AerSale Corporation Q2 FY2025 earnings call

• The second quarter was driven by increasing ready-to-sell USM from feedstock investments and flight equipment sales, leading to higher profitability. - Aggressively pursued feedstock acquisitions totaling $27.1 million year-to-date, with a focus on wide-body airframes and engines; narrow-body engines face intense competition. - In Asset Management, the 757 passenger-to-freighter conversion program saw increased customer engagement. - TechOps revenue was impacted by reduced heavy MRO activity, but margin improvements were seen at the Roswell facility. Component MRO expansion projects are near completion. - Engineered Solutions had increased deliveries of AerSafe, with the backlog supporting 2025 financial objectives. - AerAware received Transport Canada validation, with ongoing product development and in-air demonstrations for potential customers.

Asset Management: Sales increased from $41.8 million in the prior year to $76.3 million in the second quarter of 2025. Flight equipment sales rose from $17.9 million to $33.4 million. Excluding flight equipment activity, segment revenue grew by 79.5% to $42.8 million. TechOps: Revenue decreased 11.9% year-over-year from $35.3 million to $31.1 million, but increased 17.1% from the first quarter of 2025. Engineered Solutions: Deliveries of AerSafe, an FAA-approved Supplemental Type Certificate, increased, and the backlog of AerSafe stood at $12.9 million as of quarter end. AerAware: Made incremental progress, including receiving Transport Canada Civil Aviation validation of its STC, with ongoing product development and customer engagement.

• Expect incremental financial improvement in the second half relative to the first half. - Anticipate full year sales growth with EBITDA growth outpacing revenue due to expanding margins and increased operating leverage. - Strong base of ready-to-sell inventory supports USM sales and flight equipment transactions. - Lease pool is expected to expand further. - Component MRO expansion projects will generate additional revenue. - AerSafe backlog is set to continue growing with increased installation volume.

• Narrow-body engine market is highly competitive with valuations consistently falling below target internal rate of return benchmarks. - Issues with A320neo and 737 MAX have kept older narrow-body equipment in service longer, making it less available at reasonable prices. - AerAware product development and regulatory validation may progress slower than expected.

Q: Ken Herbert asked about the types of assets acquired and the pace of activity in the second half.

A: Nicolas Finazzo discussed that wide-body airframes and engines are better understood and generate more revenue, while narrow-body engines face challenges due to issues with A320neo, 737 MAX, and FAA/Boeing problems.

Q: Ken Herbert inquired about flight equipment sales visibility.

A: Nicolas Finazzo explained that the decision to sell or lease flight equipment is based on evaluating the value and risk, with ongoing analysis of available inventory.

Q: Ken Herbert asked about balance sheet risks and MRO progress.

A: Martin Garmendia stated no impairment risk seen on assets, and Nicolas Finazzo discussed MRO progress including component MRO completion and MRO operations.

Q: Sam Struhsaker asked about the cost cutting initiative and margin benefit.

A: Martin Garmendia said there is an expected $5-6 million annual cost benefit and a ~200-basis point margin improvement.

Q: Sam Struhsaker asked about the impact on USM margin.

A: Martin Garmendia said USM margin varies by product mix but remains stable with a focus on 25% IRR.

Q: Sam Struhsaker asked about AerAware's contribution this year.

A: Nicolas Finazzo said no contribution expected this year due to complex implementation and the need for operational experience