FTAI Aviation Ltd. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Dividend: Announced the 40th dividend as a public company, $0.30 per share payable on May 23.
• Aerospace Products: Strong quarter with $131 million adjusted EBITDA at 36% margin. Backlog of purchase orders for 2025 and beyond is growing. Refurbished 138 CFM56 modules in Q1, with ramp-up expected in Q2, especially in Montreal. Goal to increase market share from 5% to 25%.
• Leasing: $162 million EBITDA in Q1, including a $30 million settlement. Gains on sales of assets started the year with $9.8 million margin, increasing in Q2 as seed assets transition to SCI.
• Strategic Capital Initiative (SCI): Secured equity investors, expect further closings in Q3. On track to deploy $4 billion plus in capital by year-end. Working with IAG Engine Center Europe in Rome, expect to close joint venture soon.

Segment Performance

• Leasing Segment: In Q1 2025, leasing EBITDA was approximately $162 million. The pure leasing component was $152 million, including a $30 million settlement related to Russian assets. For 2025, leasing EBITDA is expected to be $500 million as the focus shifts to an asset-light model.
• Aerospace Products Segment: Generated $130.9 million in EBITDA in Q1 2025 with a 36% margin. This is up from $117.3 million in Q4 2024 and $70.3 million in Q1 2024. Adjusted EBITDA for the segment was $131 million in Q1 with a 36% margin.

Guidance

• Adjusted Free Cash Flow: Expected to be $300 million to $350 million in the first half of 2025, aiming for $650 million for the year.
• EBITDA: Expect $650 million in 2025, up from $381 million in 2024 and $160 million in 2023. Aerospace products EBITDA margin expected to remain strong.
• Market Share: Goal to increase aerospace products market share from 5% to 25%.

Risks

• Tariffs: Management states no material negative effect currently, but tariffs could create challenges and opportunities, with potential for price increases in parts due to OEM pass-throughs.

Question and Answer

• **Q: Dig into Aerospace Products segment revenue related to SCI program and rationale.

A: About 30% of Q1 activity went to SCI, with 20% expected for 2025. Virtuous circle for FTAI and shareholders, no cannibalization.

• **Q: Tariffs impact on aerospace products margins.

A: No material negative effect; business operates in multiple geographies, can pass on price increases, and used assets become more attractive if new asset prices rise.

• **Q: Free cash flow cadence and shareholder-friendly capital deployment.

A: Priorities are growth CapEx, debt repayment, then shareholder repayments. Target debt-to-total EBITDA to be close to three times by year-end.

• **Q: Module factory customers and usage.

A: Over 100 customers globally, usage per customer increasing, aiming for 25% market share.

• **Q: SCI ownership assets and target customers.

A: Vast majority of SCI assets are CFM-powered. Sourcing from lessors and airlines via sale-leasebacks, with strong opportunities in sale-leaseback transactions.