Investment Rating - The investment rating for the real estate industry is "Outperform the Market" (maintained) [2][18]. Core Viewpoints - The recent policy changes in Xinyang regarding the sale of existing homes are expected to significantly impact the industry, particularly by reducing the return on invested capital (ROIC) for real estate companies [3][10]. - The shift from a pre-sale to a current sale model will reshape the business model of the industry from a "balance sheet business" to a "profit and loss statement business" [10][13]. - While short-term adjustments are anticipated due to the policy changes, the long-term outlook remains optimistic as the industry transitions to a more sustainable financial model [13]. Summary by Sections Policy Changes - On May 13, Xinyang's housing authority announced measures to strengthen the management of pre-sale housing, including that new projects can only be sold after the main structure is completed, and all new land acquisitions must be sold as existing homes [3]. Financial Impact - The introduction of the current sale system is expected to lead to a significant decline in ROIC, from 12.4% to 2.9%, indicating a reduced attractiveness of the real estate business [7][9]. - The analysis suggests that if pre-sales are eliminated, companies will face either a contraction in their balance sheets or increased interest expenses, leading to a longer investment recovery period and a significant drop in internal rate of return (IRR) [4][9]. Long-term Outlook - The long-term effects of the current sale system will likely result in an increase in the required profit margins for land acquisitions, as companies can no longer rely on quick turnover to maintain high ROIC [10]. - The overall industry profit margins are expected to rise, leading to a shift towards a more stable financial structure characterized by moderate leverage and profitability [10][13]. Market Response - The report anticipates that the market will initially react negatively to the policy changes, but in the medium to long term, the transition to a current sale model will stabilize housing prices and improve the industry's valuation metrics [13][11].

Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2025 was $65.8 million, down from $90.5 million in the prior year period, reflecting a decline in whole asset sales [6][17] - Adjusted EBITDA for Q1 2025 was $3.2 million compared to $9 million in the prior year, primarily due to lower whole asset transactions [7][20] - First quarter gross margin decreased to 27.3% from 31.8% in Q1 2024, attributed to lower whole asset sales which typically carry higher margins [18] Business Line Data and Key Metrics Changes - Asset management segment sales declined by 33.8%, entirely due to lower whole asset sales; however, excluding whole assets, segment revenue increased by 81.7% to $37.5 million, driven by stronger USM sales and a larger active lease pool [7][22] - Tech Ops segment revenue decreased by 15.1% to $26.6 million, anticipated due to the conclusion of a maintenance check line with a large customer [10][22] - The engineered solutions unit saw an increase in AirSafe deliveries, with a backlog totaling $11 million at quarter end [11] Market Data and Key Metrics Changes - The availability of favorably priced feedstock improved significantly in Q1, allowing the company to acquire $43.4 million of feedstock, leading to a 10.4% win rate [8] - The company noted a strong demand for engines, with every engine type in high demand, despite a lack of supply [31] Company Strategy and Development Direction - The company is balancing lease pool expansion against quicker turn whole asset transactions to generate cash and EBITDA [9] - Strategic decisions are being made to pursue longer-term, more predictable contracts in MRO services to better match staffing levels with volume [10] - The company expects to generate new incremental revenue from component MRO facility expansion projects within the next 30 to 60 days [11][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying fundamentals of the business, despite lower whole asset sales, and expects EBITDA growth to outpace revenue growth for the year [15][21] - The company anticipates a strong recovery in the second half of the year, driven by a robust air safe backlog and efficiency measures implemented [15][22] Other Important Information - The company ended the quarter with $48.9 million in liquidity, consisting of $4.7 million in cash and $44.2 million available on its revolving credit facility [20] - Management emphasized the importance of monitoring progress based on asset purchases and sales over the long term rather than quarterly fluctuations [17] Q&A Session Summary Question: Whole asset sales outlook for 2025 - Management indicated it is difficult to predict whole asset sales but noted they have 21 engines available for trading or leasing, with expectations for a higher amount in the second half of the year [25][27] Question: Demand shifts from airline customers - Management reported that there is currently high demand for engines, with a lack of supply affecting the ability to meet that demand [30][31]