AerSale (ASLE) Q4 2024 Earnings Call March 07, 2025 04:34 AM ET Company Participants Christine Padron - VP - Global Trade & ComplianceNicolas Finazzo - Chairman & Chief Executive OfficerMartin Garmendia - Chief Financial OfficerMichael Ciarmoli - Managing Director - Aerospace & Defense Equity ResearchStephen Strackhouse - Assistant Vice President Operator Good afternoon, everyone, and welcome to the Aeracel Inc. Fourth Quarter twenty twenty four Earnings Conference Call. All participants will be in a listen ...

AerSale Corporation (NASDAQ:ASLE) Q4 2024 Results Conference Call March 6, 2025 4:30 PM ET Company Participants Christine Padron - Vice President of Compliance Nick Finazzo - Chairman and Chief Executive Officer Martin Garmendia - Chief Financial Officer Conference Call Participants Michael Ciarmoli - Truist Steve Strackhouse - RBC Capital Operator Good afternoon, everyone, and welcome to the AerSale Inc. Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please also note today's event is ...

Group 1: Earnings Performance - AerSale Corporation (ASLE) reported quarterly earnings of $0.09 per share, exceeding the Zacks Consensus Estimate of $0.07 per share, compared to a loss of $0.02 per share a year ago, representing an earnings surprise of 28.57% [1] - The company posted revenues of $94.74 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 2.39%, and showing a slight increase from year-ago revenues of $94.42 million [2] - Over the last four quarters, AerSale has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Group 2: Stock Performance and Outlook - AerSale shares have increased by approximately 10.6% since the beginning of the year, while the S&P 500 has declined by 0.7% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $0.10 on revenues of $98.85 million, and for the current fiscal year, it is $0.53 on revenues of $392.56 million [7] Group 3: Industry Context - The Aerospace - Defense Equipment industry, to which AerSale belongs, is currently ranked in the top 32% of over 250 Zacks industries, indicating a favorable industry outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that investors should monitor these revisions closely [5]

Revenue Performance - Fourth quarter 2024 revenue was $94.7 million, a slight increase of 0.3% from $94.4 million in the same quarter of 2023[3] - Excluding flight equipment sales, fourth-quarter 2024 revenue rose 35.5% year-over-year to $63.7 million, driven by improved feedstock levels and strong commercial demand[3] - Full year 2024 revenue was $345.1 million, a 3.2% increase from $334.5 million in 2023[13] - TechOps revenue for 2024 grew by 8.6% to $129.6 million, driven by increased revenues from accessory and landing gear MRO facilities[14] - Total revenue for Q4 2024 was $94,741, slightly up from $94,422 in Q4 2023, representing a year-over-year increase of 0.3%[27] Profitability - GAAP net income for Q4 2024 was $2.7 million, compared to a net loss of $2.7 million in Q4 2023[10] - Adjusted EBITDA for Q4 2024 was $13.0 million, up from $6.0 million in Q4 2023, reflecting higher sales volume and lower expenses[12] - GAAP net income for 2024 was $5.9 million, compared to a net loss of $5.6 million in 2023[17] - Earnings per share (EPS) for Q4 2024 was $0.05, compared to a loss of $0.05 in Q4 2023, indicating a recovery in profitability[27] - Reported net income for Q4 2024 was $2,702 million, a significant improvement from a net loss of $2,732 million in Q4 2023, representing a 2.9% of total revenue[33] - Adjusted net income for Q4 2024 was $4,775 million, compared to a loss of $144 million in Q4 2023, indicating a strong recovery in profitability[33] - Adjusted EBITDA for the year ended December 31, 2024, reached $33,386 million, up from $12,278 million in 2023, reflecting a 9.7% margin[33] Assets and Liabilities - Total current assets increased to $284,030 in 2024 from $264,774 in 2023, reflecting a growth of 7.3%[29] - Total liabilities rose to $149,103 in 2024, up from $108,923 in 2023, indicating an increase of 37%[29] - Cash and cash equivalents decreased to $4,698 in 2024 from $5,873 in 2023, a decline of 20%[29] - The company reported a significant increase in aircraft and engines held for lease, with net assets rising to $67,847 in 2024 from $26,475 in 2023[29] - The company’s total stockholders' equity increased to $455,620 in 2024 from $445,015 in 2023, reflecting a growth of 2.4%[29] Cash Flow - Operating cash flow for the year was $11,184, a substantial improvement compared to a cash outflow of $174,150 in 2023[31] Future Outlook - AerSale anticipates greater demand for its USM business and expects to benefit from an improving backdrop in commercial aerospace[34] - The company is well positioned to take advantage of asset availability and improving lease pool demand[34] - The company plans to continue monitoring risks and uncertainties that could impact future performance, as outlined in its SEC filings[34] Product Development - AerSale's offerings include integrated aftermarket services designed to help aircraft owners realize significant savings in operation and maintenance[36] - The company is focused on expanding its market presence through new product developments like AerSafe™, AerTrak™, and AerAware™[36] Interest Expense - Interest expense for the year ended December 31, 2024, was $5,703 million, compared to a negligible amount in 2023, indicating increased financing costs[33]

Group 1 - The core viewpoint is that AerSale Corporation (NASDAQ: ASLE) has faced challenges leading to a price target reduction of over 30% due to unclear commercialization prospects for AerAware and subpar business performance [2] - The company operates within the aerospace, defense, and airline industry, which has significant growth potential [2] - The analysis provided is data-driven, focusing on investment opportunities and contextual developments affecting investment theses [2] Group 2 - The investing group associated with the analysis offers direct access to data analytics monitors, enhancing the research capabilities for investors [2] - There is no current stock or derivative position held by the analyst in any mentioned companies, indicating an unbiased perspective [2]

Financial Data and Key Metrics Changes - Third quarter revenue was $82.7 million, down from $92.5 million in the prior year, primarily due to lower flight equipment sales [9][31] - Adjusted EBITDA improved to $8.2 million compared to $1.9 million in the prior year, driven by stronger gross margin and lower operating expenses [12][36] - Net income was $0.5 million in the third quarter compared to a net loss of $0.1 million in the prior year [34] Business Line Data and Key Metrics Changes - The Asset Management segment reported sales of $50.4 million, down from $65.1 million in the prior year, with a 36.9% increase in sales excluding flight equipment [19][20] - The TechOps segment revenue increased 17.6% to $32.3 million compared to the prior year, driven by strong commercial demand [23] - The MRO business saw an 18% year-over-year growth, contributing significantly to overall performance [8] Market Data and Key Metrics Changes - The company faced challenges in acquiring feedstock due to OEM production delays, leading to higher asset pricing and a decrease in overall acquisition rates [21][22] - Year-to-date feedstock acquisitions totaled $42 million, below the annual target of $150 million, but sufficient inventory levels are maintained for the next 12 months [20][76] Company Strategy and Development Direction - The company is focused on expanding its lease pool and MRO facilities, with expectations of increased revenue and improved margins as expansion projects conclude [8][14] - The company is pursuing monetization opportunities for its 757 P2F conversion program, with enhanced customer interest noted [18][29] - The strategic approach emphasizes disciplined bidding for feedstock to avoid overpaying and ensure long-term profitability [55][79] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the underlying growth in the core business, driven by better feedstock availability and robust demand in the commercial aerospace sector [28][86] - The company anticipates significant near-term cash flow from monetizing existing feedstock inventory and increased contributions from MROs [41][86] - Management acknowledged the competitive landscape for feedstock acquisitions and the need for a disciplined approach to maintain profitability [79][80] Other Important Information - The company reported a substantial liquidity position of $103.5 million, including $9.8 million in cash and $93.7 million available on its revolving credit facility [38] - Insurance claims related to a fire at a facility are expected to be resolved before year-end, with claims totaling over $70 million [39][40] Q&A Session Summary Question: Status of AerAware customer onboarding - Management indicated that complexities in implementation for larger carriers are causing delays, but discussions are ongoing with multiple customers [42][43][44] Question: Competitive landscape for feedstock bids - Management noted competition from airlines, leasing companies, and new entrants like private equity, emphasizing the need for disciplined bidding [48][49][50] Question: Fourth quarter revenue expectations - Management stated that there is no expected seasonality in the fourth quarter, with revenue dependent on prior feedstock purchases [58][60] Question: MRO business revenue run rate - Management expects an increase of about $50 million in run rate from MRO expansion projects, with current EBITDA contribution estimated at $8 million to $10 million [61][64] Question: Timeline for new MRO projects - Management is actively soliciting customers for new MRO facilities and expects to ramp up business as customers become familiar with the new locations [66][70]

Revenue Performance - Total revenue for the three months ended September 30, 2024 decreased by $9.8 million or 10.6% compared to the same period in 2023, driven by a decrease of $14.6 million or 22.5% in Asset Management Solutions revenues, offset by an increase of $4.8 million or 17.6% in TechOps revenues [97]. - Revenue from the Asset Management Solutions segment decreased to $50.4 million for the three months ended September 30, 2024, due to a $11.9 million or 57.2% decrease in Aircraft revenue and a $2.7 million or 6.1% decrease in Engine revenue [99]. - TechOps revenue increased by $4.8 million or 17.6% to $32.3 million for the three months ended September 30, 2024, driven by higher contributions from component and landing gear repair activities [102]. - For the nine months ended September 30, 2024, total revenue increased by 4.3% to $250.3 million compared to $240.1 million in the same period in 2023 [108]. - Total revenue for the nine months ended September 30, 2024, increased by $10.2 million or 4.3% compared to the same period in 2023, driven by a $0.9 million increase in Asset Management Solutions and a $9.3 million increase in TechOps [109]. - Asset Management Solutions segment sales increased by $0.9 million or 0.6% to $151.5 million, with a $24.4 million increase in Engine revenue offset by a $23.4 million decrease in Aircraft revenue [110]. - TechOps revenue increased by $9.3 million or 10.4% to $98.9 million, primarily driven by higher MRO product sales [114]. Profitability - Gross profit for the Asset Management Solutions segment increased by $0.8 million or 4.1% to $19.3 million for the three months ended September 30, 2024, primarily due to higher margins on Flight Equipment sales [100]. - The gross profit margin for Engines improved to 39.3% for the three months ended September 30, 2024, up from 26.9% in the prior year, attributed to higher margins on Flight Equipment sales and leasing revenues [101]. - Gross profit in the Asset Management Solutions segment increased by $9.3 million or 19.5% to $57.3 million for the nine months ended September 30, 2024 [112]. Expenses - Selling, general and administrative expenses decreased by $3.7 million or 14.7% to $21.7 million for the three months ended September 30, 2024, mainly due to lower repair and maintenance and payroll-related costs [104]. - Selling, general and administrative expenses decreased by $8.3 million or 10.7% to $69.4 million for the nine months ended September 30, 2024 [116]. Interest and Tax - Interest expense, net increased to $1.8 million for the three months ended September 30, 2024, compared to $0.3 million in the prior year, primarily due to higher borrowings to support feedstock acquisitions [106]. - The effective tax rate for the three months ended September 30, 2024, was 13.0%, a significant decrease from 93.0% in the same period in 2023, primarily due to state income taxes and stock-based compensation impacts [107]. - The effective tax rate for the nine months ended September 30, 2024, was 5.2%, a significant decrease from 59.8% for the same period in 2023 [119]. Cash Flow - Net cash used in operating activities was $26.4 million for the nine months ended September 30, 2024, a decrease of $141.7 million compared to the same period in 2023 [125]. - Net cash used in investing activities was $11.5 million for the nine months ended September 30, 2024, compared to cash provided of $6.7 million in the same period for 2023 [126]. - Net cash provided by financing activities was $41.7 million for the nine months ended September 30, 2024, compared to $17.3 million in the same period for 2023 [127]. Financial Position - As of September 30, 2024, the company had $9.8 million in cash and cash equivalents and $78.5 million outstanding under the Revolving Credit Agreement [121]. - As of September 30, 2024, the Company had $78.5 million in outstanding variable rate borrowings under the Revolving Credit Agreement [142]. - A 10% increase in the average interest rate affecting the variable rate debt would raise the annual interest expense by $0.6 million [142]. - The Company primarily uses the U.S. dollar as its functional currency to mitigate foreign currency market risk [143]. - A hypothetical 10% devaluation of the U.S. dollar against foreign currencies would not have materially impacted the Company's financial position as of September 30, 2024 [143]. Valuation Estimates - The fair value determination of the Company's reporting units and goodwill relies on estimates such as revenue growth rates, profit margins, and discount rates, which are subject to change [140].

分组1 - AerSale Corporation (ASLE) reported quarterly earnings of $0.04 per share, missing the Zacks Consensus Estimate of $0.05 per share, and showing an earnings surprise of -20% [1] - The company posted revenues of $82.68 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 7.62%, and down from $92.48 million year-over-year [2] - AerSale shares have declined approximately 53.1% since the beginning of the year, contrasting with the S&P 500's gain of 24.3% [3] 分组2 - The current consensus EPS estimate for the coming quarter is $0.07 on revenues of $92.53 million, and for the current fiscal year, it is $0.20 on revenues of $349.67 million [7] - The Zacks Industry Rank for Aerospace - Defense Equipment is currently in the bottom 31% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8]

Revenue Performance - Revenue for Q3 2024 was $82.7 million, down from $92.5 million in Q3 2023, representing a decrease of 10.0% year-over-year[2] - Flight equipment sales totaled $22.6 million in Q3 2024, down from $44.8 million in the prior year, a decline of 49.6%[2] - Excluding flight equipment sales, revenue increased by 26.0% year-over-year to $60.1 million, driven by strong commercial demand[2] - Asset Management Solutions revenue decreased to $50.4 million in Q3 2024 from $65.1 million in Q3 2023, a decline of 22.7%[4] - TechOps revenue increased by 17.6% to $32.3 million in Q3 2024 from $27.4 million in Q3 2023[5] Profitability Metrics - Adjusted Net Income increased to $1.8 million in Q3 2024, compared to $0.9 million in Q3 2023, reflecting a growth of 100.0%[9] - Adjusted EBITDA rose to $8.2 million in Q3 2024, up from $1.9 million in Q3 2023, indicating a significant increase of 331.6%[11] - Reported Net Income for Q3 2024 was $509,000, representing 0.6% of total revenue, compared to a loss of $148,000 in Q3 2023[22] - Adjusted EBITDA for Q3 2024 reached $8,249,000, accounting for 10.0% of total revenue, significantly up from $1,866,000 or 2.0% in Q3 2023[22] - Adjusted Net Income for the nine months ended September 2024 was $4,745,000, or 2.0% of total revenue, compared to $3,437,000 or 1.4% in the same period of 2023[22] Liquidity and Financial Position - The company ended the quarter with $103.5 million in liquidity, including $9.8 million in cash and $93.7 million available on its revolving credit facility[12] - Total current assets increased to $339,736,000 as of September 30, 2024, up from $264,774,000 at December 31, 2023, representing a 28.3% increase[20] - Cash and cash equivalents rose to $9,787,000 at the end of the period, compared to $5,873,000 at the beginning of the period, marking a 66.5% increase[21] - Total liabilities increased to $149,932,000 as of September 30, 2024, compared to $108,923,000 at December 31, 2023, a rise of 37.7%[20] - Total stockholders' equity increased to $451,524,000 as of September 30, 2024, from $445,015,000 at December 31, 2023, a slight increase of 1.1%[20] Operational Efficiency - Gross margin improved to 28.6% in Q3 2024, compared to 25.4% in the same period last year[6] - Income from operations was $2.0 million in Q3 2024, compared to a loss of $1.9 million in Q3 2023[7] - Net cash used in operating activities was $26,354,000 for the nine months ended September 30, 2024, compared to $168,051,000 for the same period in 2023, showing a significant reduction in cash outflow[21] - The company reported a depreciation and amortization expense of $10,945,000 for the nine months ended September 30, 2024, compared to $7,585,000 for the same period in 2023, indicating a 44.5% increase[21] Inventory and Demand Outlook - Inventory of aircraft, airframes, engines, and parts decreased to $109,706,000 as of September 30, 2024, from $151,398,000 at December 31, 2023, a decline of 27.6%[20] - The company anticipates an additional $45 million in inventory from letters of intent during the year, indicating strong demand for its USM business[23] - AerSale is well positioned to capitalize on current market dynamics and asset availability, suggesting a positive growth trajectory[23] - The expected operating capacity of MRO facilities is anticipated to meet increasing demand for services, reflecting confidence in future performance[23] Shareholder Returns and Compensation - The company reported a basic earnings per share of $0.01 for Q3 2024, compared to a loss per share of $0.00 in Q3 2023[22] - The company has experienced a significant increase in stock-based compensation, with Q3 2024 figures at $1,216,000, or 1.5% of total revenue[22] Risk Factors - AerSale's forward-looking statements highlight potential risks and uncertainties that could impact actual results, emphasizing the need for cautious interpretation of projections[24]

Core Viewpoint - AerSale's stock remains a buy despite disappointing progress on the AerAware rollout, with the company's future growth heavily reliant on this product [1][10][11] Financial Performance - In Q2, AerSale reported a year-on-year revenue increase, recovering from a decline in Q1, with total revenues reaching $77.1 million, up from $69.4 million [2][3][11] - Asset management solutions revenue increased by 12.8%, driven by higher flight equipment sales and lease revenues, while TechOps revenue grew by 9.4% [3][6] - Gross profit rose by 7.8%, but this was below the revenue growth rate, indicating margin contraction primarily due to lower demand for heavy MRO services [4][11] Segment Analysis - USM (used serviceable parts) sales increased by 19.5% year-on-year, while whole asset sales remained stable [6] - Engineering solutions sales surged from $211,000 to $1.7 million, attributed to increased AerSafe kit deliveries [6] - Leasing revenues decreased by 23% due to a shrinking lease portfolio, while product revenues grew by 15.1% and services revenues increased by 3.9% [6] AerAware Product Rollout - The AerAware product has faced significant delays, with no clear timeline for customer shipments despite receiving certification in December 2023 [8][9] - Management anticipates that deliveries could start in six months or longer, but there is no established rollout plan, which raises concerns about future revenue contributions [9][10] Market Outlook - The price target for AerSale stock has been significantly reduced from $18.70 to $6.70, reflecting a more cautious outlook on the company's performance without AerAware [10] - EBITDA estimates for 2024 have been cut by 15%, with expectations of cash burn this year, although there is potential for upside in subsequent years if MRO capacity expands and AerAware is successfully launched [10][11]