Earnings call transcript Q4 2022

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Operator

Greetings. Welcome to the AerSale Corporation Fourth Quarter 2022 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] Please note this conference is being recorded.

the to turn Carlon. host, now will conference your over Jackie I

may You begin.

Jackie Carlon

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

be the we quarter's be matters to and of for want statements the the of known results. facts future should financial expectations results, and are or Before may current materially statements forward-looking including to risks, actual to all neither statements that meaning unknown relate you discuss do nor business, other securities on different made involve our not but from this our considered performance. that regarding within statements factors performance cause this guarantees, any These we laws, important remind uncertainties federal promises call results, that historical our and achievements

that X, March discussed SEC. filings XXXX, risks its Form call. from the results the could report those on from and ended to XX-K Important forward-looking Risk on actual and other XXXX, Exchange filings the statements These events important could the Securities with this and to annual address the other cause with materially of XX, that December materially the section in year differ and differ cause company's factors identify are uncertainties filed for statements Commission, forward-looking actual on results SEC, and indicated by Factors

metrics AerSale to made the that A GAAP can ir.aersale.com. of the Section assessing available performance business. the non-GAAP at nearest reconciliation found materials to of in Investors presentation in measures metrics of non-GAAP refer we the on view be also important website as earnings We'll those our the

With that, over call the Nick to I'll Finazzo. turn

Nick Finazzo

thank to to turning of operational numbers joining call review and year in over greater begin a I'll with quarter for call Thank Martin the the provide updates brief you afternoon before overview detail. our today. Good and you, Jackie. and the

record AerAware By results and of driven as commercialization. our passenger execution was and conversion which excellent significant measure system well program, in an you'll progress XXX refer reported freighter, to revenue and company XXXX We certification success me AerSale. nearly made every on market FAA strategic flight was its hear subsequent by our enhanced operating Strong aircraft. vision year for PXF demand freighter elevated timed were broad to which for with the

achievable timely the us customer the due solid which Our manner unique a enabled year secure to end-to-end only have conversions to business. at commercial sales in these drove also serviceable material, to financial was perform and part aircraft kept was solution, all refer The aircraft performance on-airport our necessary demand supported to which a me and as by MRO our USM for facilities our capacity which ready. hear strengthening used recovery, you'll year

with adjusted Taken factors XX% year to revenue GAAP full-year increase with million. adjusted $XX.X $X.XX EBITDA of compared together, these led diluted earnings GAAP of in share the of diluted per to to was per year-over-year $X.XX million, earnings prior EBITDA share $XX.X a million. of $XXX.X

Higher numbers. EBITDA attributable our from excluded were proceeds margins million, the to were not $XX.X year entirely Act prior of adjusted almost in which CARES

revenue when our relative such, performed similar underlying funding. level a business As margin CARES at to considering Act

asset investors over performance are to we typically and advise investors uneven to do our analyze of whole patterns a remind the quarter-to-quarter As availability important and sales. that financial we expected quarter, feedstock based on full-year our believe it's we every results

the quarter. by quarter, sales. XXXX in created lesser a exception degree to revenue our the But equipment to timing the this of prior lower fourth significant results than a first-half is flight pacing no In year third included record a period. of sales flight our as followed The equipment

revenue quarter which the whole XXXX fourth whole prior $XX.X sales. in included including year period, asset asset $XXX.X million As to $XX.X a in million million, was sales, our of of compared $XX.X result,

Fourth the of quarter with $XX.X share adjusted year earnings diluted per per to prior million, was of share $X.XX diluted earnings adjusted period EBITDA $XX.X $X.XX million. EBITDA with of compared

beginning Turning result to were the year the our segment asset million, higher same sales period. of performance also lower to the period whole contributed asset management as and million engine $XX.X leasing with in the quarter, fourth In segment. to compared reduction $XX.X prior offset a and USM in the during in partially the material quarter period. sales by A during sales the of decline aircraft in

three which which which XXXX, included sold year command converted revenues due we engines decrease higher aircraft PXF we converted in and two aircraft. XXX a The one period XXX to In PXF six This aircraft engines, compares prior PXF which in XXX aircraft, is decrease sales, sold the of aircraft. included four the in to quarter sales three and price. fourth the

PXF XXX Looking to ahead, expect the busy conversion year another year for program. our we

for XXXX. our year. detail subcontracted will additional contractual these of aircraft delivery the delays multiple to providers more the Martin are conversion to which XXXX an providers in one Due skewed from three have of toward guidance, we and conversions by our in in completed of second-half will As expected the nine be heavily XX be of

an USM compared sales period, improving parts airframe the of up, parts backdrop. were as year both a mostly result to our business, commercial In prior engine and

high we regardless either to attractive period. Overall, more more channel next during short-term again at aircraft to our couple return growth focused able out margins. economics, able leasing that portfolio, that leasing down this to leases the activity look to was These on as part to off from to as period, compared prior where improves. Lower of during the availability revenue attractive we're trajectory out engine we came quarters, As mostly fewer aircraft resell which conditions. on to of we speaks asset continue in expect were of the sales or discrete on lease a result our year maximize year were the ability lease our leasing feedstock beyond the moves achieve to continue investment aircraft

we MRO ops providers. able capacity from benefit In to our allowed to were for by free subcontracting This segment, us third-party as increased greater XX.X%, services. PXF driven on-airport tech sales to up XXX demand by increased conversions availability MRO by on-airport

MROs a and our In increased airlines. result gear addition, improved demand of component as landing from passenger

Turning five to an of pleased began report that update we of flight February to FAA in completed flight have on successfully so AerAware, testing I'm far, two certification testing. stages and

That flight FAA STC certificate, the scheduled of set red you'll fourth commercialization type zone April, which supplemental we're will now a set and with to of begin weather. STC, achieving me product. third scheduled our to subject hear us as are in March and final tests this FAA notwithstanding in staffing the on refer allow with which in The to

cash we like than position I'd in in allocation $XXX capital our asset million equipment $X a on enhancements. properly excellent strong with $XXX challenging ROI. to priced result priced sheet disciplined year. capability to and and of as bid We acquisitions despite $XX approach year in our case not feedstock. ended Next, two an balance the plans flight and XXXX shareholders, falls revolving to on over an adjusted of in to our requiring returns availability which more categories. the and deals highest this adjusted facility. during equipment in feedstock the financial touch was credit We on This of risk our aircraft acquisition the a beyond. billion undrawn regarding our million an We over available absence intend was XXXX risk XXXX, deploy won million of a flight of to capital generally within properly year Aircraft

second-half XXXX pleased have guidance, would XXXX million over we XXXX That positive carried win through am announced to our deals a notwithstanding, substantial have the results $XXX than improvement all and close feedstock priced XXXX. However, would $XXX deals, the start I we had to already during at initial were into double made when a we which to been and expected XXXX. in we February, more able report financial properly million our of of to have contribution of awarded

to of engines the maintain level typically the all outlook wide this financial in. significant This sets asset success into improving well narrow aircraft priced of and invest The backdrop year. and second-half availability us up the we the represent current been of into and properly could upside throughout balance has ‘XX we're to XXXX body able a buying of if and our across

earlier, noted our AerSale the and facilities I are near As capacity across busy system.

on and We XXXX. adding to drive can of capabilities is to body on-airport the share fully facility hub expanded aircraft, miles footprints be is just USM expansion foot is narrow added This have square in we our in second-half an capacity, and is the MRO, in expect already expected pneumatic This it our too Tennessee the our quarter Millington hanger I effort accessories come XX total XXXX. Memphis. while in by capabilities opportunity specifics, increase expand MRO XXX,XXX online of detail We're which a third online based also to early Millington, all facility we to underway further MRO capacity have through Miami growth. from first to distribution that to at which

for efforts, as the for as in acquisition. of new and XXXX, financial sales. forward AerAware. crossed no with PXF pleased meaningful well company We our hit market the strategically executed AerAware coming look to well in opportunities and XXX despite the upper acquisitions multiple I'm feedstock EBITDA We year, STC milestones feedstock In the in these our extremely despite the We diminished throughout sharing records guidance, outcome our challenging program of quarters. additional performance summary, range on adjusted obtaining our conversion delivered

year recovery. and In of driven benefit guidance, expect positioned of the commercial will second-half a XXX availability, the demonstrate Martin to AerSale, opportunities. from into XXXX on supportive continued progress by conversion we're ahead AerAware to increased PXF growth to feedstock and and as XXXX, our another facility detail our aerospace expansion commercialization and program look we the As year in we for

to like throughout incremental year. I and our AerSale our of stakeholders. dedication providing their all to forward their employees look to for commitment to would updates We the thank for

over Martin. turn With call that, I'll the to

Martin Garmendia

financial I end our with will start XXXX. guidance fourth our with of an quarter and overview for performance

million have fourth million $XX.X quarter equipment If in sales. included was XXXX. we fourth million, included exclude sales. would quarter the which equipment XXXX flight $XX.X the million equipment fourth and of XXXX million in revenue flight of revenue quarter $XXX.X Revenue $XX.X $XX.X been of Our sales, was and flight of

In addition, was aircraft, the call, of on third the initially close earnings the PXF XXX we was XXXX, to of the during as quarter. quarter anticipated last one delivery at mentioned of delivered fourth convert which our beginning

long-term. the multiple earnings investors and that calls noted analysts of quarter-to-quarter sales asset from on and releases, have flight progress fluctuate the business on monitor We and press should based we purchases believe based and does timing over As may often sales. on our equipment our

management million, as the quarter aircraft $XX.X decreased quarter in lower Leasing revenue a equipment leasing our of of these portfolio result support flight investment Fourth assets. return historical number revenue we our XX.X% the due asset reduction sales. as to for market the to would on determined conditions not for fourth largely in declined planned

were XXXX. in to on-airport parts ops and similar revenue from XXXX. $XX.X of performance of levels gear or Goodyear operations quarter, Fourth sales was fourth ops better activities landing Tech USM in XX.X%, services. seen the from tech fourth quarter technical MRO benefited fourth the improvement quarter compared million to quarter of the which an was

to within to fourth margins sales of the tech sales, compared quarter mix, fourth from prior to was account offset quarter mainly XX of flight XX.X% generally the at storage, the lower XXXX facility lower Fourth which on Goodyear margin customer of by equipment quarter in higher XX%, aircraft XXXX, was were facility due revenue in have of XX. growth periods. our fewer Roswell as compared our Revenue gross ops in

quarter expenses expenses quarter general higher million of including of versus compensation non-cash expenses. of was $XX.X were tax XXXX. Selling, in in Income XXXX. general from $XX.X the million non-cash million quarter fourth of selling, in XXXX, million payroll expense operations was million $X.X the to Income of million quarter the administrative million the the equity-based and fourth Fourth $X.X in fourth quarter, $X.X compared were equity-based administrative $X.X $X.X which $XX.X million compensation. fourth were fourth expenses, in quarter with and

to aircraft quarter $XX.X to Adjusted Fourth fourth and income secondary compared relocation quarter million write private mark-to-market and of liability, quarter versus adjustment million inventory $XX.X in net non-cash the compensation, fourth down, in an equity-based XXXX. was on claim gain quarter net warrant million, XXXX. the income facility costs, offering insurance was $X.X for $XX.X the fourth of million adjusted

inventory of of relocation warrant quarter on the fourth diluted claim $X.XX liability, earnings adjusted aircraft $X.XX and costs, fourth equity-based share quarter quarter write the $X.XX for the offering for Fourth secondary private compensation, was per non-cash fourth earnings downs and $X.XX share mark-to-market and facility diluted XXXX. to insurance dollars an versus gain was per Adjusted in adjustment XXXX. quarter

adjusted adversely impacted XXXX. or payroll and not $X.X was XXXX to during aircraft sale in for have of reflected proceeds million with million used year, closed program quarter XXX-freighter sales, the primarily Fourth of quarter Cash were AerSale fourth under by related operating the flight any generally was activities support the investment of higher $XX a the are deposits the million application that in quarter $XX.X equipment due customer the sale in during margins. margins million, of associated Adjusted activities. receive which EBITDA XXXX. $XX.X proceeds EBITDA fourth did and lower which

vendor associated $XX.X advanced the XXX In in conversion program. addition, to with invest of PXF payments primarily we million, continue

an for of an sale. We ended year inventory million also cash, increase as facility. to the invested credit available million million $XXX.X as undrawn well $XXX additional AerSale with XX.X

to moving guidance Finally, and our for XXXX summary.

payroll, in generate Revenue expect passenger of to USM, improvements We is MRO growth of EBITDA Engineered generating for some to in lower a year X, Act increase higher result XXX to for and amounts as $XXX $XX million limitations SG&A the on related company as the driven levels million million see a higher costs CARES includes Combined increasing XXXX. travel. from deliveries Components executive in and April Solutions to benefits with are result an of by expected XXXX, margins. compensation an Margin adjusted expiring as primarily pressure air $XXX million $XX demand XXXX. to the revenue of which in

during This $X innovative the in whole to order and and million years. that company expected AerSale’s in in asset guidance impact anticipated create investing future will products year reflects In our the development sales to addition, research is operations. volume costs ongoing continue

the PXF the due lower expect conversion PXF we from during in delays the in the the second-half XXX increasing EBITDA in revenue be of XXX company first-half feedstock increased earlier, deliveries. to to noted benefits XXXX, feedstock and As and acquisitions and as adjusted program weaker and year

the not any product its include sales in FAA Our of does guidance for XXXX is as approval. final potential of AerAware stages

orders. the XXXX. Further, during the as And of does, feedstock guidance. we have We we two provide is once update acquisitions will an first have SEC not assumed if issued continue seen the we and represent of it it rate initial upside will XXXX months have could to our

flight has aside summary, the traction from equipment timing underlying gain to robust With In of sales, the a a our remains trajectory. on business growth continued the strong momentum variability strong generating in forward. in as well for availability, balance continue liquidity, and and capitalize increasing stakeholders are order to well to we other as feedstock positioned sheet external opportunities and on high internal going returns our

to ready operator, take we questions. are that, With

Operator

from question. Subin the with Stifel. Thank question comes proceed Instructions] will your [Operator first you. of a At line with session. this Please time, question-and-answer be we Our conducting Bert

Bert Subin

thank afternoon you and for the time. then Hey, good

Nick Finazzo

Hey, Bart. good afternoon,

Bert Subin

afternoon. good Hey,

outpace just had just about the sales? start. on the I because was guidance, to what On $XX a how to you the last seems I earnings able drove quarter, anticipating which on maybe EBITDA through just despite November, higher large midpoint call, you for at it pretty maybe XQ look So, are midpoint those of still at your sort sales if guidance that walked the just and of contemplated maybe us you're million question discrepancy

Nick Finazzo

for the what another sales, to? you're have we I'm million $XX little you a say when referring quarter specifically had Yes, confused projected to in

Bert Subin

$XXX for right? to had your guidance, million $XXX So, million you

Nick Finazzo

Correct.

Bert Subin

below that. in came And

discrepancy, Or what higher things drove into expecting sales equipment and that wondering that you were there I'm sort ‘XX? something So, unexpected was flight just happened? slipped of

Nick Finazzo

Yes, we I more happening fourth hopeful mean, overall I have quarter. were the sales projecting, would asset to say we in were whole

overall we Fortunately we were generate revenue for offset that's margins able to strong the we were what us, off to sell shortfall. equipment that able

Bert Subin

everything the the like, the sort the sort on now. sounds as of have of Okay. call went right as scheduling of just release, in know, And commentary on you it in if based as AerAware maybe on the it could you based things, and well side

an happen, of in If out, to that or could earning by You best-case have I were were to you if conceivable again mean, that were theory that STC timeframe do to out sometime in if that in sort it's think in play May. that July scenario? schedule you be could granted sales as play

Nick Finazzo

impossible put possible. of have sales to did really irresponsible it's we maybe predict. we we we're we that to order, FCC would think to in we this until or don't but -- is on that we we I not it's have first an impossible going STC get in speculate possible, It's before sales it's sales, might but possible that's possible, when get our but AerAware approved it's initial kits not think our think even as that stock, a and we predict little We the Well, any to have first projecting have we be order. not guidance, think when a

Bert Subin

makes in a way to sense. like to a today? aviation just sort AerSale sort about thoughts think for that easing the inning challenge. a maybe these more lot of expected a aftermarket on the we bit, how Could that Sounds like -- looks and seen company capitalize like are final on cycles demand, look us best positioning it's it remain of, industry. around of Having maybe you little maybe really is on, some slowing. demand? but If high-level regards Yes, you And it's you're just is And out? market this a is is just cycle? capitalize at robust USM that thinking pretty way Nick, been what strength question the the we the question, give play to to the What's not just with still

Nick Finazzo

Well, supply good the the ever market with I don't USM to requirements. enough think there's USM

during certainly demand and Now exception parked peak not that was the airplanes there almost flying of no hit was COVID, for many you an so had because and USM.

have those to as Puts engines the same keep service see shops been for of side. airplanes -- cannibalized or well, shop. USM engines have what Now have have are on to flying, enough a parked time. engines depleted shop up. been consuming of requirements airlines to we're those is are body in requirements, supply not and market The The again, not enough in. picking their aircraft starting because And their good engine just that They demand up useful flying. the recovery The the body and for the repaired. narrow a on engines overhaul -- aircraft there's is quite USM backed their now engine to underway well be need wide life, recovered there's been depleted are we're just few amount the the engines business to has USM substantially are going that USM, for good that of

seem or parts. side. substantially or doesn't much much matter Widebody engine widebody. to see narrowbody whether it's And to is demand didn't that freighter the the And engines the hasn't for widebody decline we widebody in due suffered market a widebody as

the for extremely requirement we So, to strong. continuing USM see stay

body narrow the the out new there. flight definitely we're those had Now the Boeing's both with AXXXneo. FAA just it with issues that with two with displacing older is sides of kind of to issues staying multiple story delivery aircraft, affecting the engine equipment -- and experiencing USM are delay problems that That which of with not amount it's with and Airbus's aircraft the they've

the the at I the used USM that good there both there's our there's flying, the use our it's point aircraft side. because never result which are feed market XXX. demand enough is is that -- USM make bolster engine narrow aircraft positive not diminished that's that would The The a well, the for that's into market material. in basis market, AXXX of material, the side and statement coming this negative service availability To body of the for and certainly those is amount more material. And keep

had trying all we year, -- acquisition to sources So, feedstock those and we no of did last months have level two we people value across and all two we maybe of to those and deal plus in of have gone this funds for could in levels what very ways away, invest funds of a of been have are causing -- out that’s impinging high investors first up their the the of in cost of and this on feedstock and first double the XXXX. that USM to typically be buy at that that have the the figure all margin of there's number sending their what to for assets cost in of year. year months out investors this everything That find very, we substantial extract is one all had space we're can't of since a ability some market. longer probably overpaying lost is And funding

those -- very feedstock availability substantial year, had the year. was two substantial of surprising. surprised think reasons We but are we've to months why a in the two of that’s side, we a level success can that of in months such the So of were acquisition again, that it's demand, that first demand on the with improvement first see coupled improvement in the the in two

rate, guidance So, the we're we the balance this the to we've probable continue things for It very optimistic been continue is year. about if year, of at that the buying. increase the rate balance of buy we'll

of out and I'd So, the the the can if say -- feedstock that. does think get price it and in right machine AerSale the that's the at greatest you can all, right you extract I all value

the opportunity and years and year forward think we I this to feedstock substantial it. here coming look significant for in the is growth

Bert Subin

color. good Nick. much, Thanks so Really

Nick Finazzo

welcome. You're

Operator

with [Technical from Please comes question DIfficulty] next Our RBC. line of proceed the with Ken Herbert

Ken Herbert

Hi Hi, afternoon. Nick. Martin. Good

Nick Finazzo

afternoon. Good

Martin Garmendia

Ken. Hi,

Ken Herbert

the with of could the nine the PDUFA there's some XXX, assume sounds process, -- delay Nick, been XX like how you of maybe XX should the the to think guidance just off, where it update on your -- some us these the on put does start Hey are year? sold of this conversions we moved pool And process? completes the into you lease or stand in about and

Nick Finazzo

we aircraft in So, three I have think conversion now. four or

One of them I started believe December. in

got in to contracted was three it we providers. October. of for being And ended SEC those one that supposed was and on have able The start provider our one their we December; those slots two. now with relied -- in started Initially, They that to -- first one contract our of delayed. on not to were we up have thought we and would have --

and us or between So, booked. the all XXX, provider slots got now STC XX the we've

we we Some then of those provider contracted a and cargo to do installations. took as with the actually kits

AerSale top exact back But out conversions. third the the in back itself October I know be several that pushed any and it we're that of supposed and these to not months. dates doing go and of in, my of second don't to aircraft will push head. December

Martin Garmendia

those in supposed delivered It's to be periods.

Nick Finazzo

would delivered that even know in X we October to the in first we happen quarter. may don't one so I deliveries quarter, the the get if the Well, first be expected in first quarter,

when XX in all previously we you the asked we thought year. would fairly would mentioned, those be we thought year, spaced evenly and get throughout As the we

forward of year a this the a quarter, first one on full two we've get maybe will got of and at the I know maybe go rest point possible it's basis. even exception the come in don't if line the with the in to pretty Now balance

so But first will thing we three that first quarter those in have and think back of available the ‘XX. push in the delivered whole quarter expected shifts couple early aircraft of to quarter, months, be will last the that a of into

Ken Herbert

about sounds costs conversions How that. with there's like finding next these that it XX you're on your number purchasing you strategy here relative delays for conversions cost changes outsourcing your sounds to Are changed? has helpful. around associated of a in been the like the It that's maybe the significantly kit the aircraft, the of more okay, Okay, that? think with doing we should

Nick Finazzo

the having our actual the the for lowers do the FCC us having our conversions over the is for or vendor It the do us doing actually us. So, and actually provider buying installation. own cost of by vendor, better kits the conversions cost

shift actually a So, buy the actual to converted and conversion benefit had them kits itself. is get we cost to where ourselves the

Martin Garmendia

cost the in benefit Where seeing first increases two yes had program spare Ken, the pretty engines advantage we balance. and of overall on -- that engine we of years of we the the in XXX-conversion inventory is the are are seeing robust

the to the require more cost assets, that those to those have engine a few we even engines that's Now might increasing assets. we go and so the have of for work, into market secure overall

So, we the compared reflected is lower which last. that in year, for why profile we're a projecting margin our guidance, this to

Ken Herbert

Martin. Thanks, Okay.

sort those of, any Was test with of Just how how first Artware, have indications gone? positively test those flight associated incremental commented completed provide finally, on that expectations you that negatively or significantly to went? packages that you've two, the you flight you learned two there the either five are anything of and Can was outlined.

Nick Finazzo

They've gone great.

because people airplane. the board a had airplane, I've They're I and on is made are comment they think These that they like the started it. when the FAA different They FAA been than before. on comment, new were, not works. and this see this flying got impressed, previously system how the

months, period I'm company, came less time, a hours. So, we could we couple of two overall, tests I XX last spread in we disappointing than negatives the longer out hours. phases of that this The even for sure, the There part out. only thing expect. us, is negative all that's is were flight again, though as only the flown of over testing I seven whole for did part is we've invested well anybody no only probably And in through in would February, first the of flight flew that say think this as

airplane pilots the will the flight the and be multiple pilot from to demonstrating it's the set brand-new system time the on on the disappointing involved. FAA, the with the there areas assessing fifth our on flown that's be multiple that a it. just of be how perform, But system from factors, elapsed and get of how So It's part are airplane relatively between individuals trained FAA human FAA have that long. flights, a FAA and never flight gets pilots the will sets both will commercial will FAA that parties multiple pilots on lot airplane, that the understanding and those pilots who and there's

all when that from of long. sort frustrating but it a or dealing that Ken, people scrutiny seen getting it’s of -- with, we’re making We're so all the really it's aircraft. we're good, the characteristics mean, it’s never modifications not of So, -- giving we're vision. FAA like just never to level the experienced this we've part it's I physical enhanced we're before that

that's part of this gotten about so the behind to And got on done cooperative. that's the a it will all the they nothing, really the of attitude increased very good scrutiny with things this I that it. we're positive fully And getting system, max. is about over scrutiny maybe result They're they're certified. say but FAA's FAA, the supportive, the have very have that when

get the full their going that something the And is what thorough. they're safe doesn't I we of advanced rock-solid system the and a of be They're exist going today. that has an do have, at job. I going we're the STC. technology we'll support which that FAA to to But think see think have they is day, to end

Martin Garmendia

control the the flight by that's certified I display. primary XXX this after MAXC FAA primary if the flight is at being system, And add, could first

So we're is again, territory. in new This this is novel of kind technology. --

screening, more providing rightfully which is so. FAA the So, is

Ken Herbert

Thanks, Martin. Thanks, Nick. Great.

Nick Finazzo

Okay, welcome.

Operator

Difficulty] question with Ciarmoli with Truist of next from Please proceed Our [Technical line Securities. the comes Michael

Michael Ciarmoli

Hey, customers for just finished kits many customer? even to inventory? customers And building will still tell potential the you us AerAware. what you've launch behind guys. know stay evening, maybe does good presumably up Can Nick do requirement questions. maybe certified? how on be you launch gotten get And you volume this the once Are Thanks taking kits? the

Nick Finazzo

be, us of with of the tell year, that, think talk customer XXX that customer, exactly to to I premature The -- our but we we'll the MAXs. I and you – flown throughout over launch to we're XXX by that. mandated flown XXX that some won't past I a other occasions fleet customer of doing minimum on a hours will people but of you launch about tell I have, you And multiple exceed all regarding has and question, the end underway the customer have many kits They well will I again, kits the tell with regarding regard XXXNGs airplanes. have So, build will this. our potential how who we've it's

big would that be one. So a

long adding and year take years year, XXX for take up one one if up next build several it and -- of XXX-airplane year It of a we or then equipment? customer sets set to get How to flight another XXX did target minimum XXX after would XXX to would Just a a to a that kits. XXX in airplane XX AXXX for type. fleet this

Michael Ciarmoli

you their do gate? out going asking But XXX of see initial Do realized from rate I the guess, them? Got XXXs. they I take might on take that get it. plus what of are idea You right the have cadence of the five I'm take you kind to an they SPC, be? what Yes, customer, XX?

Nick Finazzo

know. don't we Again,

Let’s -- get start least installed. the told fleet we the been system however, of so that their airline what will is using at they have XX%

they're of expect be as year kits, I could installed if would could them as able they to they that period those want not to they and system it get use the time. XXX takes going because more that to fast get a or to So, for would

So, And fast kits in to requirement, advance us kits up because just that's the and for kits, of take it's on want the why could deliver build to the to we as we've manufacture time Universal take it. of going production to as of working their been they requirement. manufacturing for it gear for this level put in capacity and it's their going Elbit kits time would

Michael Ciarmoli

some this accelerating-second revenue second-half Helpful. ‘XX. driver? or as maybe based kind kind into growth a into rank the AerAware talked then into you to but not of, of look year if of, color and capability would potential AerAware, to you about those kind we obviously of, ‘XX revenue growth feedstock any be And half kind going I next maybe bigger expansion. ask year. just I'm numbers, the if Obviously, of Can even big purchase for talked would on it. continue conversions you And order one, what be specific Got were said. you your then what you think about, year guess, size you from think But contribution next you, the drivers?

Nick Finazzo

speculative that to at too It answer me for point would this question. be

Michael Ciarmoli

all one the out for at of of their That's there? I with, potentially last against are feedstock? I sort burning of all guess you less seeing kind guys kind running mean, driving all And hinted competition Are entities Do you of more know time. you're of you many you need seeing okay. What for airlines fair. Do on kind it? green Okay, the think the then that's about assets how competing purchases? USM? of, the

Nick Finazzo

course. Of

increasing but driving the need other seen out utilization, of for recover we've seen issue not as shop. to Of is we've our the -- far started of more once with is USM, USM the utilization not course, the as getting the the flight USM equipment market

the more because demand. optimistic USM I'm to that's force continuing were product. when seeing feel there USM because And even that, increasing our we we very and have the feeding did we into now why strong we're shop demand glad increase, So, we now sales wasn't about

it long like As selling get somebody shop, stuff having out any the seem as it to who we're it. the needs trouble doesn't of we

of demand is So that that's sell ready helping continues put to to availability our having into lot a rise. work USM we of material

don't issue. feedstock it's I see that is availability So, changing. the the Again, that of

I'd bid bid dollars’ pass of we to million of hundreds up million not terrible over millions that margins millions I billion terrible not of of never last can good because push on won of competitors worth deals. light disciplined. to we're $XX worth really of worth deals not about could win than our certainly against, do to push $X.X hundreds that. regard numbers and to And done with rather millions deals our deals, down. if We've that, intentionally look, $XX of hundreds in Now year. going worth chose just we're have we of on of we deals crappy dollars

we We if say won I'd won disciplined of have deals. chose million we last very remain $XX didn't. were The deals year. them. priced we rest we Those bid raise won we properly and our So, price -- to their deals could

we those who them the assets more they I you can. value out extract assure can people cannot of than Now bought

those companies people, with that by they the understand to There assets of space investment starting pricing the those in personal who no against companies at who that that list acquisitions, have they did? bought why roads financed with and companies us don't people died litter overspent our of growing by have a So is that in competed were market [Indiscernible] are the have product, and okay? that

$XX been We'll deals no were low were year. wasn't. time. basis, long adjusted making so pass properly priced. they win deals, justify on four of than more We've didn't we $XX those And funds, don't has they'll requirement, Because not apologetic either And a fund cost margin, take last whoever super no be a threshold, We million opinion, doing of can risk which acquisitions. deal I a worth there that don't cost this of bought those rest how no going know overspend. our in on that I'm million the of to

outside an I that think collect overpaid. we in than somebody we've way seen that asset, more and can it just mean, from by when I we we think total get

at tempering So, survive, amount that diminished, think I experience, that been companies now competition their bidding have have would based has ones the to those the success we're gone other bid been are successful that competitors of somewhat going now because XX% our is rate are of ones who I -- away. the used about have bids up, their been bidding, on that and

don't that's a two had adjusted those of they previously, margin a doesn't bid would. basis, we would to money. And maybe investment, lower against those we take a plenty on if we still doesn't much But whether So, good we're it time dozen will mean a doesn't dozen. have that risk doesn't And it money, mean won't bidders down than have tell.

Martin Garmendia

single players dimensional an temporary have a lower [Multiple with those And margins. battle Speakers] those uphill

Michael Ciarmoli

guys. Yes, color. That's jump absolutely. in the Thanks queue. Love disciplined I'll commentary. that back great

Nick Finazzo

Welcome. Good talking Okay. you. to

Operator

Khanna line question question. from next Please Cowen. Our of with proceed the Gautam comes your with

Unidentified Participant

on Jack is This the Thanks question. today. guys. actually Gautam for Hey, for

interest really specific and one some kind good Just back about talking here. to guys detail provided AerAware customer of I about know you

the highlighting? getting hear you kind incremental on Just XXX you're about I just XXX. know one than other wanted up potentially of your to this customers that perspective talked kits And to

have to monetize and you do actually to what their production in regards see this Just like further? up pick to Thanks. start to orders

Nick Finazzo

Okay. Hi, Jack.

go Regarding -- the question. many we let's too to got questions, first back

Martin Garmendia

Overall, beyond our launch customer. Other customers…

Nick Finazzo

customers beyond Okay. Yes, launch other okay our customer.

a the we that airlines XX. number in fleet system range talking So, from would and are sizes of interested say let's to their are very

as that would some could And we're same fortunate get all as XX challenging. enough that XXXs. but to if have XXX, to far smaller, our those offer, companies of necessarily a kits even the not be at be to We couple ability to XXXs, to time, an deliver

us. I Our kits, is increase ability to not our problematic production think of for

a kits, radome, production of our the kits of We modifying of number installation manufacturing are bracket up but staffing the consist an components for camera. sub own our

internally, third-parties externally. increase think our eight I of eight-segment subcontract remanufacture not it's that third-parties eight do To We other the the the and to of eight-piece out to at an make those harness pieces piece brackets pieces use multiple pick eight or radomes have packages. of to has the separate companies -- can capability, wire accommodate a all but the necessarily manufacturing people wire piece that any camera. to harness other to of or

that ourselves another demand need would kits to Well, the understand and to the once kits say on of space contract did XXX kits build to we to or to a a because efficient build quality we then -- ourselves, Matter XXX the we teaching that several we most to expeditious kids we're Getting that manufactured up the didn't right be lot get do to so go we is and kits, contract we wiring speed the were kits, out had to they by cost-effective what understand it, capacity basis, build a that way really most XX these that up the then kits us we let's is XXX, to make if year. to to to to able minimum party do of the internal harness way to rework review a on the if and fact, -- year me. and how going more the vendors we a third-party do first either more the that those do of kits.

do along year. the capacity that we'll stead learned subcontract get a build it. And to than a can't minimum to this do more that, out for a way significantly in an fast lot and good we're ourselves again, build if kits the we've XXX enough we to we So, if order something

up supply different the spool Manufacturing quickly to of story, don't chain that installation of kits. the I Now is that flip side of time. that's within is the their period a little manufacture Hardware a Elbit kits as can short know XXXs

that, longer. that typically takes think I

to their until side have can produce the for Elbit we're ultimately of going airlines wait large order, so, kits. the And to

Unidentified Participant

very That's good color there. Okay.

back USM and one on quick just going February. how to one, in your feedstock and in comments it's pretty Just strong last January

greatest the where If you seeing could just strength. you're provide some context

I the engine side. on think alluded you to more

Given the there the at level. OEM issues

hear to Thanks. perspective Just the green your shoots there? of on love would some

Nick Finazzo

and So USM able into not the material, the never repaired side engines on and are going good shop USM. engine -- able again, being is that now demanding USM is to –

from engine engine an you goes the can good if not parts The parts heat parts, be and a the you the shop you're reworked. part end to of are hot you when to to up have referred were parts XXX or fatigue USM I a to because is to are get material away Now parts limited that consume XXX those These and an point. out like parts. them going due and either that on certain they an out engine engine, side throwing once lot section that

good in and a life never of hot USM, of parts that's that's the never of lot engine limited parts shop referring the to There's to or the section that. I'm an side. can refer enough consuming When having on on get service You engine visits. enough what and I --

the are from are new PMA all parts up, customers or to forced picking the parts shops there's as buy USM enough to brand to supply that forced they're So OEMs. buy not

again, I that's question. So, What's part? guess other part of the your

Unidentified Participant

broad seeing color you're gear, where the most wheels brakes like would strength it's of just any specifically kind seems other landing and just it Thanks. Yes, broad-based, like whether but be just helpful.

Nick Finazzo

brakes, I pieces, think landing components its component it's pieces, repair, It's wheels gear. and everything. accessories, structural avionics it's now

Airframe be Of replaced, that, side that again parts that course, that's the not business. work rotable structural the USM, the it's of we parts overhaul on, more need to board. across on accessories, components, it’s

Unidentified Participant

I'll Okay. pass it Thank on. you,

Nick Finazzo

Jack. Thanks, Okay.

Operator

session. of reached over have the for I'll the remarks. closing Finazzo end call Nicholas we now turn to question-and-answer And the

Nick Finazzo

righty. All

thanks audience for understand fully and unique insightful Ken, all multi-dimensional which to AerSale’s questions, our integrated Birt, Jack, Michael model. business for I better helpful they're the So, think

again, And our for today. interest. Thank your thanks listeners So you guys. for

to and final a AerSale was along any these continue dynamics. resilient that company can our strong turbulence the purpose we market as way through We're fly destination. built for

sit everyone. enjoy evening, a back, and the just great Have relax So ride.

Operator

And this at participation. lines and your you your concludes Thank today's conference may this time. you disconnect for

AerSale (ASLE) 6 Mar 232022 Q4 Earnings call transcript