FTAI Aviation Ltd. Q1 FY2025 earnings call

• Announced the 40th dividend as a public company, $0.30 per share payable on May 23. - Aerospace products had strong Q1 with $131 million in adjusted EBITDA at 36% margin, growing backlog, and ramping up production in Montreal, Miami, and Rome. - 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. - Strategic Capital Initiative (SCI) secured equity investors, on track to deploy $4 billion plus in capital, and expects to close the new joint venture in Rome soon. - No material negative effect from tariffs currently, with ability to pass on price increases and used assets becoming more attractive if new asset prices rise.

In Q1 2025, the Leasing segment had approximately $162 million in EBITDA, with the pure leasing component at $152 million (including a $30 million settlement related to Russian assets). The Aerospace Products segment had $130.9 million in EBITDA at a 36% margin, up from $117.3 million in Q4 2024 and $70.3 million in Q1 2024. For 2025, leasing EBITDA is expected to be $500 million, and the company aims to increase its aerospace products market share from 5% to 25%.

• 2025: Target adjusted EBITDA of $650 million, with leasing EBITDA expected at $500 million. - 2026: Aim for approximately $1.4 billion in EBITDA. - Free cash flow: Expect $300 million to $350 million in the first half of 2025, targeting $650 million for the year.

• Tariffs: While no material negative effect currently, long-term impact could affect new asset prices, but used assets may become more attractive. - Market Uncertainty: Forward-looking statements are uncertain and may differ from actual results; need to review risk factors in SEC filings.

Q: Dig into Aerospace Products segment and SCI program rationale A: Tremendous demand for rebuilt engines, no cannibalization, 30% of activity went to SCI to grow the partnership, with 20% expected for future years.

Q: Tariffs impact on aerospace products margins A: No material negative effect, ability to pass on price increases, used assets become more attractive if new asset prices rise.

Q: Free cash flow and parts inventory A: Invested $127 million in parts, plan to invest $200 million in first half, with parts inventory provisioning ahead of shop visits.

Q: Shareholder-friendly capital deployment A: Priorities are growth CapEx, debt repayment, then shareholder repayments; aiming for debt-to-total EBITDA of three times by end of 2025.

Q: PMA parts adoption and repair capabilities A: PMA parts performing well, sourcing unserviceable parts and repairing them, with increasing adoption by airlines focused on cost savings.

Q: Module production capacity A: Original 100 modules per quarter was Montreal; adding Miami and Rome, capacity to be 200+ modules per quarter, ramping up manpower.

Q: Insurance recoveries A: Recovered $30 million in Q1, with $24 million committed in Q2 and remaining $100 million to be settled.

Q: Lease rates and market demand A: Lease rates stable, high demand for extensions, low fleet storage percentage indicating strong market.

Q: Geographic exposure and China potential A: Southeast Asia growth potential, China as a wildcard with CAAC license in Rome facility.

Q: SCI ownership assets and target buyers A: Majority CFM-powered assets, sourcing from lessors and airlines via sale-leasebacks.

Q: Cash flow and corporate eliminations A: Adjusted cash flow and intra-entity eliminations discussed, with corporate and other items affecting EBITDA.

Q: Southeast Asia acquisitions and tariffs A: Near-term focus on Rome, but long-term potential in Southeast Asia, acquiring facilities with own business.

Q: SCI equity method inclusion A: Equity income from SCI partnership is included quarterly, with potential for significant income as the business grows.