ASLE - Earnings call transcript Q3 2021

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Operator

Please standby. Good day and welcome to the AerSale Inc.

Third Quarter 2021 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to, Kristen Gallagher, Human Resources, Director. ahead. go Please

Kristen Gallagher

Officer. like XXXX I’d Nick everyone AerSale’s Chief to Chief Good call. to Conducting quarter Financial Garmendia, Martin earnings Officer; are; the third Executive afternoon. and welcome call Finazzo, today

the turn made the our metrics of nor can results. Annual may you Finazzo. including AerSale risks, in metrics Before ir.aersale.com. we on materially cause business. the unknown factors XXXX, of for discuss those the GAAP its matters to and actual expectations important do financial the statements meaning website December filed cause Important found XX, assessing guarantees, XXXX quarter’s different the current statements results, differ call. section other of that from the achievements Nick over the uncertainties, statements I’ll those A historical the and in that could cause non-GAAP also on call results, that, Securities section in the relate actual our other performance this that statements be important company’s year of uncertainties that reconciliation materially the We’ll performance, that results Exchange considered identify March Form or are from that differ within discussed to of business to could this forward-looking on factors on the indicated filings known earnings Investors are to and XX, available Securities measures with we but made of to non-GAAP and filings not With forward-looking and the to SEC. our statements all as Commission These materials involve call results risks want the we performance. refer to future nearest and this These with at on address materially ended and Factors presentation XX-K any regarding neither remind and Laws, to Risk facts, important forward-looking Federal promises for Report be be view events should other actual the by from our statements

Nick Finazzo

Good our afternoon you then and on progress today. with line, a I’ll you, the of the produced updates normalization. overview the making and turn products, of quarter, operational results AerAware. Kristen. thank everyone I’ll the by call review engineered aerospace over program begin for operations to was followed on and our AerSafe and call end Thank brief solutions an supportive of in the joining by increasingly we're driven to broad-based Martin our success strong numbers. process We as quarter, the XXX which to the airline market commercial begin

quarter payroll $X.X in revenues the million in conversions was proceeds million freighter are related flight the in in million, last $XX.X quarter equipment no solutions The compared quarter fleet million support asset for equipment monetize maintenance The third in $XX.X XX.X% prior of the some revenue, $XX.X revenue XXXX track. primarily of in not million XXXX. to $XX.X increase of third third proceeds A there on XXXX. XXX account or XXXX. third and company lower remain of XX.X% aircraft year, our were TechOps of quarter on an during related recognized was extent. equipment million revenue to of the Demand third in the of revenue by activities flight year. recognized our lower included payment lease Our was leasing any to program decline compared But partially which flight of passenger corresponding the sales. the to Boeing of to or revenues, EBITDA management storage end sales to offset in moderated increase remaining did which and plans $XX.X quarter strong, sales, include Adjusted

largely absence These with return are this shareholders. proceeds, well believe for our received the margins positioned payments as our proposition lower and last were Our of year, we condition due line quarter results our the to we internal in to we're deliver from contribution year. these and as value expectations the the customers lease well on to

Within prior specifics three XX.X sold management. equipment year aircraft and parts included Turning and We engine the to serviceable segments one or that airframe in and USM material period. sales of higher parts than beginning quarter. flight the asset our million use engine business, with were

as monetize the track line on in operation up In in held travel. keep with previous air to to We return year. this strategic we've upswing continued with assets to airlines quarters are order aircraft into the

Our was Due lower prior at to XXXX. the of aircraft X than expiration XXX leasing revenue period. Boeing year of the the leases end passenger

the benefited prior return period XXXX. In in year recur that addition, from did lease payments not

continue five which airlines of perform our our We given two third-party operation Good segment and XXX volume Boeing associated sales and three to in In and hangar labor reduce purchases XX.X% Goodyear our at strong opportunities as one to attractive year, force market aircraft, asset work Our to XXXX freighter, airlines aircraft in their At TechOps more we fleets perform stands facility. for following remain levels. lease passenger service fleet Roswell to of lower for the were expect the and line demand freighters. took bays assess well. down due aircraft currently to storage our eight due facility, at all support conversion cargo third-party returned as capacity our into normalized

pandemic. Despite aircraft recommissioning the remain aircraft of value is As supply rolled labor in aircraft of at the built deferral, subsequently into a engines are and the recognition the margin consistently added deferred materials, is facilities near utilization the support stored our associated at since with any gear we the until capacity sold. cost and the storage of start been labor, landing all aircraft high of the and of margin through has the the this result,

we XXX the and for solutions, platforms, of see Classic Airbus includes incremental XXX demand AXXX, AerSafe product XXX, engineered which family XXX to and continue the and aircraft. existing to and XXX XXX Boeing our Moving NG

are FTFR the system known a nearing foam XXX for Boeing receive specification as requirements technical incorporates to fuel mandated reduction, AerSafe serves FTFR. otherwise reticulated alternative by the achieves by system in a the an as to platform. AerSafe Airbus certification FAA AerSafe a final flammability the new We installed aircraft. a that military tank and alerting polyurethane STC nitrogen

date quantity which by can the center mandatory to installation AerSafe. directive airworthiness system May be in addition has the issued an of fuel of XXXs of requirements XXXX In satisfied regarding FTFR, with a fuel compliance indication the the been tanks

we solution aircraft such, AerSafe regulatory product expect comply cost to our time As effective accelerate demand requirements. as utilize this with and to for XXX our operators

continued We work product also have development on and our approval FAA AerAware. of

to a Vision allows style incorporating Display pilots weather Our advanced conditions. Flight Wearable technology Head through military Enhanced that see adverse System

well other progressing multispectral Elbit manufactured an are and Universal towards NG XXX-XXX the Display components at aircraft. to by prototype camera, Avionics successfully Wearable Boeing our subsidiary We this and AerSale certification, partner and stage Head has own AerSale integrated Systems its

the due AXXX, our After with that the AerSale sets also are verification continues of should this not advanced for the we're item been system installing this the FAA partners, into to we're STC FAA, is Final FAA the system and the the Airbus XX length into verbally labor software for integration own three XX, be AerAware in of ground approval granted shortly aircraft. We complexity Consequently, with completion before approval engineering although to of of system of XXX of is be and Boeing technology. disappointed NG. with platform pacing Concurrent the our XXX-XXX by XX constraints thereafter. reassured family the with Boeing the testing has NG of the flight Due certifiable. to AerAware our time completion of the have technology breaking end part and validation, expected taken, with February unusual XXXX. initial we this

We’re production when AerAware our capacity facility receive it's only interim, of all if we produce PMA at the we've matter In matter Miami been the of a rather necessary highly of potential not the it's have up visibility in the AerAware beefing parts We're by of of excited Systems, the will limited confident an a XXX, STC. our to business. to timing opportunity to approval. on components transform its and FAA Elbit universal market install exact final a massive while we

the We expect poor to standard ability AerAware the gold flight carbon become weather traffic safety, delays improve attractive reduce diversions, Vision airport and return Technology by Enhanced very with aircraft, to to caused of operations minimizing flight footprint and on airlines, its congestion. a on airport conditions, investment offer by commercial

makes variant mixed pace expect the the continue ongoing albeit to clear. COVID recovery we less impact in XX forward, commercial of the Delta the as a Looking outlook markets at

reactivations purpose and USM consumption positioned. AerSale our Boeing sales markets, model. operate and overhaul launch. includes from leasing, we procurement, is monetize built, long-term, to opportunities increase In in storage investment continued equipment for due ultimately we're and aftermarket of commercial and MRO excellently for the seeing parts re-commissioning half FAA freighter a the to aircraft, And greater expect of an aircraft aircraft Our volume, available a MRO, aviation made multi-dimensional That We're demand and first contributions aircraft We sale. benefit our and of in certifications, part for to the product remainder XXXX. pickup on in the from activity, XXXX fully-integrated, adaptive flight AerAware track and through XXX the decommissioning.

our advance closely and to Our on all market, capitalize monitor and drive stakeholders. unique peers of us model opportunities enables external the internal value and to our

deliver Our the increase and model guidance. to in dynamic exceptional and primary driver have AerSale’s full in to circumstances, ability our year EBITDA and ability results our demonstrated diversification complex is

the in Importantly, XXXX. a is and were the original projected this will detail in our aforementioned moment which sales, delay which in included Martin despite certification, AerAware forecast increase, guidance for

services enhanced fully taking conversion than delay margins units. our the of AerSale’s and have add expected of advantage all our in this where value core higher was program, by incorporated We by operating goods by mitigated XXX

value our utilize where competition extraction integrated to methodologies models, financial multi to dimensional enables of cannot. business ability the AerSale positive unique achieve results our Our all

AerSale Friday call the issued to the of 'that wanted violate position the that, spec act'. a turning redeem been does part over vis-à-vis questions be redemption afternoon we've Department exchange as our compliance Martin, ability and to issue Act. address is the warrants does take that under just our a that not this I investor or received cashless to the to redemption employing receiving, Act warrants Cares our Treasury common cashless that We appear warrant of moment a submitted determination Before were numerous AerSale’s Cares confirmation to transaction restrictions. not stock a past to concerning

any making to publicly any further comments exercise at prescribed warrant issue appropriate the have board right redeem redeem to I And warrants will notice As not can its of our warrants do as we so. the in when to such the a be approval answering redemption. agreements. on or until able AerSale questions I will time we're

So it Martin. to at this time, I'll over numbers go over before Martin the taking any questions. hand to

Martin Garmendia

before with performance our Thanks, update financial overview Nick. ending our I start with an an will of on guidance.

quarter and flight did not which million third flight revenue sales. $XX.X the third included was quarter million, of include in any of sales. was million Our Revenue equipment XXXX $XX.X equipment $XX.X

a As based long on is and sales. may purchases our term. it over sales year monitor equipment to on year fluctuate from business our progress quarter important the And reminder, to and to asset therefore quarter flight

improvement aircraft third Consumption increase strong was upswing quarter a return to in payment recognized serviceable USM parts $XX.X $XX.X Asset travel. return as the prior continued operation offset the the The of quarter primarily leasing in the or Management into the on for used in flight of was by quarter due year. account to equipment mentioned Solutions against lower Third The sales. increase million the backdrop to was of air of material maintenance XXXX. revenues from above for partially least airlines million

and effects expect to makes forward, the of recovery the mixed be as I'll variant markets COVID-XX clear. outlook Looking Delta a less continue. ongoing pace we commercial the at it

XXXX XXXX. of first We and XXX are through our monetize to half investment remainder on track of the

third-party revenue and $XX.X Roswell million MRO operation. shift from from third line, the lower in aircraft as quarter towards airlines $XX.X as maintenance XXX quarter aircraft from XXXX, into work, as down conversion Third due to resources away of our our activities storage TechOps and facility our in at related well at returned primarily Goodyear million, cargo a was facility

benefit to going position work, We are reactivation forward. conversions a maintenance in heavy great cargo from additional and

AerAware activity, to for product We launch. our from overhaul expect demand pickup in to and commercial volume parts consumption benefit aircraft, of a for MRO USM the from due contributions innovative greater recommissioning

of Selling, Third primarily and return The quarter to third the to of compared payment $XX.X prior year. quarter third administrative million, XX.X% gross in margin with company $XX.X in corresponding no the million the was due million XX.X%, was the in the net in condition recognized XXXX. lease were XXXX in compared to XXXX. non-cash payroll $X.X proceeds equity program the decline equity-based expenses, third XXXX. quarter of third of The support incurred general compensation quarter of quarter of compensation

compensation related of share XXXX, quarter. XXXX. AerSale items equity mark-to-market warrants XXXX. incurred the quarter still and quarter million Diluted quarter were which received on Net our as net quarter We of the was as the the compared quarter was third in private of million, income it's million not based no the Adjusted program both proceeds XXXX, comparable public XXXX, payroll the program of $X.X quarter, receive $X.X was of and operations well and from the the million third third in there $X.X XXXX third the income in listing million. to excluding $X.X support Income in $XX.X per million earnings was net in for, XXXX. non-cash did any this the $X.XX $X.X third of proceeds during for quarter loss of million expenses $X.X year support quarter quarter not AerSale for was to corresponding while to ago also of these XX, of to December expenses in million XXXX. of of payroll due third a third third loss costs $XX.X

of Excluding mark-to-market was on private share the and the XXXX. of non-cash impacts equity compensation, quarter earnings diluted for adjusted the per warrants, the $X.XX

our in cash cash third received prior XXXX, quarter in driver of was corresponding XXXX, for the $XX.X that deposits. million third of corresponding receivable main in from million of from on in or its adjusted acquisition from sheet corresponding year financial absence the as cash EBITDA of allow revenues, and XX.X% of us had We opportunistically support was during cash utilized and return customer last quarter period. purchases, by million of well from well benefited and merger EBITDA activities operating as $X.X period $XX.X believe, revenue. accounts provided was undrawn because of the of of the million adjusted in $XXX or quarter the increased program that corresponding The of will support revolver lease which $XX.X XXXX was the Adjusted and forward. balance benefit to inventory quarter the compared there was proceeds generation end, payroll as AerSale million Third EBITDA to going in payroll this in condition third XX.X% EBITDA execute while acquisition million. flexibility million declined quarter At XXXX, fund asset $XX.X Adjusted flow ago year. approximately opportunities $XX and during collections largely the the year period quarter higher XXXX. the payment as proceeds third lower net quarter the program of contributions of Cash no

in Finally, our guidance update summary.

demand flight request going to based MRO in on revised for timing of segment, demand on This conversions e-commerce $XXX cargo passenger revenue is products to is services, cost and million services. increase improvement million the the $XX other in airport guidance to decrease guidance in equipment and accelerating freighter and TechOps an sales. to guidance EBITDA The of Our $XX and markets, related revenue of XXXX. $XXX and AMS for on million million adjusted for

ongoing is adjusted Boeing fleet EBITDA. AMS monetization the The the decline strong this margin XXX be to the and performance and driver to segment. continue of acquisition resulted expected in However, going higher offset main of

available We expect sell demand the the XXXX, aircraft. aircraft XXXX continue to to conversion a and of of as the of for first in half cargo result majority strong

the our from AerSafe increased we MRO of from with we to higher quarter third for the addition For performance summary, TechOps during demand are product. In of XXXX. in commercial aircraft, volume contributions recommissioning expect satisfied

profit is add. freighter guidance, our margins our year forecasts, aircraft, increasing our higher customer because and our strong our are for we as due recognize value full profitability to We demand exceeding

We which products support the recovery continue services. markets a With that for foreseeable for strengthening expect burgeoning in and to the to future commercial demand we're ready questions. our will some operator, take

Operator

Thank from Instructions] [Operator our you. Khanna we take And Company. today will with Cowen first and question Gautam

Gautam Khanna

Good guys. afternoon. Thanks Yes.

Martin Garmendia

Good afternoon.

Gautam Khanna

I had a questions. couple

range that revenue the did of monetization And prepare the and $XX taken the, raise was guidance up. can reduction change if on to me XXXs? related Could the for that? modernizations, you EBITDA just walk did million relatedly, revenue the you, the the to is for EBITDA you First what entire

Martin Garmendia

Yeah.

So our part conversion the as of in removed focus the Nick one. on resources noted, at revenues was facilities We to MRL overall reduction the process.

will be recognized XXX the on transaction. So that revenue as monetize we

In original amounts addition, we as based we noted, projections, taken Nick we had did have where included, originally out. our those area on

of overall using quarter kind Again, more have due that that have for far because were reduce So, we timing to been than actually do already the slightly, of the the And able our we have deals business. done expected. the we revenue had and to been we much all sales. looking of flight so equipment expect have did what we what four value remaining higher, in add sections at by sales But much that been margins we pipeline.

Gautam Khanna

or on where you many and MOUs can what an just not monetize XXXs have what do are sense. plans a the on that remind And ones give them of engines to five tarmac update but makes the cetera? us for have may us That really have get to how and you -- do could remaining them resale, you are

Nick Finazzo

two we out actually have parted we XX, the Sure airframes. XX

remaining first aircraft the two engines. First, of the with XX

under have those give or can the of you contract details LOI, We XX-- Martin XX aircraft. on

Martin Garmendia

XX.

Nick Finazzo

aircraft -- two have looking those. that we'll spec be but for, three aircraft schedule actually sorry that conversions customers should for Prater will I'm have customers We for XX, don't aircraft we for of and those we

we get to expect to original package. So, monetize the not is entire XX. We're from going parted out the nothing --

XX got placed which up matter aircraft. will whole of as we've all additional a an being end fact, As of

Gautam Khanna

it, you tide what in. acquisition incoming tide Any the described then seeing in work acquisition environment yet for an incrementally you equipment, betting And previously to continues there? or every want you pricing as but frame market the could on for are out seeing? available flood and almost way at state What what you comment I are not to are aircraft the seeing are on? becoming you come We're that us. we to a week, are but starts that

year is why and are real a on is more realistic what becoming aircraft market for market to Is it or now hitting pricing and and moved Now is. haven't the that? aircraft it's market half actually a or because been because have the the

think I latter. it's the

aircraft think becoming because are realistically in not market. they're more priced I this moving that

So, continue to and the win. on onto We're market. coming aircraft more that incrementally, we're gradually, bidding we see starting to

potentially cases are makes being we the engines. from best the mentioned engines acquire and remain that by are we we're the Now, where service by pure us, and to either seeing do on And and aircraft could find feel a what ready their run sold airframes and out. being it where we're crap of equipment in of not close are put for are only I've service, deals removes that stripped again that which, us because airframe, leasing an or much a parts we also to all win those? really acquiring to or seeing run primarily buying and into aircraft the kept off need service that without placed generating the or we're having who most the than the for airlines cost whole aircraft revenue. able value extract they of aircraft are to to that buyer these are engines pricing ones out still previously, But this aircraft but what lot for essence an maybe And can price who's work aircraft sense to to a engines. the works is in still leasing are selling companies out greater is that back why companies as It's today lessee this and operate the financial value the with that start that's we

take to refurbish a got whole sold we've marketplace. And or to into engine that's able released to whole that aircraft, into us, I machinery describing the For an use a that's XXX were our asset value our aircraft Mark was going what transaction. be entire and opinion. to that’s earlier that we -- -- really to its that the I we our And added in

work plenty will with wait price next really be to they'll sold. the transaction, needs out. operator. that's do buy aircraft they feel to work, lease somebody of There go create that that's work financial return financial engines of no it newish going it in can take service. it to -- one that a competitive be whatever there going infrastructure with the with AerSale That under going to where that's hold need And something not you're the not that us. that are to metal It's acquire to that out into leased a space. roof we it's to the have company of our to are That's going all If in to or those used lie lot not could at Because opportunity to aircraft is lease can off-lease a to anyone for add you're aircraft the advantage equipment and over it's buyers having we where a else work. service a necessary value, and really that or

Gautam Khanna

Excellent.

queue. you. the get back I’ll Thank So in

Nick Finazzo

Sure.

Operator

Khanna Instructions] a follow-up [Operator we have Gautam Cowen do from and with

Gautam Khanna

a I you that us. Difficulty] placeholder with for hear next didn't was I but me guys/ can target you do expect to could equipment monopolize you year deploy share for you want [Technical ask to Sorry, buys going have to also what just

Operator

It'll moment. one be

Gautam Khanna

you hear Can me? Hi.

Operator

apologies. Our

stand brief a interruption, Just as please by.

Gautam Khanna

Can hear Hi. me, you sir?

Operator

Yes be moment. we can you, hear one

Nick Finazzo

This is Nick.

on speaking….back So

Operator

please sir, ahead. Yes go

Nick Finazzo

is that speaking, Finazzo the in Okay. Kristen I Nick heard Gautam queue. he would he is would after anything we stay – back cut hear this The only said that. off. didn't This -- thing we had get was got

Operator

open We to question. ask – do have Mr. Khanna

Gautam Khanna

you guys? hear Great. me Can

Nick Finazzo

We can. Yes.

Gautam Khanna

Terrific.

Okay.

happened. I would that. if know the don't based next about to next year of on equipment deploy of what you it's Hey sizing, I might might amount you going sense So preliminary – Sorry was ask, just a buys the or be opportunity the what view capital what maybe had on XX months be? but over sounds it just any promising, pipeline, what you're like seeing? the more for

Nick Finazzo

historically, first to in a our answer. hard the five really only early in our capital we $XXX have It's Yeah. years million you tell on I can business significant of deployed question business.

if to on less average. going – of we comparison, we by a But monetizing deploy can were a I several whatever can that tell million to just million I we can years our today on we average, able performance, we hundreds had over would – to XXX year were based so a the next be and acquisitions move you, on less. millions. quickly So able deploy XXX greater it's make. or infrastructure expect we we can't we prior – where year or

it's can think to basis. on this that we assume double that time I at an So realistic annual

Gautam Khanna

it the we'll the is mentioned AerAware, this year so wonder think? order You of testing June soon the On next then it's Do that half conversations? where think could like, Okay. done. quarter based you the what do an all any it's for – get the the approval? year? product do is make of And next your do sense that you then be what sense. I quarter like on kind And back think it's soon you first sounds after how Like, just – But might customer on of there that the you lag how, is happen? on September for initial

Nick Finazzo

on I at receive partner. of verification this – by who answering won't software we will so been boy receive We're give And like validation that we've end milestones that specifically, of the hate and feel on the we wolf me that – that for side. our at the waiting you I us. February. latest let the that well, told the cried validate

So let's assume get the is hoping get – at us end is that it to perform the that's software will testing. our early, of it are by validated. we if February that final But on end the of get software time. FAA we And prior we let February, validation flight

audit that process validation that necessary of to predicated on So well, so software. been not works to the – software the just We've software of of be the demonstrated will predicated it's STC that's the we've three validation, The and FAA the see testing that the is been verify – to so with they an on due held flying now testing it. works. has times, all that the validation done. they be issuance not that the up But because the system flight system will the

of FAA them. that, to we're February. just and the certification. all do to If be to testing validation that software our left – able do issues will end And So hopefully, we concurrently will Universal with get their the the our is with working prior once flight that be we're Elbit, of final the will expectation of fly us, the

it's that be anticipate quarter. quarter. they've into in the because us that attention think they're on of the to really level in Could The this to imagine depends best March, I and in it But be there. case that think is but second third get the the waiting I going -- can't the would we attention because we interest that could I be may going it's be could us it the roll gives at -- If sometime into So it the more quarter? realistically, roll that on giving too. remains should it point why FAA kind us, FAA. third been

year. hopeful first are the at or certification the during second next in quarter end of that we receive the We of could the -- quarter

Gautam Khanna

Okay.

just based big for the receive was you sense the you that that conversations initial certification. on of back have the might question be other your Do a orders The customer? how might with that on on

Martin Garmendia

seem airline We because the that of would installed would fleet bandied of a be any be system, we've some and the NG that's to That previously. FAA number of of XXX before that half aircraft on system existing specifics have minimum already. that I've AerAware of order would not heard times We half use reasonable that half to about don't mentioned they'll And been is require aircraft. be working to both XXX fleet both. have would XXX with a the -- able it on will the XXX be Max multiple as be the its with AerAware

conversation our has been primarily -- have be to that talking imagine our our discussions as we've other it we us would had one of potential well. but with a customer, aircraft But gives shorter. airlines range. lot -- the with if with I been launch Our customer if would XXX

Gautam Khanna

Thank you very much.

Martin Garmendia

welcome. You’re

Operator

I'll for closing to Nick conclude today's will any Finazzo session. over answer remarks. conference and the question additional That turn

Nick Finazzo

with good Martin your look Okay. when afternoon. this to call. we listening interest do fourth in earnings and and you you forward Well, forward for a thank speaking AerSale I -- everyone. our all call to I speaking Have look again quarter to again evening, our

Operator

will your conclude for you Thank That today's conference. participation.

You may disconnect. now

AerSale (ASLE) 10 Nov 212021 Q3 Earnings call transcript