ASLE - Earnings call transcript Q4 2021

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Operator

0:04 Greetings and welcome to the AerSale Corporations Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder this conference is being recorded. to conference like host, to now Ms. I’d turn over the your X:XX of Resources. Gallagher, Human Kristen Director Thank you, ma'am.

begin. may You

Kristen Gallagher

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

Nicolas Finazzo

from strength of the million an of we're year, updates during progress you, quarter which support Martin profitability total brief we with prior the finished or numbers. our decrease I’ll our strategy quarter resources X:XX $XX.X in Kristen. freighter joining Adjusted with Thank begin reallocated on of objectives. on line full afternoon facility I’ll cargo call year the the the We set thank X:XX Good overview the of single a to year. quarter our XXX $XX.X everyone period revenue a on an elaborate you pandemic conversion a more our to million conversion the strong operational $XXX.X $XXX.X sales. increase turn operating the prior the set million, X:XX XX% which program. the followed today. more $XX.X key our sales by million. market on quarter in as for and total increase $XX.X program coupled and of with recover making in full offset with versus progress a the sales, of program $XX.X We record were strong These I year to than year million, XX.X% accounted performance to in in also and partially airlines was single equipment also than from sales improving lows. million full along We an total benefited operating our $XX,XXX financial the loss of our record. fourth commercial reported the a XXX results conversion continue improving aerospace other Goodyear year XX% quarter million of doubled sales gains of this during was year-over-year. Adjusted then year-over-year. Our call to and with to as prior X:XX a moment. compared will an flight an year of fourth resulted quarter EBITDA TechOps XXX the to from X:XX segment profit for in over XXXX Strength related EBITDA for was review also with by company quarter profitability year more for collectively environment. largely freighter Higher

that speaks X:XX our proud level SPAC invasion as we our the made performance AerSale This in a to commitments exceeding model. power a to exceptional our end-to-end are by make truly growth company, of comments public getting Russian of and I'd went most to other the with year and in SPAC Ukraine. first regarding transaction into Before companies from that XXXX. sets demonstrated underlying the we've We in apart purpose-built like combining couple public of segment details, investors a

and which we're we is taken sanctions, to remarks. ability To with to shocked into violence. our fully these detail lease impacted Russia, the flying flight the to throughout airlines or of have end, compliant are that the I community, most my and supportive of supply will deeply parts As which saddened end equipment global are events by actions

and leases equipment, whole asset than these quarter, best in to equipment to good flight engine limited as airframe be parts to reiterate will should the its segment feedstock X:XX beginning aircraft demand expect use Within X% sales feedstock sold of and less engines. our X investment, our material the and we important of customers. want that I equipment advantage is conversion overall their to to of consolidated airline XXX the expanding giving competitive sales be year flight both our lumpy report our equipment to flight These to with slots whether such on as levels Martin solution large going Turning feedstock our and XXXX by earn the sales as conversion We sales can retain visibility them return and fourth program it that to use effect $XX.X strategy. remarks. into program be acquire long-term to preliminary greatest am pleased XXX an direct or X:XX It ultimately to In these higher sufficient XXXX performance highest on aircraft part assets critical included X million serviceable to were our assessed that than our be improved. management. I and at programs. fully we current of business, flight specifics end-to-end and feedstock that are budget. period freighter guidance and in and Parts through to and further his elaborate business, used us USM or our prior or continue the

of leased has the returns During the Although where XXXX, execute our our year, remain prior and increased outsized feedstock allows we the business compared to these only disciplined our utilization year, our fourth to revenue highly assets. to this on achieve of multidimensional strong model leasing compared us increased year acquisitions on over availability steadily peers. period integrated due those quarter opportunities to X:XX

The Russia of programs force new impact in identify Additionally, have are created are regarding X leases. lease Our terminated war X Ukraine, revenue lease had our other ways X:XX secure leases create regain lessees a these not that to have operated as in XXXX. cooperative, on termination sanctions, actively of under for assets we X we these In control throughout against these minimal sanctions headwind of very until for the airplanes we will X expect our required exposure these the performing these our assets. lease regain were engines except we lessee will able modest assets will global unplanned airlines to or control XXXX these assets by be The remaining the Russia, engine, in assets and generating performance system. and quickly monetize that imminently. we on which recent we have a to to X:XX as their to total, aircraft to mandated as been leases able

airlines segment, total TechOps will We and attractive in as were expect XXXX our following opportunities sales purchases fleets their a In XX.X% for assess asset hunting third-party to continue levels. service million. down normalized more $XX.X

the we winds XXX approval program support moments MG, AXXX us XXX will FAA Solutions, hanger achieves presents conversion the generate reticulated down serves can alternative family system new term. of remains lower and As strong the the as Classic through which military labor Airbus MRO a a of offsetting last in which AXXX FDF. that freighter of continue sales as on year I XXX, AXXX, and for requirements to growth the Boeing activities ago, as AXXX Engineered reduction, the program system our analysis indicates this aircraft. our reallocation strategic aircraft. aircraft. and were of otherwise [indiscernible] airlines XXX resources also of higher XXX mandated customer Demand to mentioned consists installed fuel but and as nitrogen AerSale returns product a specification activities to incremental STCs, the from free intercompany in strong, to include FTFR opportunity our AerSale existing we Moving for in result by see and AirSafe X:XX tank known this X:XX short technical program. supporting foam Airbus few to inheriting the and with by received a work later up that demand the a month, polyurethane space it the XXX This entirely

flight pilots that issued, poor center mandatory In the and approval date XXXX. work airworthiness has advanced quantity display an XXX style our on of weather enhanced has tank, indication addition head the compliance to FTFR, of conditions. separation fuel May which vision through incorporating our system, directive requirements a system mandates of see also continued in XX:XX and aircraft of been AerAware, We wearable fuel technology product military allows development the which the FAA a have to for

account towards are see will once a be approval business. is about We to remain the with believe the product this be the and and continue the to that this potential to updated We commercialize for in AerAware FAA. this history the transform phase FAA our our progressing granted rawer work early XXXX largest should suggesting timelines, the potential issued to certification AerAware have type continue as market certificate sales opportunity by supplemental to for to AerSale product We but market this enthusiastic by modest in ramp-up XXXX. year included May development only XX:XX completed for

it's offer safety, an technology We commercial to return airport on caused by expect and not of for XX:XX to footprint to flight aircraft flight flight when. and In ultimately carbon grant a on by we technology poor enhanced with matter investment any attractive enhancement embrace our the AerAware AerAware's the improve traffic in reduce market weather unparalleled desired it that the congestion. of of STC safety delays view, the industry. ability its the or believe and airport if features conditions, solution an offers flight It's are vision just become airlines, diversions FAA operations if minimizing matter the to will us other will a

as continued higher and more aircraft XXX our and airlines sale. aircraft we're of seeing recommissioned than the steady for the are Martin, traveling is pandemic-related recovery I the world would rapidly for to made Boeing parked increases beyond. through XXXX XX:XX after opportunities years emerge and the increase call our more in in a freighter need available systems eager around touch aircraft and in markets, environment. restrictions. disruptions track begin and XXXX. confidence to are an also like bit MRO. restrictions and Governments the We're turning investment lifting behind We're are the on a the sale This poised X gaining are on us, XXXX over monetize of to prolonged to worst There capacity Before to and consumers reactivations benefits macro and

and perfectly adaptive positioned. purpose-built, We part leasing, decommissioning. model aviation aftermarket Over MRO, term, flight equipment and certifications AerSale the operate FAA includes and long multidimensional, procurement, sales storage fully integrated, aircraft is a that

and XXXX look and unique drive peers opportunities. guidance turn This $XXX deploy to monitor led for model in model call million market strong of record opportunities us M&A capital asset all over and of our I results to internal XX:XX stakeholders. time, no potential off year-end, capitalize $XXX to base acquisition closer our are market enables XXXX for and and value in in of revolver. We growth numbers. opportunities a undrawn the to closely further that supported the allows Martin capitalize million at a Our XX:XX ready to At demonstrates and our on advance will all external stand on sheet that to over by us cash with both balance this quickly debt as Martin. the This issuance

Martin Garmendia

will XXXX. I end Nick. of an financial fourth for performance Thanks, start XX:XX quarter overview and guidance with our our with

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

to remaining equipment or the them million the AMS quarter through fluctuate USM fourth for from on the on from important of Boeing and XXXX, our process leading XXXX. our XX:XX flight million, resources compared Fourth monitor mentioned mainly aircraft our the through fourth conversion And This we XX:XX term. maintenance quarter-to-quarter third we As being monetized an XX as Asset sales airlines in to increased away the due purchases based lower a quarter reminder, flight therefore, progress the monetize the our XXX long equipment of quarter air continued facility. million the for to XXXX our $XX operation third-party from it line quarter call, quarter XXXX. XXXX, year-to-year against business from of work into to the mentioned support revenue remain on majority We revenue through fourth may Consumption Fourth $XX.X and and Solutions, revenue. previously. $XX.X travel. earnings were asset over aircraft During quarter reallocating upswing to sales. our Management in of to improved returned at was in cargo TechOps in XXX with track aircraft $XX.X quarter Goodyear that backdrop sales to million of parts is

cargo from $XX.X this improvement of forward, compared of of the aircraft higher for the overhaul quarter us loss compensation was $XX.X fourth sales. million operations from of on quarter comparable write-offs, In in of in in the XXXX. fourth gross compensation, to was fourth and support in quarter compared was the million. quarter conversions payroll recommissioning The due the fourth million expenses quarter in warrant addition, was quarter not of XXXX, XXrd, quarter million loss allowed net XXXX. million $X.X consumption adjustments of in for largely demand XX:XX million noncash program equipment XXXX operations investment fourth to we the activity. greater to XX:XX XXXX and listing Adjusted ongoing a reallocation from stock-based fourth $X.XX $X.X expenses. income Net for the stock-based of We fourth adjusted per inventory realize parts receive to AerSale the commercial XXXX. in million fourth general from Diluted a was XXX compared However, XXXX. XXXX fourth quarter to a due to quarters on mix $XX.X XX.X% of XX.X% December to to earnings and the is million XXXX. mainly noncash incurred to share fourth high-margin higher USM in account for margin administrative fourth compared not Fourth volume Going sale greater was fourth public the expect the to pickup in margins XX:XX the of of in the were benefit due quarter did income mark-to-market Selling, liability, to in MRO any unrealized $XX.X $XX compared of XXXX. of flight on X we quarter of the proceeds to in and Income the and of payroll $X quarter quarter from XXXX. the the $XX,XXX

$X in fourth was and $X.XX of for Excluding revenue, Cash the sales or by sales of comprising was approximately strong flow EBITDA noted revolver opportunities and of Flow end, related used in XX:XX compared was the At while M&A million cash was guidance items per period balance million moving undrawn during million $XXX quarter activities operating XX.X% the XXXX. share adjusted year operating in impacts increase year in Fourth income sheet, corresponding in we of and generation margin execute on on $XX.X balance summary. XXXX, to had XX:XX that XXXX XXXX. revenue, in stronger the cash adjusted quarter revenue XXXX for and of adjusted operating activities $XXX.X sheet, AerSale earnings of forward. was and its adjusted equipment flight the driver larger and the diluted drove non-cash EBITDA our improvements our acquisitions equipment to The main free higher XXXX, cash of million to million provided are increased or deposits $XX.X X.X% of of flight to XX:XX portion Finally, overall of profile a favorable debt asset ready higher With above and million. mix financial going $XX.X potential sales. EBITDA.

of headwinds, ultimately not disruptions, mindful to an As have not we mentioned, aerospace services. into that these guidance increase flight already XX:XX into their how in it cargo as improvement will in prices. the several result for our have limited macro and providing Given revenue, this recency and global may due AMS and supply specifically by million is expects we fleet predominant on and industry for in environment, account to monetization unpredictability developed, guidance events, E-commerce the million requests taken of we conversions are of taking which continued In activity the majority may of chain AerSale in be in unfold, these Boeing fuel and company's of expanding and Ukraine expected strong and commercial higher impact current converted XXX impact related freighter including consideration factors the also adjusted the EBITDA. impact is these sell XXXX to $XXX be cargo demand sanctions, identifiable and $XXX million MRO its Nick including as to to impacts events in on impacted are the $XX providing we the other million a to guidance that and based war aircraft. we services, the guidance, issuing acquisition $XX and aware ongoing these demand ongoing in The for of. beyond the to accelerating markets identifiable driver XX:XX an this this segment. the demand XXX segment, are Further, on of TechOps products of Boeing remaining airport passenger the AMS and items for

As Type execution only sales internal yielded our summary, backdrop AerAware modest this AerAware year the account to of ramp-up the we the Nick Supplemental commercialize Certificate once phase success. have and In noted, adjustments against over pandemic this year XX:XX last issued. been has the product, a for have included to for superior

In now also are on financial and a footing. we operational stronger addition resilient, to being more

ready We stakeholder seek to our internal have hedge. and cyclical thrived in market some over sources operator, questions. to XX:XX goals we a external value this generate as our continuing of to achieve take challenging years. we forward the commercial look counter diversity that few are next a creating to with With aviation revenue We

Operator

a time session. we'll conducting this question-and-answer Instructions]. At [Operator XX:XX be

Cowen. first Our of line Khanna with question Gautam to comes

question. with proceed may You your

Gautam Khanna

very I elaborate Russian you was on guys. Hey, much, wondering you exposure. if Thank XX:XX the could

potentially or negative X% is incrementally is already sales that that guide? that reflected? it? Or Is to that So the in less,

Martin Garmendia

No. XX:XX

was removed we We specific have that anything that knew. already

out to leases from removed some not has removed happen that Well, So our we microenvironment of escalation been as event. we and removed AerSale of guidance. impacts Russia of continuing the could kits any the the that have the impact

Gautam Khanna

terms remaining the then the like? mentioned you'd XX:XX are, on you orders, what of And respect Okay, in items kind just expect what could if getting what then to got of you it. with certified, product thereafter and and the AerAware elaborate QX, is, on the sort of timeline

Nicolas Finazzo

it's Hi, -- So Gautam, we continue Nick. XX:XX

partner So course the the is We in completing we're business, ordinary we've that have on May. this. but completed it's all rectified, to That because partner we received is be taking proceeding and our software for the that that been by complicated, steadily. wait identified with believe software as expectation it's is will from by moving continue issues our validation long validation of early it

because concurrently. you've type our can the the -- supplemental We be certificate. get done a reporting to do to in We will will test the line done we interim, will testify that FA. the to then in issue the FAA believe have Hopefully, before our the finally aircraft validation got in order test flying the

flying validation over the XX years, at been system their predominantly has would the FAA be this longer days. working point out barring our have give long FAA get the us the get do distract process. we we're the in expectation a from having our until do complete, FAA that the flying. that this test FAA mode, complete resources our complete by wait barring FAA past everything of will something So be to certified everything reporting have That done I -- including than it's to test how do would and by -- we wait and earlier on wait data with then no to we done because It'll final in if FAA. like report, later. way we to putting the have our resources submit until But we several we've just then submit have we the taken if do else a we're And May, not can it. that we to the sometime to take test the that would we is We the the completed to I done May, typically will to assess -- hopefully, our something in Things houses. XX:XX FAA. flying. the -- certification XX guess we before to May, the we test completed if early once just is would take validation

on So that's definitely there's things more is other availability resolving back as interact been FAA itself the the more slowed limited and office with face-to-face into that Hopefully of people members to are down. going completed and within that by will after energy FAA and so few our optimistic our FAA can this the that -- a the and put we we we months this remain final get documentation. focus submit

Gautam Khanna

Okay, that did potentially about comment sort after date timeline matters just make curious the what – and once I'm on I'm that open May, XX:XX you aerospace does May so a of and happens May just up the markets how or a curious aerospace? new

Nicolas Finazzo

-- on with say compliance On complies a date required to XX:XX that, and XXX of fuel indication all aircraft by date so XXX. May is let's the for now these certification have separation. that. have method passenger the obviously system we The quantity compliance AerSafe have for May, May

So are and in all system operating that it. by service active May, aircraft and have have that passenger to

also of Current that sorry jurisdictions every move jurisdictions have that their from sanctions had AerSafe prohibit those aircraft those have aircraft the sales of that requirements into product Russia. into will Now, jurisdiction that We today. number fly us from sales selling a an our that's as AerSafe airlines Russian of requirements for don't kits not -- XX:XX product.

coming a we're installed we the would going Martin there. have until As not XX:XX may approval, of way, aircraft opportunity sales forecast. will that to the airplanes kit, sales. those in kit ago, we don't that have such of that we grant of Those of that they them a though our into need those sales by from -- to we airlines appear sell balance they're minutes out them, if and will in we'll And grant safety despite out. those intended are mentioned whether out in their our aircraft and delayed. are OFAC happen be Russia to don't And they operator leave that We've to that airplanes basis We the those sell we on be the those forecast those the approval. sales. time have the out seeking them operating come our approval took is item, OFAC don't we Aircraft the It of don't the pulled of If sales into Russia. as just out that Russia, Russia even to means come sales next even what takes know as fly Russia. in lot to do may few delayed the year. budget that out pulled -- into won't It have don't likely that they for doesn't mean airlines kits

we So that yet. we no of don't have visibility -- have

Gautam Khanna

on monetization. And it. one the just Got XX:XX last XXX one

it. how You and mentioned the XX XX. bulk know And so of those will year, for the majority of through of this we the them can… are get timing curious, much monetized magnitude how sense kind the just the you them I main this XX Any you of just be half. bulk year? I'm Or is thinking of over it done year, year? X%, said phase that of just this the XX,

Nicolas Finazzo

Okay. XX:XX

to that within we'll next now. it a have company are leasing expected lessee One X aircraft undergoing So we that are it the days. a -- deliver sell is that to almost and complete, conversion we XX right

that take operator XX to airplanes Chinese have the last leave to. would would deliver X we're year, them ones delivered get to to doing be X that on operator that would existing have will we already we've this That the quarter. would X the in sold a aircraft them. will conversions we will Chinese second These that in have have that converted be left. that China This we would and We airplanes follow other And airplanes that we'll themselves. on leave third we committed

kits, availability for kits a have I with And we commitment, between domestic the we've available not precision another us, the more through kits a to available they basically of XXXX. China gap committed said, of precision the or all conversions do they cargo placed Because if have facility. precision or of a in have do, We we've find whether X. as made the to precision all -- for got cargo commitment be conversion available X commitment

airplanes. X more to X on go counting have to We option an least XX. with acquiring at We're

the conversion freighters and into So by those they'll And probably expectation as balance start all XXXX. we carry airplanes sell if process of when we'll converted XXXX. year our is will the this quarter a again in our XXXX in airplanes party to carry through XX, last the go into as of third

Gautam Khanna

Great. XX:XX much. Thank very you

Nicolas Finazzo

You welcome, XX:XX Gautam. are

Operator

Nicholas XX:XX I would gentlemen, the of have today's Ladies to to call back question-and-answer end Mr. this we Finazzo over and like reached session. remarks. for turn closing

Nicolas Finazzo

XX:XX Okay.

to and you pleased thank today future. your We're about very progress and interest in always, a for to with listening call good everyone. evening, AerSale. this the excited for As Have date our

Operator

XX:XX This concludes conference. today's

your time. participation may Thank your at for day. your the You rest lines disconnect you this of do and

AerSale (ASLE) 14 Mar 222021 Q4 Earnings call transcript