FTAI Aviation(US:FTAI)2025-07-31 20:17PART I - FINANCIAL INFORMATION Item 1. Unaudited Consolidated Financial Statements The unaudited statements show significant revenue growth and a return to profitability in H1 2025, driven by the Aerospace Products segment Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $4,101,075 | $4,037,952 | | Cash and cash equivalents | $301,911 | $115,116 | | Leasing equipment, net | $1,849,116 | $2,373,730 | | Inventory, net | $752,866 | $551,156 | | Total Liabilities | $3,936,131 | $3,956,584 | | Long-term debt, net | $3,444,612 | $3,440,478 | | Total Shareholders' Equity | $164,944 | $81,368 | - Key changes from year-end 2024 include a significant increase in cash and inventory, a decrease in net leasing equipment, and a doubling of shareholders' equity14 Consolidated Statements of Operations Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $676,237 | $443,594 | $1,178,317 | $770,288 | | Aerospace products revenue | $420,686 | $245,200 | $685,111 | $434,257 | | MRE Contract revenue | $69,585 | $— | $170,223 | $— | | Total Expenses | $465,753 | $606,189 | $816,875 | $839,949 | | Internalization fee to affiliate | $— | $300,000 | $— | $300,000 | | Net Income (Loss) Attributable to Shareholders | $161,689 | $(228,205) | $251,633 | $(196,918) | | Diluted EPS | $1.57 | $(2.26) | $2.44 | $(1.96) | - The company reported a significant turnaround in profitability, driven by a 52% YoY increase in total revenues for Q2 2025 and the absence of the $300 million internalization fee paid in Q2 202416 Consolidated Statements of Cash Flows Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(136,284) | $(187,636) | | Net cash provided by (used in) investing activities | $496,148 | $(219,383) | | Net cash (used in) provided by financing activities | $(173,069) | $485,748 | | Net increase in cash | $186,795 | $78,729 | - Investing activities shifted from a net use of cash to a significant source of cash, primarily due to $397.1 million in proceeds from asset sales to the 2025 Partnership and $589.3 million from other asset sales22 - Financing activities became a net use of cash, mainly due to lower debt proceeds ($430M vs $1.84B YoY) and a $124.2 million redemption of preferred shares in 202524 Notes to Consolidated Financial Statements - On May 28, 2024, the company terminated its external management agreement and internalized its management functions, involving a $150.0 million cash payment and share issuance31 - The company launched a Strategic Capital Initiative, creating the "2025 Partnership" to acquire aircraft, selling 37 aircraft to this partnership in H1 2025 for a gain of $45.5 million4748 - In September 2024, the company acquired Lockheed Martin Commercial Engine Solutions (LMCES) for $170.0 million to enhance its MRE business66 Segment Net Income (Loss) Attributable to Shareholders (in thousands) | Segment | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Aviation Leasing | $183,457 | $95,377 | | Aerospace Products | $240,225 | $151,308 | | Corporate and Other | $(160,164) | $(443,603) | | Eliminations | $(11,885) | $— | | Total | $251,633 | $(196,918) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes improved financial results to strong Aerospace Products performance, the elimination of external management fees, and a new asset-light strategy Results of Operations Consolidated Results of Operations Summary (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $676,237 | $443,594 | $1,178,317 | $770,288 | | Net Income (Loss) Attributable to Shareholders | $161,689 | $(228,205) | $251,633 | $(196,918) | | Adjusted EBITDA (Non-GAAP) | $347,805 | $213,904 | $616,363 | $378,005 | - Total revenues for H1 2025 increased by $408.0 million YoY, primarily due to a $250.9 million increase in Aerospace products revenue and $170.2 million from new MRE Contract revenue166 - Total expenses for H1 2025 decreased by $23.1 million YoY, mainly because of the $300.0 million internalization fee incurred in 2024166 Segment Analysis Aviation Leasing Segment Results (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total Revenues | $322,979 | $319,747 | | Net Income Attributable to Shareholders | $183,457 | $95,377 | | Adjusted EBITDA (Non-GAAP) | $361,292 | $229,788 | Aerospace Products Segment Results (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total Revenues | $855,334 | $434,257 | | Net Income Attributable to Shareholders | $240,225 | $151,308 | | Adjusted EBITDA (Non-GAAP) | $295,809 | $161,517 | - The Aerospace Products segment nearly doubled its revenue in H1 2025 compared to H1 2024, driven by strong engine and module sales and the new MRE contract185 Liquidity and Capital Resources - The company launched a Strategic Capital Initiative to maintain an asset-light model, with partnerships acquiring on-lease aircraft while FTAI acts as servicer197 - Principal uses of liquidity include aircraft/engine acquisitions, shareholder dividends, and debt service, while sources are revenues, asset sales, and borrowings198201 Historical Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(136,284) | $(187,636) | | Net cash provided by (used in) investing activities | $496,148 | $(219,383) | | Net cash (used in) provided by financing activities | $(173,069) | $485,748 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk from its variable-rate debt, though no borrowings were outstanding as of June 30, 2025 - The company's main market risk exposure is to interest rate fluctuations on its variable-rate debt, primarily the Revolving Credit Facility214 - As of June 30, 2025, there were no outstanding borrowings on the floating rate debt, meaning a hypothetical 100-basis point interest rate change would have no immediate impact217 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter218 - No material changes occurred during the fiscal quarter that affected the company's internal control over financial reporting219 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company does not expect current legal proceedings to have a material adverse effect on its business or financial results - Management does not anticipate that current or threatened legal proceedings will have a material adverse effect on the company's financial results221 Item 1A. Risk Factors The company identifies key business, taxation, and share-related risks, including macroeconomic uncertainty, reliance on specific engine types, and its past PFIC status - Business risks include macroeconomic conditions, geopolitical instability, industry oversupply, and high concentration in CFM56/V2500 engines223225226236 - The new Strategic Capital Initiative introduces risks such as market, liquidity, and potential conflicts of interest in allocating investment opportunities248251 - Taxation risks are significant, with the company having been a Passive Foreign Investment Company (PFIC) in 2022 and 2023, which has lingering adverse U.S. tax implications296297 - Share-related risks include market price volatility, potential dilution, and anti-takeover provisions that could deter a change in control305312319 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None321 Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None321 Item 5. Other Information There is no other information to report for the period - None321 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including governance documents, debt agreements, and officer certifications