FTAI Aviation Ltd. Q3 FY2024 earnings call

• Announced the 38th dividend as a public company and 53rd consecutive dividend, with $0.30 per share dividend paid on November 25th.
• Adjusted EBITDA for Q3 2024 was $232 million, up 8% from Q2 2024 and 50% from Q3 2023.
• Leasing segment posted approximately $136 million EBITDA in Q3, with pure leasing component at $122 million in Q3 2024, and plans to generate $500 million in leasing EBITDA in 2024 including $50 million in gains on asset sales.
• Aerospace Products had $101.8 million EBITDA, 34% margin, and increased 2024 estimated EBITDA to $360-$375 million from $325-$350 million.
• Acquired Montreal facility (FTAI Canada) increased production of modules from 30 per quarter in 2023 to 75 per quarter in Q3 2024 and expects 100 per quarter in 2025.
• Onboarded 19 new customers in Q3, with new customers typically starting with 1-2 modules and repeat customers ordering 5-10 modules, and also expanding field service capabilities.

In Q3 2024, FTAI Aviation's adjusted EBITDA was $232 million. The leasing segment contributed $136.4 million (58.8% of total EBITDA), with the pure leasing component at $122 million in Q3 2024, up from $112 million in Q2 2024 and $102 million in Q3 2023. The aerospace product segment had $101.8 million EBITDA (43.9% of total EBITDA) with an overall EBITDA margin of 34%. Corporate and other had negative $6.2 million. Leasing also sold $20.7 million book value of assets for a gain of $14.3 million, with plans to have more sales in Q4. Aerospace Products had $101.8 million EBITDA, up from $91.2 million in Q2 2024 and $43.3 million in Q3 2023, and saw growth in adoption of their aerospace products.

• 2024 annual aviation EBITDA expected to be between $860 million to $875 million, up from previous guidance of $825 million to $850 million.
• Leasing EBITDA target for 2024 is $500 million including $50 million in gains on asset sales.
• Aerospace Products 2024 estimated EBITDA increased to $360-$375 million from $325-$350 million.

• Uncertainty associated with forward-looking statements as they may differ materially from actual results.
• Risk factors outlined in the Quarterly Report filed with the SEC.
• Impact of legacy contracts from FTAI Canada acquisition on margins in Q4 2024, but they are running off.
• Uncertainty around insurance settlements and timing of recoveries, though expecting total recoveries in the neighborhood of $150 million ultimately.

Q: Sheila Kahyaoglu asks about FTAI's business model post-normalization and duration of CFM56 platform.

A: Joe Adams discusses that their products are sticky once adopted, with no evidence customers will revert to old ways, and confidence in the long duration of the CFM56 platform.

Q: Sheila Kahyaoglu asks about number of new customers onboarded and their module usage.

A: David Moreno states Q3 was record for new customers with 19 onboarded, new customers typically start with 1-2 modules, and repeat customers order 5-10 modules.

Q: Jason Holcomb asks about V2500 progress and customer demand.

A: David Moreno provides updates on V2500 production, LATAM deal starting, and securing two large North American airlines for about 20+ engines in next few years.

Q: Hillary Cacanando asks about Aerospace segment EBITDA margin decrease.

A: Joseph Adams explains it was due to legacy contracts from FTAI Canada acquisition running off, with impact expected in Q4 and to be finished by year end.

Q: Giuliano Bologna asks about growth sources in product segment.

A: Joseph Adams mentions organic growth from being under 5% market share in large engine markets and tripling productivity at FTAI Canada.

Q: Kenneth Herbert asks about supply chain risk management.

A: Joseph Adams states they increased working capital by purchasing parts to avoid supply chain disruptions, using it as low-cost insurance.

Q: Brandon Oglenski asks about backlog and margin sustainability.

A: David Moreno says backlog is correlated with repeat customers (66% volume), and margins expected to increase due to organic growth and cost reduction efforts.

Q: Stephen Trent asks about insurance settlements.

A: Joseph Adams provides updates on insurance lawsuits, with some agreed deals, overtures on others, and expecting total recoveries around $150 million.

Q: Stephen Trent asks about stock split.

A: Joseph Adams says open to considering stock split if data supports it enhancing value.

Q: Andre Madrid asks about field services margin and mix.

A: David Moreno explains field services enhance module velocity rather than being a primary margin play, with small dollar amounts but improving aircraft service speed.