Company Performance - AerSale Corporation (ASLE) reported a quarterly loss of $0.05 per share, missing the Zacks Consensus Estimate of $0.10, and compared to a loss of $0.03 per share a year ago, indicating a significant earnings surprise of -150% [1] - The company posted revenues of $77.1 million for the quarter ended June 2024, which was 8.72% below the Zacks Consensus Estimate, and an increase from $69.33 million in the same quarter last year [1] - Over the last four quarters, AerSale has surpassed consensus EPS estimates only once and has topped consensus revenue estimates just once [1] Stock Performance - AerSale shares have declined approximately 54.6% since the beginning of the year, contrasting with the S&P 500's gain of 9.9% [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.15 on revenues of $100.34 million, and for the current fiscal year, it is $0.49 on revenues of $378.74 million [4] - The estimate revisions trend for AerSale is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [4] Industry Context - The Aerospace - Defense Equipment industry, to which AerSale belongs, is currently ranked in the bottom 32% of over 250 Zacks industries, indicating potential challenges for stock performance [5] - Another company in the same industry, Ducommun (DCO), is expected to report quarterly earnings of $0.63 per share, reflecting a year-over-year change of +16.7%, with revenues anticipated to be $193.72 million, up 3.4% from the previous year [5][6]

[Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) [Forward-Looking Statements Overview](index=3&type=section&id=Forward-Looking%20Statements%20Overview) Outlines forward-looking statements as predictions subject to known and unknown risks, including supply chain, market, and regulatory factors - Forward-looking statements are predictions based on current expectations and projections, subject to known and unknown risks and uncertainties[6](index=6&type=chunk)[7](index=7&type=chunk) - Key risk factors include disruptions in the supply chain, factors adversely impacting the commercial aviation industry, fluctuating market value of products, ability to repossess Flight Equipment, dependence on MRO outsourcing, skilled personnel shortages, and inability to obtain components[7](index=7&type=chunk) - The company does not plan to publicly update or revise any forward-looking statements unless required by applicable law[9](index=9&type=chunk) [PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [ITEM 1 Condensed Consolidated Financial Statements](index=5&type=section&id=ITEM%201%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for AerSale Corporation, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes [Condensed Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Presents the company's financial position, detailing assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :--------------------------- | :------------ | :---------------- | | Total current assets | $295,828 | $264,774 | | Total assets | $598,694 | $553,938 | | Total current liabilities | $43,008 | $45,713 | | Total liabilities | $148,895 | $108,923 | | Total stockholders' equity | $449,799 | $445,015 | - Total assets increased by **$44.76 million** from December 31, 2023, to June 30, 2024, primarily driven by increases in inventory (aircraft, airframes, engines, and parts) and accounts receivable[11](index=11&type=chunk) - Total liabilities increased by **$39.97 million**, largely due to an increase in the revolving credit facility balance[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) Details the company's revenues, expenses, and net income or loss over specific periods Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $77,101 | $69,326 | $167,641 | $147,597 | | Gross profit | $21,720 | $20,140 | $50,516 | $44,531 | | (Loss) income from operations | $(1,852) | $(6,957) | $2,811 | $(7,790) | | Net (loss) income | $(3,637) | $(2,688) | $2,640 | $(2,683) | | Basic (Loss) earnings per share | $(0.07) | $(0.05) | $0.05 | $(0.05) | | Diluted (Loss) earnings per share | $(0.07) | $(0.08) | $0.05 | $(0.07) | - Total revenue increased by **11.2%** for the three months ended June 30, 2024, and by **13.6%** for the six months ended June 30, 2024, compared to the respective prior year periods[14](index=14&type=chunk) - The company reported a **net loss** of **$3.6 million** for the three months ended June 30, 2024, compared to a **net loss** of **$2.7 million** in the prior year period. For the six months, it reported a **net income** of **$2.6 million**, a **significant improvement** from a **$2.7 million net loss** in the prior year[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) Outlines changes in the company's equity accounts, including common stock and retained earnings Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share data) | Metric | Balance at Dec 31, 2023 | Balance at June 30, 2024 | | :------------------------------------ | :---------------------- | :----------------------- | | Common stock (shares) | 52,954,430 | 53,084,214 | | Additional paid-in capital | $311,739 | $313,883 | | Retained earnings | $133,271 | $135,911 | | Total stockholders' equity | $445,015 | $449,799 | - Total stockholders' equity increased by **$4.78 million** from December 31, 2023, to June 30, 2024, primarily due to **net income** and share-based compensation[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Summarizes cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(36,800) | $(129,197) | | Net cash used in investing activities | $(9,000) | $7,886 | | Net cash provided by financing activities | $44,212 | $8,767 | | Decrease in cash and cash equivalents | $(1,588) | $(112,544) | | Cash and cash equivalents, end of period | $4,285 | $34,644 | - Net cash used in operating activities significantly decreased by **$92.4 million**, from **$129.2 million** in 2023 to **$36.8 million** in 2024, primarily due to lower feedstock acquisitions and timing of vendor advances[20](index=20&type=chunk)[141](index=141&type=chunk) - Net cash provided by financing activities increased to **$44.2 million** in 2024 from **$8.8 million** in 2023, mainly due to net borrowings under the Revolving Credit Agreement[20](index=20&type=chunk)[143](index=143&type=chunk) [Notes to the Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Provides detailed explanations and disclosures supporting the unaudited consolidated financial statements [NOTE A— DESCRIPTION OF THE BUSINESS](index=9&type=section&id=NOTE%20A%E2%80%94%20DESCRIPTION%20OF%20THE%20BUSINESS) AerSale Corporation, formerly Monocle Holdings Inc., was formed through a business combination in December 2020, focusing on the commercial aviation aftermarket sector - AerSale Corporation was formed on December 22, 2020, through a business combination with Monocle Acquisition Corporation[24](index=24&type=chunk)[25](index=25&type=chunk) - The company's corporate headquarters is in Miami, Florida, with additional global offices, hangars, and warehouses[25](index=25&type=chunk) [NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%20B%20%E2%80%94%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the significant accounting policies, including the preparation of unaudited interim consolidated financial statements in accordance with U.S. GAAP and SEC rules - Interim financial statements are prepared in accordance with U.S. GAAP for interim financial information and Rule 10-01 of Regulation S-X, permitting reduced disclosures[26](index=26&type=chunk) - Revenue from USM sales is recognized at the point of shipment, while whole asset sales revenue is recognized upon transfer of control to the customer[28](index=28&type=chunk)[29](index=29&type=chunk) - Leasing revenue is recognized straight-line over the lease life, with supplemental rent recorded as revenue or maintenance deposit liabilities depending on contractual commitments[30](index=30&type=chunk) - Service revenue is recognized over time using the input method (cost-to-cost) as performance obligations are satisfied, requiring judgments and estimates for future costs and profitability[35](index=35&type=chunk)[36](index=36&type=chunk) - Certain balances in the December 31, 2023 balance sheet and June 30, 2023 cash flow statements were reclassified for presentation consistency, with no material impact on **net income**, equity, or total cash flows[38](index=38&type=chunk) [NOTE C — REVENUE](index=15&type=section&id=NOTE%20C%20%E2%80%94%20REVENUE) This note provides details on contract assets and liabilities, and disaggregates revenue by segment and product type for the three and six months ended June 30, 2024 and 2023 Contract Assets (in thousands) | Metric | June 30, 2024 | December 31, 2023 | Change | | :------------ | :------------ | :---------------- | :-------- | | Contract assets | $4,597 | $6,474 | $(1,877) | - Contract liabilities (deferred revenue) amounted to **$3.0 million** as of December 31, 2023, with **$2.7 million** related to services. For the six months ended June 30, 2024, **$2.4 million** of beginning contract liabilities were recognized as revenue[42](index=42&type=chunk) Total Revenue by Segment (in thousands) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Asset Management Solutions | $41,799 | $37,071 | $101,061 | $85,501 | | TechOps | $35,302 | $32,255 | $66,580 | $62,096 | | **Total Revenues** | **$77,101** | **$69,326** | **$167,641** | **$147,597** | [NOTE D — INVENTORY](index=17&type=section&id=NOTE%20D%20%E2%80%94%20INVENTORY) This note details the composition of inventory, including USM, work-in-process, and whole assets, and reports on inventory scrap loss reserves and a significant fire incident Major Classes of Inventory (in thousands) | Inventory Class | June 30, 2024 | December 31, 2023 | | :---------------- | :------------ | :---------------- | | USM | $126,807 | $120,053 | | Work-in-process | $25,028 | $22,270 | | Whole assets | $226,978 | $186,845 | | **Total Inventory** | **$378,813** | **$329,168** | | Less short term | $(221,371) | $(177,770) |\n| **Long term** | **$157,442** | **$151,398** | - Inventory increased by **$49.6 million** from December 31, 2023, to June 30, 2024, primarily in whole assets[47](index=47&type=chunk) - A fire destroyed inventory valued at an estimated replacement cost of **$52.8 million** (cost of **$6.0 million**) in April 2024. The company recorded a **$6.0 million** impairment and a **$6.0 million** non-trade receivable, with recovery from insurance deemed probable[49](index=49&type=chunk) [NOTE E — INTANGIBLE ASSETS](index=17&type=section&id=NOTE%20E%20%E2%80%94%20INTANGIBLE%20ASSETS) This note outlines the company's accounting for goodwill and other intangible assets, which are subject to annual impairment tests, and provides a breakdown by subsidiary and segment - Goodwill and indefinite-lived intangible assets are not amortized but are subject to annual impairment tests[50](index=50&type=chunk) Intangible Assets with Indefinite Lives (in thousands) | Subsidiary/Asset Class | June 30, 2024 | December 31, 2023 | | :--------------------- | :------------ | :---------------- | | Qwest: FAA Certifications | $724 | $724 | | Qwest: Goodwill | $13,416 | $13,416 | | ALGS: FAA Certifications | $710 | $710 | | ALGS: Goodwill | $379 | $379 | | ACS: Trademarks | $600 | $600 | | ACS: FAA Certifications | $7,300 | $7,300 | | ACS: Goodwill | $63 | $63 | | ACT: Trademarks | $200 | $200 | | ACT: FAA Certificates | $796 | $796 | | ACT: Goodwill | $6,002 | $6,002 | | **Total** | **$30,190** | **$30,190** | Intangible Assets with Definite Lives (in thousands) | Subsidiary/Asset Class | Useful Life (Years) | June 30, 2024 | December 31, 2023 | | :--------------------- | :------------------ | :------------ | :---------------- | | Qwest: Customer relationships | 10 | $4,677 | $5,163 | | ALGS: Customer relationships | 10 | $20 | $30 | | ACS: Customer relationships | 10 | $928 | $1,033 | | ACT: Customer relationships | 10 | $4,971 | $5,430 | | AerSale: Flight manuals | 10 | $543 | $- | | **Total** | | **$11,139** | **$11,656** | - Total amortization expense for definite-lived intangible assets was **$0.5 million** for Q2 2024 and **$1.0 million** for H1 2024[54](index=54&type=chunk) - Interim quantitative goodwill impairment tests were performed as of March 31, 2024, and June 30, 2024, for Asset Management and ACT reporting units due to a significant decline in stock price, but **no impairment was found**[55](index=55&type=chunk) [NOTE F— PROPERTY AND EQUIPMENT, NET](index=21&type=section&id=NOTE%20F%E2%80%94%20PROPERTY%20AND%20EQUIPMENT,%20NET) This note provides a summary of property and equipment, net, and the associated depreciation expense, detailing the composition of these assets Property and Equipment, Net (in thousands) | Asset Class | June 30, 2024 | December 31, 2023 | | :---------------------------- | :------------ | :---------------- | | Tooling and equipment | $16,720 | $16,024 | | Furniture and other equipment | $12,475 | $12,076 | | Computer software | $2,555 | $2,374 | | Leasehold improvements | $21,081 | $16,269 | | Equipment under capital lease | $- | $192 | | Flight equipment held for R&D | $8,368 | $7,784 | | Less accumulated depreciation | $(28,516) | $(27,027) | | **Total** | **$32,683** | **$27,692** | - Depreciation expense was **$1.2 million** for Q2 2024 and **$2.3 million** for H1 2024, an increase from **$0.9 million** and **$1.8 million** in the respective prior year periods[59](index=59&type=chunk) [NOTE G — LEASE RENTAL REVENUES AND AIRCRAFT AND ENGINES HELD FOR LEASE](index=21&type=section&id=NOTE%20G%20%E2%80%94%20LEASE%20RENTAL%20REVENUES%20AND%20AIRCRAFT%20AND%20ENGINES%20HELD%20FOR%20LEASE) This note provides information on aircraft and engines held for lease, their net book value, associated depreciation, supplemental rents, and minimum future annual lease rentals Aircraft and Engines Held for Lease, Net (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :---------------------------- | :------------ | :---------------- | | Aircraft and engines held for lease | $62,178 | $58,136 | | Less accumulated depreciation | $(30,687) | $(31,661) | | **Net Value** | **$31,491** | **$26,475** | - Total depreciation expense for leased assets was **$1.9 million** for Q2 2024 and **$3.1 million** for H1 2024, an increase from **$1.1 million** and **$2.2 million** in the respective prior year periods[60](index=60&type=chunk) - Supplemental rents recognized as revenue totaled **$2.3 million** for Q2 2024 and **$3.8 million** for H1 2024[61](index=61&type=chunk) Minimum Future Annual Lease Rentals (in thousands) | Year ending December 31: | Amount | | :----------------------- | :----- | | Remaining six months of 2024 | $6,309 |\n| 2025 | $4,713 |\n| 2026 | $3,416 |\n| 2027 | $2,411 |\n| **Total** | **$16,849** | [NOTE H —ACCRUED EXPENSES](index=22&type=section&id=NOTE%20H%20%E2%80%94ACCRUED%20EXPENSES) This note provides a summary of the components of accrued expenses as of June 30, 2024, and December 31, 2023, including compensation, legal fees, commission accruals, and taxes Accrued Expenses (in thousands) | Component | June 30, 2024 | December 31, 2023 | | :-------------------------------------- | :------------ | :---------------- | | Accrued compensation and related benefits | $2,989 | $2,241 | | Accrued legal fees | $588 | $854 | | Commission fee accrual | $787 | $260 | | Accrued federal, state and local taxes and fees | $176 | $105 | | Other | $1,820 | $2,018 | | **Total** | **$6,360** | **$5,478** | - Total accrued expenses increased by **$0.88 million** from December 31, 2023, to June 30, 2024, primarily driven by increases in accrued compensation and commission fees[66](index=66&type=chunk) [NOTE I – WARRANT LIABILITY](index=22&type=section&id=NOTE%20I%20%E2%80%93%20WARRANT%20LIABILITY) This note details the company's warrant liability for Private Warrants, classified as a liability and remeasured at fair value each reporting period using the Black-Scholes option pricing model - **623,834** Private Warrants were outstanding as of June 30, 2024, and December 31, 2023, with an exercise price of **$11.50** per share and an expiration date of December 22, 2025[67](index=67&type=chunk) - Private Warrants are classified as a liability and remeasured at fair value using the Black-Scholes option pricing model, with changes recognized in the condensed consolidated statements of operations[68](index=68&type=chunk) Black-Scholes Assumptions for Private Warrants | Assumption | June 30, 2024 | December 31, 2023 | | :------------------------------ | :------------ | :---------------- | | Risk-free interest rate | 4.33% | 3.84% | | Expected volatility of common stock | 40.95% | 41.66% | | Expected option term in years | 1.5 | 2.0 | [NOTE J— FINANCING ARRANGEMENTS](index=24&type=section&id=NOTE%20J%E2%80%94%20FINANCING%20ARRANGEMENTS) This note details the company's outstanding debt obligations, including the Wells Fargo Senior Secured Revolving Credit Agreement and the Synovus Property and Equipment Revolving Term Loan, providing information on commitment amounts, interest rates, and covenant compliance Outstanding Debt Obligations (in thousands) | Debt Facility | June 30, 2024 | December 31, 2023 | | :---------------------------------------------- | :------------ | :---------------- | | $180.0 million Wells Fargo Revolving Credit Agreement | $80,955 | $29,000 | | $10.0 million Synovus Equipment Revolving Term Loan | $615 | $8,559 | | **Total** | **$81,570** | **$37,559** | | Less current portion | $(93) | $(1,278) |\n| **Total long-term portion** | **$81,477** | **$36,281** | - The Wells Fargo Revolving Credit Agreement was amended in July 2023 to increase commitments to **$180.0 million** and extend maturity to July 24, 2028. The interest rate is SOFR plus **2.75%** (**8.08%** as of June 30, 2024)[72](index=72&type=chunk) - The Synovus Equipment Loan, with a **$10.0 million** commitment, became a term loan on June 30, 2024, maturing June 30, 2027. It bears interest at one-month SOFR plus **3.50%** (**7.96%** as of June 30, 2024)[74](index=74&type=chunk) - The company was in compliance with all debt covenants as of June 30, 2024[73](index=73&type=chunk)[75](index=75&type=chunk) [NOTE K — EARNINGS PER SHARE](index=26&type=section&id=NOTE%20K%20%E2%80%94%20EARNINGS%20PER%20SHARE) This note provides a reconciliation of the computation for basic and diluted earnings per share (EPS) for the three and six months ended June 30, 2024 and 2023, detailing weighted average shares outstanding and the impact of anti-dilutive shares Earnings Per Share Reconciliation (in thousands, except share and per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income for EPS - Diluted | $(4,081) | $(4,081) | $2,640 | $(3,742) | | Weighted-average shares outstanding - basic | 53,029,359 | 51,227,484 | 53,010,425 | 51,217,990 | | Weighted-average shares outstanding - diluted | 53,029,359 | 51,404,653 | 53,111,439 | 51,417,889 | | (Loss) earnings per share – basic | $(0.07) | $(0.05) | $0.05 | $(0.05) | | (Loss) earnings per share – diluted | $(0.07) | $(0.08) | $0.05 | $(0.07) | - For the three months ended June 30, 2024, basic and diluted EPS were **$(0.07)**, compared to **$(0.05)** and **$(0.08)** respectively in the prior year[80](index=80&type=chunk) - For the six months ended June 30, 2024, basic and diluted EPS were **$0.05**, a positive change from **$(0.05)** and **$(0.07)** respectively in the prior year[80](index=80&type=chunk) [NOTE L— BUSINESS SEGMENTS](index=26&type=section&id=NOTE%20L%E2%80%94%20BUSINESS%20SEGMENTS) This note describes the company's two reportable business segments: Asset Management Solutions and TechOps, providing selected financial information and reconciling segment gross profit to (loss) income before income tax provision - The company operates in two segments: Asset Management Solutions (leasing, trading, disassembling Flight Equipment) and TechOps (MRO activities, engineered solutions, serviceable products)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) Segment Revenue (in thousands) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Asset Management Solutions | $41,799 | $37,071 | $101,061 | $85,501 | | TechOps | $35,302 | $32,255 | $66,580 | $62,096 | | **Total** | **$77,101** | **$69,326** | **$167,641** | **$147,597** | Segment Gross Profit (in thousands) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Asset Management Solutions | $15,361 | $11,355 | $38,013 | $29,414 | | TechOps | $6,359 | $8,785 | $12,503 | $15,117 | | **Total** | **$21,720** | **$20,140** | **$50,516** | **$44,531** | Reconciliation of Segment Gross Profit to (Loss) Income Before Income Tax Provision (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Segment gross profit | $21,720 | $20,140 | $50,516 | $44,531 | | Selling, general and administrative expenses | $(23,572) | $(27,097) | $(47,705) | $(52,321) | | Interest (expense) income, net | $(1,528) | $381 | $(2,463) | $1,428 | | Other income, net | $102 | $138 | $271 | $371 | | Change in fair value of warrant liability | $138 | $1,393 | $2,117 | $1,059 | | **(Loss) income before income tax provision** | **$(3,140)** | **$(5,045)** | **$2,736** | **$(4,932)** | [NOTE M — STOCKHOLDERS' EQUITY](index=30&type=section&id=NOTE%20M%20%E2%80%94%20STOCKHOLDERS'%20EQUITY) This note details the company's common stock, the 2020 Equity Incentive Plan, and the 2020 Employee Stock Purchase Plan, including share activity, fair value assumptions, and unrecognized compensation costs - As of June 30, 2024, **53,084,214** shares of common stock were issued and outstanding[91](index=91&type=chunk) - The 2020 Equity Incentive Plan authorizes discretionary grants of various equity awards, with **6,200,000** shares registered[92](index=92&type=chunk) - For the six months ended June 30, 2024, no share-based compensation expense was recognized for performance-based restricted stock units as achievement of milestones was deemed not probable[97](index=97&type=chunk) - **644,550** stock options were granted under the 2020 Plan during the six months ended June 30, 2024, with a weighted average exercise price of **$7.02** and a **10-year** term[102](index=102&type=chunk) - Unrecognized compensation costs related to stock options were **$2.3 million** as of June 30, 2024, expected to be recognized over a weighted average period of **1.9 years**[103](index=103&type=chunk) - The 2020 Employee Stock Purchase Plan (ESPP) issued **48,202** shares during the six months ended June 30, 2024[104](index=104&type=chunk) [ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=ITEM%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, discussing business overview, accounting pronouncements, and detailed analysis of results [The Company](index=35&type=section&id=The%20Company) Describes AerSale's business model, segments, and proprietary solutions in the commercial aviation aftermarket - AerSale operates as a global platform for the commercial aviation aftermarket, specializing in maximizing the value of mid-life Flight Equipment through sales, leasing, and MRO services[107](index=107&type=chunk)[109](index=109&type=chunk) - The company's two business segments are Asset Management Solutions (monetizing Flight Equipment as whole assets or USM) and TechOps (MRO activities, engineered solutions, and component repair)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - AerSale develops proprietary Engineered Solutions, such as AerSafe® (fuel tank flammability compliance) and AerAware™ (Enhanced Flight Vision System), which are non-OEM solutions to regulatory and technical challenges[113](index=113&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, including revenue, gross profit, and expenses [Three months ended June 30, 2024 compared to the three months ended June 30, 2023](index=37&type=section&id=Three%20months%20ended%20June%2030,%202024%20compared%20to%20the%20three%20months%20ended%20June%2030,%202023) Compares Q2 2024 financial performance to Q2 2023, detailing revenue, gross profit, and expense changes Revenue by Segment (Three Months Ended June 30, in thousands) | Segment | 2024 | 2023 | Percent Change | | :--------------------------- | :------ | :------ | :------------- | | Asset Management Solutions | $41,799 | $37,071 | 12.8% | | Aircraft | $9,110 | $12,053 | (24.4)% | | Engine | $32,689 | $25,018 | 30.7% | | TechOps | $35,302 | $32,255 | 9.4% | | MRO | $29,517 | $28,417 | 3.9% | | Product Sales | $5,785 | $3,620 | 59.8% | | Whole Asset Sale | $- | $218 | (100.0)% | | **Total Revenue** | **$77,101** | **$69,326** | **11.2%** | Gross Profit by Segment (Three Months Ended June 30, in thousands) | Segment | 2024 | 2023 | Percent Change | | :--------------------------- | :------ | :------ | :------------- | | Asset Management Solutions | $15,361 | $11,355 | 35.3% | | Aircraft | $3,422 | $1,760 | 94.4% | | Engine | $11,939 | $9,595 | 24.4% | | TechOps | $6,359 | $8,785 | (27.6)% | | MRO | $4,561 | $7,241 | (37.0)% | | Product Sales | $1,798 | $1,168 | 53.9% | | Whole Asset Sale | $- | $376 | (100.0)% | | **Total Gross Profit** | **$21,720** | **$20,140** | **7.8%** | - Asset Management Solutions revenue increased by **$4.7 million** (**12.8%**), driven by a **$7.7 million** increase in Engine revenue, partially offset by a **$2.9 million** decrease in Aircraft revenue[119](index=119&type=chunk) - TechOps revenue increased by **$3.0 million** (**9.4%**), primarily due to higher MRO product sales and component/landing gear repair activities, despite lower demand for heavy MRO services[122](index=122&type=chunk) - Selling, general and administrative expenses decreased by **$3.5 million** (**13.0%**) to **$23.6 million**, mainly due to lower payroll costs[123](index=123&type=chunk) - Interest expense, net, was **$1.5 million** for Q2 2024, compared to **$0.4 million** interest income, net, for Q2 2023, reflecting increased borrowings[126](index=126&type=chunk) [Six months ended June 30, 2024 compared to the six months ended June 30, 2023](index=41&type=section&id=Six%20months%20ended%20June%2030,%202024%20compared%20to%20the%20six%20months%20ended%20June%2030,%202023) Compares H1 2024 financial performance to H1 2023, detailing revenue, gross profit, and expense changes Revenue by Segment (Six Months Ended June 30, in thousands) | Segment | 2024 | 2023 | Percent Change | | :--------------------------- | :------ | :------ | :------------- | | Asset Management Solutions | $101,061 | $85,501 | 18.2% | | Aircraft | $25,448 | $36,948 | (31.1)% | | Engine | $75,613 | $48,553 | 55.7% | | TechOps | $66,580 | $62,096 | 7.2% | | MRO | $55,365 | $55,571 | (0.4)% | | Product Sales | $11,215 | $6,307 | 77.8% | | Whole Asset Sale | $- | $218 | (100.0)% | | **Total Revenue** | **$167,641** | **$147,597** | **13.6%** | Gross Profit by Segment (Six Months Ended June 30, in thousands) | Segment | 2024 | 2023 | Percent Change | | :--------------------------- | :------ | :------ | :------------- | | Asset Management Solutions | $38,013 | $29,414 | 29.2% | | Aircraft | $8,259 | $10,215 | (19.1)% | | Engine | $29,754 | $19,199 | 55.0% | | TechOps | $12,503 | $15,117 | (17.3)% | | MRO | $9,477 | $13,186 | (28.1)% | | Product Sales | $3,026 | $1,555 | 94.6% | | Whole Asset Sale | $- | $376 | (100.0)% | | **Total Gross Profit** | **$50,516** | **$44,531** | **13.4%** | - Asset Management Solutions revenue increased by **$15.6 million** (**18.2%**), primarily from a **$27.1 million** increase in Engine revenue, partially offset by an **$11.5 million** decrease in Aircraft revenue due to softer freighter market demand[131](index=131&type=chunk) - TechOps revenue increased by **$4.5 million** (**7.2%**), mainly driven by higher MRO product sales[133](index=133&type=chunk) - Selling, general and administrative expenses decreased by **$4.6 million** (**8.8%**) to **$47.7 million**, primarily due to lower share-based compensation and payroll costs[134](index=134&type=chunk) - Interest expense, net, was **$2.5 million** for H1 2024, compared to **$1.4 million** interest income, net, for H1 2023, reflecting increased borrowings[135](index=135&type=chunk) [Financial Position, Liquidity and Capital Resources](index=45&type=section&id=Financial%20Position,%20Liquidity%20and%20Capital%20Resources) Discusses cash position, cash flow activities, debt, and ability to meet financial obligations - Cash and cash equivalents stood at **$4.3 million** as of June 30, 2024[138](index=138&type=chunk) - Net cash used in operating activities was **$36.8 million** for H1 2024, a **significant decrease** from **$129.2 million** used in H1 2023, mainly due to lower feedstock acquisitions[141](index=141&type=chunk) - Net cash used in investing activities was **$9.0 million** for H1 2024, driven by property and equipment purchases for TechOps expansion, contrasting with **$7.9 million** provided in H1 2023 from Flight Equipment sales[142](index=142&type=chunk) - Net cash provided by financing activities was **$44.2 million** for H1 2024, primarily from net borrowings under the Revolving Credit Agreement[143](index=143&type=chunk) - As of June 30, 2024, **$81.0 million** was outstanding under the Revolving Credit Agreement, with **$97.5 million** of availability, and the company was in compliance with all debt covenants[145](index=145&type=chunk)[147](index=147&type=chunk) - The company has a purchase commitment of **$27.5 million** with Universal Avionics for technical equipment for its AerAware™ product, expected to be satisfied by Q2 2025[148](index=148&type=chunk) [ITEM 3 Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=ITEM%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, specifically interest rate risk and foreign currency exchange risk - The company is exposed to interest rate risk from variable-rate borrowings under its Revolving Credit Agreement and Equipment Loan, tied to SOFR[151](index=151&type=chunk) - A **10%** increase in the average interest rate on variable-rate debt outstanding as of June 30, 2024, would increase annual interest expense by **$0.7 million**[151](index=151&type=chunk) - Foreign currency exchange risk is not material, as the U.S. dollar is the primary functional currency, and a hypothetical **10%** devaluation of the U.S. dollar would not materially impact financial position or operations[152](index=152&type=chunk) [ITEM 4 Controls and Procedures](index=48&type=section&id=ITEM%204%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting - Management acknowledges that controls and procedures provide only reasonable assurance due to inherent limitations and resource constraints[153](index=153&type=chunk) - The CEO and CFO concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2024[154](index=154&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2024[155](index=155&type=chunk) [PART II – OTHER INFORMATION](index=50&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [ITEM 1 Legal Proceedings](index=50&type=section&id=ITEM%201%20Legal%20Proceedings) Company faces incidental litigation but expects no material adverse effects on financial condition or operations - The company does not believe that the ultimate liability associated with known claims or litigations will materially affect its consolidated financial condition or results of operations[157](index=157&type=chunk) [ITEM 1A Risk Factors](index=50&type=section&id=ITEM%201A%20Risk%20Factors) No material changes to risk factors previously disclosed in the latest annual report - No material changes in risk factors from the 2023 Form 10-K[158](index=158&type=chunk) [ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=ITEM%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered sales of equity securities or use of proceeds - No unregistered sales of equity securities and use of proceeds[159](index=159&type=chunk) [ITEM 3 Defaults Upon Senior Securities](index=50&type=section&id=ITEM%203%20Defaults%20Upon%20Senior%20Securities) Reports no defaults upon senior securities - No defaults upon senior securities[159](index=159&type=chunk) [ITEM 4 Mine Safety Disclosures](index=50&type=section&id=ITEM%204%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the company[160](index=160&type=chunk) [ITEM 5 Other Information](index=50&type=section&id=ITEM%205%20Other%20Information) No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended June 30, 2024[160](index=160&type=chunk) [ITEM 6 Exhibits](index=51&type=section&id=ITEM%206%20Exhibits) Lists legal and corporate documents filed as exhibits to the Quarterly Report on Form 10-Q - The exhibits include various legal and corporate documents such as merger agreements, certificates of incorporation, bylaws, warrant agreements, and certifications[163](index=163&type=chunk)[165](index=165&type=chunk) [SIGNATURES](index=55&type=section&id=SIGNATURES) Contains official signatures of principal executive and financial officers, certifying the report - The report is signed by Nicolas Finazzo, Chairman, CEO, and Director, and Martin Garmendia, CFO and Treasurer, on August 7, 2024[168](index=168&type=chunk)

[Financial & Operational Highlights](index=1&type=section&id=AerSale%20Reports%20Second%20Quarter%202024%20Results) AerSale's Q2 2024 results show increased revenue and adjusted EBITDA, despite higher net losses, supported by strategic feedstock acquisitions Key Financial Metrics | Financial Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenue | $77.1 million | $69.3 million | | GAAP Net Loss | $3.6 million | $2.7 million | | Adjusted Net Loss | $2.6 million | $0.6 million | | Adjusted EBITDA | $3.2 million | $(0.5) million | - Flight equipment sales in Q2 2024 included **five engines and no aircraft**, contrasting with four engines and two unserviceable airframes in the prior year[1](index=1&type=chunk) - The company completed **$36 million** in feedstock acquisitions during the quarter, with an additional **$71 million** under contract as of June 30, 2024[1](index=1&type=chunk) [Management Discussion and Analysis](index=1&type=section&id=Management%20Discussion%20and%20Analysis) This section offers a detailed analysis of AerSale's Q2 2024 financial and operational performance, outlining key drivers, segment contributions, and strategic advancements [Overall Performance](index=1&type=section&id=Overall%20Performance) AerSale's Q2 2024 revenue increased to $77.1 million, up from $69.3 million in the prior-year period, driven by higher sales of Used Serviceable Material (USM) and strong MRO revenue. The company is advancing strategic initiatives, including expanding MRO capacity and capabilities, to drive future growth and more consistently cover fixed costs - Overall revenue growth resulted primarily from a higher volume of USM sold and strong MRO revenue amidst a robust commercial backdrop[2](index=2&type=chunk) - The company is progressing on a multi-year expansion of MRO facilities, including a new on-airport MRO in Millington, Tennessee (completed in May), expanded pneumatics capability in Miami, and a tripling of its aerostructures shop size in Miami[3](index=3&type=chunk) - Management emphasizes that revenues can fluctuate quarterly based on flight equipment sales, and progress should be monitored by MRO activity and asset purchases[2](index=2&type=chunk) [Segment Performance](index=1&type=section&id=Segment%20Performance) Both major segments reported revenue growth in Q2 2024. Asset Management revenue increased to $41.8 million, driven by a 19.2% rise in USM sales. TechOps revenue grew 9.4% to $35.3 million, benefiting from strong MRO demand and higher sales of the AerSafe™ product Segment Revenue Performance | Segment | Q2 2024 Revenue | Q2 2023 Revenue | Change | | :--- | :--- | :--- | :--- | | Asset Management | $41.8 million | $37.1 million | +12.7% | | TechOps | $35.3 million | $32.3 million | +9.4% | - Asset Management growth was primarily due to stronger USM sales as the company monetizes feedstock acquired in the past 12 months, alongside one additional engine on lease compared to 2023[4](index=4&type=chunk) - TechOps growth was driven by continued strong demand for MRO services, particularly at the Roswell, NM facility, and higher sales of its AerSafe™ product ahead of 2026 compliance deadlines[4](index=4&type=chunk) [Profitability and Expenses](index=1&type=section&id=Profitability%20and%20Expenses) Gross margin slightly declined to 28.2% from 29.1% due to initial lower margins on new MRO contracts. A significant reduction in SG&A expenses to $23.6 million helped narrow the loss from operations to $1.9 million. The company reported a GAAP net loss of $3.6 million and an adjusted net loss of $2.6 million for the quarter Profitability and Expense Metrics | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Gross Margin | 28.2% | 29.1% | | SG&A Expenses | $23.6 million | $27.1 million | | Loss from Operations | $(1.9) million | $(7.0) million | | GAAP Net Loss | $(3.6) million | $(2.7) million | | Adjusted Net Loss | $(2.6) million | $(0.6) million | | Diluted EPS | $(0.07) | $(0.08) | | Adjusted Diluted EPS | $(0.05) | $(0.03) | - The decrease in gross margin was primarily due to lower margins at component MROs as teams work through the efficiency curve on recently awarded contracts[5](index=5&type=chunk) - The reduction in SG&A was primarily due to lower payroll-related expenses, including a decrease in stock-based compensation from $3.0 million to $1.1 million[5](index=5&type=chunk) [Liquidity and Capital Resources](index=2&type=section&id=Liquidity%20and%20Capital%20Resources) AerSale maintained a strong liquidity position of $101.8 million at the end of Q2 2024, consisting of $4.3 million in cash and $97.5 million available on its revolving credit facility. Cash used in operating activities was $36.8 million, mainly for continued investment in inventory. Management intends to use this liquidity to continue acquiring feedstock - Total liquidity at quarter-end was **$101.8 million**, comprising **$4.3 million** in cash and **$97.5 million** in available credit[7](index=7&type=chunk) - Cash used in operating activities totaled **$36.8 million**, primarily driven by investments in inventory[7](index=7&type=chunk) - The CFO stated that the strong liquidity position will enable the company to continue acquiring properly priced feedstock in a constrained supply environment[8](index=8&type=chunk) [Update on Engineered Solutions](index=2&type=section&id=Update%20on%20Engineered%20Solutions) The company continues to advance its proprietary Enhanced Flight Vision System, AerAware™. In December 2023, the FAA granted a Supplemental Type Certificate (STC) for AerAware™ on the Boeing B737NG aircraft line, marking the world's first commercial EFVS system to achieve a 50% visual advantage - The FAA issued an STC for the AerAware™ system for the Boeing B737NG product line in December 2023[9](index=9&type=chunk) - AerAware™ is the first commercial EFVS to achieve a **50% visual advantage** over unaided vision and the first certified on a large transport aircraft with a dual-pilot, Head-Wearable Display solution[9](index=9&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section presents AerSale's Q2 2024 consolidated financial statements, including statements of operations, balance sheet, and cash flows, reflecting the company's financial position and performance [Consolidated Statements of Operations](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For Q2 2024, total revenue increased to $77.1 million from $69.3 million year-over-year. Despite higher gross profit of $21.7 million, increased operating and other expenses led to a net loss of $3.6 million, compared to a net loss of $2.7 million in Q2 2023 Consolidated Statements of Operations (in thousands) | (in thousands) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenue | $77,101 | $69,326 | | Gross Profit | $21,720 | $20,140 | | (Loss) from Operations | $(1,852) | $(6,957) | | Net (Loss) | $(3,637) | $(2,688) | | Diluted (Loss) per Share | $(0.07) | $(0.08) | [Consolidated Balance Sheet](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEET) As of June 30, 2024, total assets stood at $598.7 million, an increase from $553.9 million at the end of 2023. This was primarily driven by a rise in total inventory to $378.8 million. Total liabilities increased to $148.9 million from $108.9 million, largely due to a significant increase in the revolving credit facility balance Consolidated Balance Sheet (in thousands) | (in thousands) | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $4,285 | $5,873 | | Total Inventory | $378,813 | $329,168 | | Total Assets | $598,694 | $553,938 | | Revolving credit facility | $80,955 | $29,000 | | Total Liabilities | $148,895 | $108,923 | | Total Stockholders' Equity | $449,799 | $445,015 | [Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the first six months of 2024, the company used $36.8 million in cash from operating activities, a substantial improvement from the $129.2 million used in the prior-year period. The primary use of cash was a $56.6 million investment in inventory. Net cash provided by financing activities was $44.2 million, mainly from net proceeds from the revolving credit facility Consolidated Statements of Cash Flows (in thousands) | Six Months Ended June 30 (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(36,800) | $(129,197) | | Net cash (used in) provided by investing activities | $(9,000) | $7,886 | | Net cash provided by financing activities | $44,212 | $8,767 | | Decrease in cash and cash equivalents | $(1,588) | $(112,544) | [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) This section provides a reconciliation of AerSale's non-GAAP financial measures, including Adjusted EBITDA and Adjusted Net Loss, to their most directly comparable GAAP equivalents [Reconciliation of Non-GAAP Measures](index=8&type=section&id=Adjusted%20EBITDA%20Net%20Income%20and%20Diluted%20EPS%20Reconciliation%20Table) The company's Adjusted EBITDA for Q2 2024 was $3.2 million, a significant improvement from a loss of $0.5 million in Q2 2023. This was achieved by adjusting the GAAP net loss of $3.6 million for items such as depreciation, amortization, interest, taxes, and stock-based compensation. Adjusted Net Loss was $2.6 million, or $(0.05) per diluted share Reconciliation of Non-GAAP Measures (in thousands) | Reconciliation (in thousands) | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Reported Net (Loss) | $(3,637) | $(2,688) | | Adjustments | $4,228 | $1,558 | | **Adjusted Net (Loss)** | **$(2,591)** | **$(590)** | | Interest, Taxes, D&A, etc. | $5,767 | $(10)$ | | **Adjusted EBITDA** | **$3,176** | **$(540)** | Per Share Data | Per Share Data | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Reported Diluted (Loss) per Share | $(0.07) | $(0.08) | | **Adjusted Diluted (Loss) per Share** | **$(0.05)** | **$(0.03)** |

Financial Data and Key Metrics Changes - First quarter revenue was $90.5 million, an increase of $15.7 million from $78.3 million in the first quarter of 2023, with adjusted EBITDA growing 80% year-over-year to $9 million [7][19][21] - Gross margin improved to 31.8% from 31.2% in the prior year, primarily due to a favorable sales mix [20] - Net income for the first quarter was $6.3 million compared to $5,000 in the same period last year, with adjusted net income rising to $5.5 million from $3.3 million [21] Business Line Data and Key Metrics Changes - Asset Management segment sales increased 22.4% year-over-year to $59.3 million, driven by higher flight equipment sales [8][19] - TechOps segment sales rose to $31.3 million from $29.8 million in the previous year, with growth across all facilities [12] - Leasing portfolio sales declined by approximately 45% due to fewer assets under lease, but an increase in leasing activity is expected as more engines become available [11] Market Data and Key Metrics Changes - Airline traffic and capacity are operating above pre-pandemic levels, indicating strong commercial demand, particularly for USM [9] - The cargo market remains under pressure as demand normalizes post-pandemic, with expectations for continued challenges in this segment [11] - The company has acquired $31 million of feedstock with an additional $52 million under letter of intent, indicating ongoing efforts to enhance inventory [10] Company Strategy and Development Direction - The company aims to maximize ROI on acquired feedstock and is focused on monetizing inventory amid a challenging supply environment [18] - There is a strategic emphasis on expanding MRO capabilities and increasing the availability of trained mechanics to support growth in the TechOps segment [13] - The company is actively pursuing opportunities in Engineered Solutions, particularly with products like AerAware and AerSafe, which are expected to drive future revenue [14][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand in the TechOps segment and the potential for growth in component MRO and heavy MRO activities [12][22] - The company acknowledges challenges in feedstock availability but remains confident in its ability to extract value from inventory [23] - Management highlighted the importance of safety enhancements in AerAware as a potential catalyst for customer adoption [15][30] Other Important Information - The company has made significant investments in AI tools to streamline the review of documentation for equipment, enhancing operational efficiency [62] - The company has a healthy inventory position of $350 million, with a focus on monetizing assets through various channels [45][67] Q&A Session Summary Question: Any visibility on used equipment monetizations in Q2? - Management indicated no pending sales for 757s in Q2 but expects continued growth in engine sales and USM monetization [25][27] Question: What are the hesitations from customers regarding AerAware? - Management noted that the process is complex, involving multiple facets of airline operations, and emphasized the safety aspect as a potential catalyst for adoption [28][29] Question: Update on FAA training documentation for AerAware? - Management expects FAA validation of the training program within the next 30 days, which could facilitate customer orders [34][35] Question: Any significant roadblocks to initial orders for AerAware? - Management stated that the main challenges involve integrating the system into airline operations and simulators, but price has not been an issue [39] Question: How is the bidding environment for feedstock? - Management confirmed ongoing activity in bidding, with a competitive market leading to a lower win rate [60][64] Question: Breakdown of inventory value and availability? - Management indicated that approximately three-quarters of the inventory value is engine material, with ongoing efforts to monetize USM parts [67]

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) AerSale Corporation's Q1 2024 financial statements show increased assets and liabilities, improved profitability, and detailed notes on key financial components Consolidated Financial Highlights (Q1 2024 vs Q1 2023) | Metric | Q1 2024 ($k) | Q1 2023 ($k) | Change ($k) | Change (%) | | :---------------------- | :----------- | :----------- | :---------- | :--------- | | Total Revenue | 90,540 | 78,271 | 12,269 | 15.7% | | Gross Profit | 28,796 | 24,391 | 4,405 | 18.1% | | Income (loss) from operations | 4,663 | (833) | 5,496 | N/A | | Net Income | 6,277 | 5 | 6,272 | N/A | | Basic EPS | 0.12 | - | 0.12 | N/A | Balance Sheet Snapshot (Mar 31, 2024 vs Dec 31, 2023) | Metric | Mar 31, 2024 ($k) | Dec 31, 2023 ($k) | Change ($k) | Change (%) | | :---------------------- | :---------------- | :---------------- | :---------- | :--------- | | Total Assets | 571,694 | 553,938 | 17,756 | 3.2% | | Total Liabilities | 119,711 | 108,923 | 10,788 | 9.9% | | Total Stockholders' Equity | 451,983 | 445,015 | 6,968 | 1.6% | Cash Flow Summary (Q1 2024 vs Q1 2023) | Metric | Q1 2024 ($k) | Q1 2023 ($k) | Change ($k) | | :------------------------------------ | :----------- | :----------- | :---------- | | Net cash used in operating activities | (21,473) | (62,442) | 40,969 | | Net cash provided by investing activities | 226 | 3,019 | (2,793) | | Net cash provided by (used in) financing activities | 18,011 | (70) | 18,081 | - Total inventory increased to **$350.8 million** as of March 31, 2024, from **$329.2 million** at year-end 2023, with whole assets being the largest component[45](index=45&type=chunk) - Revolving credit facility balance increased to **$52.0 million** as of March 31, 2024, from **$29.0 million** at year-end 2023[12](index=12&type=chunk)[68](index=68&type=chunk) [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) [Condensed Consolidated Statements of Operations (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20(Unaudited)) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) [Notes to the Condensed Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) [NOTE A— DESCRIPTION OF THE BUSINESS](index=8&type=section&id=NOTE%20A%E2%80%94%20DESCRIPTION%20OF%20THE%20BUSINESS) [NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%20B%20%E2%80%94%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) [NOTE C — REVENUE](index=13&type=section&id=NOTE%20C%20%E2%80%94%20REVENUE) [NOTE D — INVENTORY](index=14&type=section&id=NOTE%20D%20%E2%80%94%20INVENTORY) [NOTE E — INTANGIBLE ASSETS](index=16&type=section&id=NOTE%20E%20%E2%80%94%20INTANGIBLE%20ASSETS) [NOTE F— PROPERTY AND EQUIPMENT, NET](index=18&type=section&id=NOTE%20F%E2%80%94%20PROPERTY%20AND%20EQUIPMENT%2C%20NET) [NOTE G — LEASE RENTAL REVENUES AND AIRCRAFT AND ENGINES HELD FOR LEASE](index=18&type=section&id=NOTE%20G%20%E2%80%94%20LEASE%20RENTAL%20REVENUES%20AND%20AIRCRAFT%20AND%20ENGINES%20HELD%20FOR%20LEASE) [NOTE H —ACCRUED EXPENSES](index=20&type=section&id=NOTE%20H%20%E2%80%94ACCRUED%20EXPENSES) [NOTE I – WARRANT LIABILITY](index=20&type=section&id=NOTE%20I%20%E2%80%93%20WARRANT%20LIABILITY) [NOTE J – FINANCING ARRANGEMENTS](index=22&type=section&id=NOTE%20J%20%E2%80%93%20FINANCING%20ARRANGEMENTS) [NOTE K — EARNINGS PER SHARE](index=24&type=section&id=NOTE%20K%20%E2%80%94%20EARNINGS%20PER%20SHARE) [NOTE L— BUSINESS SEGMENTS](index=24&type=section&id=NOTE%20L%E2%80%94%20BUSINESS%20SEGMENTS) [NOTE M — STOCKHOLDERS' EQUITY](index=28&type=section&id=NOTE%20M%20%E2%80%94%20STOCKHOLDERS%27%20EQUITY) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) AerSale's Q1 2024 revenue grew **15.7%**, driven by strong segment sales and improved gross profit, with enhanced liquidity and managed debt obligations - Total revenue increased by **$12.3 million (15.7%)** to **$90.5 million** in Q1 2024, driven by Asset Management Solutions (**$10.8 million increase**) and TechOps (**$1.4 million increase**)[100](index=100&type=chunk) - Total gross profit increased by **$4.4 million (18.1%)** to **$28.8 million** in Q1 2024[101](index=101&type=chunk) Segment Revenue Performance (Q1 2024 vs Q1 2023) | Segment / Type | Q1 2024 ($k) | Q1 2023 ($k) | Change ($k) | Change (%) | | :----------------------- | :----------- | :----------- | :---------- | :--------- | | **Asset Management Solutions** | | | | | | Aircraft | 16,338 | 24,895 | (8,557) | (34.4%) | | Engine | 42,924 | 23,535 | 19,389 | 82.4% | | *Total AMS* | *59,262* | *48,430* | *10,832* | *22.4%* | | **TechOps** | | | | | | MRO services | 25,848 | 27,154 | (1,306) | (4.8%) | | Product sales | 5,430 | 2,687 | 2,743 | 102.1% | | *Total TechOps* | *31,278* | *29,841* | *1,437* | *4.8%* | | **Total** | **90,540** | **78,271** | **12,269** | **15.7%** | - Selling, general and administrative expenses decreased by **$1.1 million (4.3%)** to **$24.1 million**, mainly due to lower stock-based compensation[107](index=107&type=chunk) - The company recorded a **$2.0 million income** from the change in fair value of warrant liability in Q1 2024, compared to a **$0.3 million expense** in Q1 2023[108](index=108&type=chunk) - Net cash used in operating activities decreased by **$40.9 million** to **$21.5 million** in Q1 2024, primarily due to lower feedstock acquisitions and higher operating results[114](index=114&type=chunk) - As of March 31, 2024, **$52.0 million** was outstanding under the Revolving Credit Agreement with **$126.3 million** availability, and the **$4.6 million** Equipment Loan was subsequently paid off in April 2024. The company was in compliance with all debt covenants[119](index=119&type=chunk)[120](index=120&type=chunk) - A **$33.8 million** purchase commitment with Universal Avionics for AerAware™ product technical equipment is expected to be satisfied by Q2 2025[122](index=122&type=chunk) [The Company](index=30&type=section&id=The%20Company) [Recent Accounting Pronouncements](index=32&type=section&id=Recent%20Accounting%20Pronouncements) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) [Asset Management Solutions](index=34&type=section&id=Asset%20Management%20Solutions) [TechOps](index=34&type=section&id=TechOps) [Selling, General and Administrative Expenses](index=34&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) [Change in Fair Value of Warrant Liability](index=34&type=section&id=Change%20in%20Fair%20Value%20of%20Warrant%20Liability) [Interest Income (Expense), Net](index=34&type=section&id=Interest%20Income%20(Expense)%2C%20Net) [Income Taxes](index=36&type=section&id=Income%20Taxes) [Financial Position, Liquidity and Capital Resources](index=36&type=section&id=Financial%20Position%2C%20Liquidity%20and%20Capital%20Resources) [Cash Flows from Operating Activities](index=36&type=section&id=Cash%20Flows%20from%20Operating%20Activities) [Cash Flows from Investing Activities](index=36&type=section&id=Cash%20Flows%20from%20Investing%20Activities) [Cash Flows from Financing Activities](index=38&type=section&id=Cash%20Flows%20from%20Financing%20Activities) [Debt Obligations and Covenant Compliance](index=38&type=section&id=Debt%20Obligations%20and%20Covenant%20Compliance) [Off-Balance Sheet Arrangements and Contractual Obligations](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements%20and%20Contractual%20Obligations) [Critical Accounting Policies and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) AerSale faces market risks from variable interest rates and foreign currency fluctuations, with a **10% rate hike potentially increasing annual interest expense by $0.5 million** - The company is exposed to variable interest rates on **$52.0 million** outstanding under the Revolving Credit Agreement and **$4.6 million** under the Equipment Loan. A **10% increase** in the average interest rate would increase annual interest expense by **$0.5 million**[125](index=125&type=chunk) - AerSale primarily uses the U.S. dollar as its functional currency, and a hypothetical **10% devaluation** of the U.S. dollar against foreign currencies would not have a material impact on its financial position or continuing operations[126](index=126&type=chunk) [Interest Rate Risk](index=39&type=section&id=Interest%20Rate%20Risk) [Foreign Currency Exchange Risk](index=39&type=section&id=Foreign%20Currency%20Exchange%20Risk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) AerSale's management confirmed effective disclosure controls and procedures at a reasonable assurance level as of March 31, 2024, with no material changes in internal control - Management recognizes that controls provide only reasonable assurance and involve judgment in balancing benefits and costs[127](index=127&type=chunk) - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2024[128](index=128&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[129](index=129&type=chunk) [Limitations on Effectiveness of Controls and Procedures](index=39&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) [Evaluation of Disclosure Controls and Procedures](index=40&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) [Changes in Internal Control over Financial Reporting](index=40&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) [PART II – OTHER INFORMATION](index=40&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) AerSale anticipates no material impact from incidental litigation on its financial condition or operations, supported by vigorous defense and insurance coverage - The company intends to vigorously defend against litigation and maintains significant levels of insurance to protect against adverse judgments[130](index=130&type=chunk) - Based on current information, the ultimate liability associated with known claims or litigation is not expected to materially affect the company's consolidated financial condition or results of operations[130](index=130&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) AerSale reports no material changes to the risk factors previously disclosed in its 2023 Annual Report on Form 10-K - There are no material changes in the information reported under Part I – Item 1A 'Risk Factors' contained in the 2023 Form 10-K[131](index=131&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) AerSale did not engage in any unregistered sales of equity securities or use of proceeds during the reporting period - None[132](index=132&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) AerSale reported no defaults upon senior securities during the reporting period - None[132](index=132&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to AerSale Corporation - Not applicable[132](index=132&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024 - No director or officer adopted or terminated any 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended March 31, 2024[133](index=133&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including merger agreements, corporate documents, and officer certifications - Exhibits include the Amended and Restated Agreement and Plan of Merger, Certificate of Incorporation, Bylaws, and certifications from the CEO and CFO[135](index=135&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) [Signatures](index=46&type=section&id=Signatures) The report is duly signed by AerSale Corporation's Chairman, CEO, and CFO, certifying its contents - The report was signed by Nicolas Finazzo (Chairman, Chief Executive Officer, and Director) and Martin Garmendia (Chief Financial Officer and Treasurer) on May 9, 2024[148](index=148&type=chunk)

Investors liked the results, but questions remain about a promising new product line.Aircraft component and systems supplier AerSale (ASLE 7.62%) reported a stronger-than-expected quarter, but the company isn't reporting much traction yet for one of its most closely watched products. Shares of AerSale initially traded up 25% post-earnings before falling back to up 8% as of 2 p.m. ET Thursday.Strong core sales, but still waiting on AerAwareAerSale's core business is maintaining and selling used airplanes, en ...

Exhibit 99.1 AerSale Reports First Quarter 2024 Results First Quarter 2024 Highlights ● Revenue of $90.5 million versus $78.3 million in the prior year period. ● GAAP net income of $6.3 million versus $5 thousand in the prior year period. ● Adjusted Net Income 1 of $5.5 million versus $3.3 million in the prior year period. ● Adjusted EBITDA1 of $9.0 million versus $5.0 million in the prior year period. ● Flight equipment sales consisted of one aircraft and four engines in the first quarter of 2024, compared ...

Wall Street expects a year-over-year decline in earnings on higher revenues when AerSale Corporation (ASLE) reports results for the quarter ended March 2024. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on May 8. ...

Company Performance - Moog reported quarterly earnings of $2.19 per share, exceeding the Zacks Consensus Estimate of $1.70 per share, and up from $1.42 per share a year ago, representing an earnings surprise of 28.82% [1] - The company posted revenues of $930.3 million for the quarter, surpassing the Zacks Consensus Estimate by 6.48%, compared to year-ago revenues of $836.79 million [1] - Over the last four quarters, Moog has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [1] Stock Movement and Outlook - Moog shares have increased approximately 8.5% since the beginning of the year, outperforming the S&P 500's gain of 5.8% [2] - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and future earnings expectations [2][3] Earnings Estimates and Industry Context - The current consensus EPS estimate for the upcoming quarter is $1.82 on revenues of $890.25 million, and for the current fiscal year, it is $6.94 on revenues of $3.52 billion [4] - The Zacks Industry Rank for Aerospace - Defense Equipment is currently in the bottom 30% of over 250 Zacks industries, indicating potential challenges for stock performance [5] - AerSale Corporation, another company in the same industry, is expected to report quarterly earnings of $0.05 per share, reflecting a year-over-year decline of 28.6% [5][6]

Company Overview - AerSale Corp. provides integrated and diversified aviation aftermarket products and services aimed at helping aircraft owners and operators save on operation, maintenance, and monetization of their aircraft, engines, and components [2] - The company's offerings include Aircraft & Component MRO, Aircraft and Engine Sales and Leasing, Used Serviceable Material sales, and internally developed 'Engineered Solutions' to enhance aircraft performance [2] Earnings Performance - AerSale has experienced four consecutive misses of the Zacks Consensus Estimate, indicating a consistent failure to meet market expectations [3] - The Zacks Rank is influenced by earnings history but is more heavily affected by the movement of earnings estimates [3] Earnings Estimates - Recent earnings estimates for AerSale have declined significantly, with the current year (2024) consensus dropping from $1.03 to $0.48 over the last 60 days [4] - The next year's estimate has also decreased from $1.23 to $0.86 during the same period [4] - The negative movement in earnings estimates is a primary reason for AerSale's Zacks Rank of 5 (Strong Sell) [4] - Many stocks within the Zacks universe are experiencing negative earnings estimate revisions, contributing to a broader trend of stocks falling to a Zacks Rank 5 [4]