AerSale(ASLE) - 2024 Q2 - Quarterly Results

Financial & Operational Highlights 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] - The company completed $36 million in feedstock acquisitions during the quarter, with an additional $71 million under contract as of June 30, 2024[1] Management Discussion and Analysis 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 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] - 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] - Management emphasizes that revenues can fluctuate quarterly based on flight equipment sales, and progress should be monitored by MRO activity and asset purchases[2] Segment Performance 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] - 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] Profitability and Expenses 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] - 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] Liquidity and Capital Resources 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] - Cash used in operating activities totaled $36.8 million, primarily driven by investments in inventory[7] - The CFO stated that the strong liquidity position will enable the company to continue acquiring properly priced feedstock in a constrained supply environment[8] Update on Engineered Solutions 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] - 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] Financial Statements 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 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 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 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 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 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) |