the related interest is recorded for the Company’s long-term debt agreements.

Foreign currency forward exchange contracts

The Company has operations in Canada, as well as other countries outside of North America, and consequently the Consolidated Balance Sheets can be affected by movements in exchange rates for limited balances denominated in foreign currency. Currency exposures can also arise from certain revenue and purchase transactions denominated in foreign currencies, primarily payroll costs which are in local currencies.

The Company enters into short term foreign exchange contracts throughout the year designated as a cash flow hedge to manage the exposure to changes in the exchange rate on its Canadian and United Kingdom payroll costs, requiring the Company to buy a notional amount of Canadian dollars and British Pounds Sterling. The contracts require the Company to buy a notional amount of the foreign currency at a set rate weekly from a reference date to maturity date, or until a maximum value is reached. The Company hadone foreign currency contract that was entered April 12, 2024 at a notional value of GBP 17.5 million and matured on December 31, 2024.

NOTE 17: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes all non-stockholder changes in equity. The changes in accumulated other comprehensive income (loss) by component is as follows:

NOTE 18: SEGMENT INFORMATION

The Company’s chief operating decision making officer (“CODM”) is the Company’s Chief Executive Officer. Consistent with how the Company evaluates its performance and the way the Company is organized internally; the Company reports its activities intwo segments: Engine Services and Component Repair Services. The CODM regularly uses the below financial measures to allocate financial and human resources to individual segments and evaluate segment performance. The CODM also uses these measures in the annual budget and quarterly forecasting processes. The CODM considers budget-to-actual variances on a monthly basis when making decisions about allocating capital and personnel to the segments.

The Company's CODM is regularly provided and evaluates the performance of our segments based on segment Revenue and segment Adjusted EBITDA. Management believes segment Adjusted EBITDA is indicative of operational performance and ongoing profitability and is used to evaluate the operating performance of the Company’s segments and for planning and forecasting purposes, including the allocation of resources and capital.

The Company defines Segment Adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit), depreciation and amortization directly attributable to each operating segment and adjusted for certain non-cash items that the Company may record each period, as well as non-recurring items such as acquisition costs, integration and severance costs, refinance fees, business transformation costs and other discrete expenses, when applicable. Expense information is provided to and reviewed by the CODM on a consolidated basis to evaluate cost efficiency and company level performance.

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

The Company’s Component Repair Services segment provides engine component and accessory repairs to the Commercial Aerospace, Military & Helicopter, and Other, including land and marine, and oil and gas end markets. Revenue in the Component Repair Services segment is derived from the engine piece part and accessory repairs that we perform, repair development engineering and other related services, and some engine new part manufacturing. Cost of revenue consists primarily of cost of materials, direct labor and overhead.

Our segment disclosure includes intersegment revenues, which primarily consist of subcontract services between segments. The revenue and corresponding cost of revenue are eliminated on consolidation. The elimination of such intersegment transactions is included within intersegment revenue in the table below. The revenue is eliminated with the segment receiving the subcontract services. The segment providing services retains revenue while the segment receiving the services records the elimination.

The Company does not report total assets by segment for internal or external reporting purposes as the Company's CODM does not assess performance, make strategic decisions or allocate resources based on assets.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies (see Note 2, Summary of Significant Accounting Policies).

Selected financial information for each segment is as follows:

(1)

Other segment items for each reportable segment primarily includes cost of sales and other selling general and administrative expenses.

(2)

Corporate primarily consists of costs related to executive and staff functions, including Information Technology, Human Resources, Legal, Finance, Marketing, Corporate Supply Chain and Corporate Engineering Services finance, which benefit the enterprise as a whole. These costs are primarily related to the general management of these functions on a corporate level and the design and development of programs, policies, and procedures that are then implemented in the individual segments, with each segment bearing its own cost of implementation. The Corporate function also includes expenses associated with the Company's debt.

(3)

(4)

Represents non-cash stock compensation expense associated with awards issued under the 2019 Long-Term Incentive Plan in connection with Carlyle’s ownership.

(5)

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

(6)

Represents professional fees related to business transformation, secondary offering costs, and quarterly management fees payable to Carlyle Investment Management L.L.C. and Beamer Investment Inc. under consulting services agreements, representation and warranty insurance costs associated with acquisitions, that are the result of other, non-comparable events to measure operating performance as these events arise outside of our ordinary course of continuing operations. See Note 13, "Related Party Transactions” for descriptions of the consulting services agreements with Carlyle Investment Management L.L.C. and Beamer Investment Inc.

(1)

Other segment items for each reportable segment primarily includes cost of sales and other selling general and administrative expenses.

(2)

Corporate primarily consists of costs related to executive and staff functions, including Information Technology, Human Resources, Legal, Finance, Marketing, Corporate Supply Chain and Corporate Engineering Services finance, which benefit the enterprise as a whole. These costs are primarily related to the general management of these functions on a corporate level and the design and development of programs, policies, and procedures that are then implemented in the individual segments, with each segment bearing its own cost of implementation. The Corporate function also includes expenses associated with the Company's debt.

(3)

(4)

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

(5)

Represents quarterly management fees payable to Carlyle Investment Management L.L.C. and Beamer Investment Inc. under consulting services agreements, representation and warranty insurance costs associated with acquisitions, that are the result of other, non-comparable events to measure operating performance as these events arise outside of our ordinary course of continuing operations. See Note 13, “Related Party Transactions” for descriptions of the consulting services agreements with Carlyle Investment Management L.L.C. and Beamer Investment Inc.

The following table presents revenues from external customers by geographic area based on location of the customer:

(1)

Countries grouped within Rest of Europe, Asia, and Rest of world are individually immaterial as compared to total revenue with no country representing more than 3% of total revenue for thethree months ended March 31, 2025 and 2024.