AerSale(ASLE) - 2024 Q2 - Quarterly Report

Forward-Looking Statements Forward-Looking Statements Overview 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][7] - 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] - The company does not plan to publicly update or revise any forward-looking statements unless required by applicable law[9] PART I – FINANCIAL INFORMATION ITEM 1 Condensed Consolidated Financial Statements 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) 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] - Total liabilities increased by $39.97 million, largely due to an increase in the revolving credit facility balance[11] Condensed Consolidated Statements of Operations (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] - 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] Condensed Consolidated Statements of Stockholders' Equity (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] Condensed Consolidated Statements of Cash Flows (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][141] - 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][143] Notes to the Condensed Consolidated Financial Statements (Unaudited) Provides detailed explanations and disclosures supporting the unaudited consolidated financial statements NOTE A— DESCRIPTION OF THE BUSINESS 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][25] - The company's corporate headquarters is in Miami, Florida, with additional global offices, hangars, and warehouses[25] NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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] - 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][29] - 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] - 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][36] - 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] NOTE C — REVENUE 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] 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 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] - 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] NOTE E — INTANGIBLE ASSETS 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] 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] - 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] NOTE F— PROPERTY AND EQUIPMENT, NET 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] NOTE G — LEASE RENTAL REVENUES AND AIRCRAFT AND ENGINES HELD FOR LEASE 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] - Supplemental rents recognized as revenue totaled $2.3 million for Q2 2024 and $3.8 million for H1 2024[61] 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 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] NOTE I – WARRANT LIABILITY 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] - 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] 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 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] - 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] - The company was in compliance with all debt covenants as of June 30, 2024[73][75] NOTE K — EARNINGS PER SHARE 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] - 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] NOTE L— BUSINESS SEGMENTS 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][82][83] 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 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] - The 2020 Equity Incentive Plan authorizes discretionary grants of various equity awards, with 6,200,000 shares registered[92] - 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] - 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] - 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] - The 2020 Employee Stock Purchase Plan (ESPP) issued 48,202 shares during the six months ended June 30, 2024[104] ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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][109] - 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][109][110] - 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] Results of Operations 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 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] - 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] - Selling, general and administrative expenses decreased by $3.5 million (13.0%) to $23.6 million, mainly due to lower payroll costs[123] - 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] Six months ended June 30, 2024 compared to the six months ended June 30, 2023 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] - TechOps revenue increased by $4.5 million (7.2%), mainly driven by higher MRO product sales[133] - 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] - 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] Financial Position, Liquidity and Capital Resources 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] - 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] - 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] - Net cash provided by financing activities was $44.2 million for H1 2024, primarily from net borrowings under the Revolving Credit Agreement[143] - 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][147] - 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] ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 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] - 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] - 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] ITEM 4 Controls and Procedures 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] - The CEO and CFO concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2024[154] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2024[155] PART II – OTHER INFORMATION ITEM 1 Legal Proceedings 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] ITEM 1A Risk Factors 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] ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered sales of equity securities or use of proceeds - No unregistered sales of equity securities and use of proceeds[159] ITEM 3 Defaults Upon Senior Securities Reports no defaults upon senior securities - No defaults upon senior securities[159] ITEM 4 Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the company[160] ITEM 5 Other Information 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] ITEM 6 Exhibits 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][165] 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]