Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $347.8 million in Q2 2025, up 30% from $268.6 million in Q1 2025 and up 63% from $213.9 million in Q2 2024 [19] - Adjusted free cash flow for the first half of 2025 was $370 million, exceeding the target of $350 million, with expectations to reach $750 million for the full year [14] - The company raised its EBITDA outlook for aviation leasing from $500 million to $600 million and for aerospace products from $600-650 million to $650-700 million for 2025 [15] Business Line Data and Key Metrics Changes - Aerospace products generated $165 million in adjusted EBITDA with a margin of 34%, reflecting a 26% increase from $130.9 million in Q1 2025 and an 81% increase from $91.2 million in Q2 2024 [21] - The leasing segment posted approximately $199 million of EBITDA, with the pure leasing component at $169 million, up from $152 million in Q1 2025 [20] - The company refurbished 184 CFM56 modules in Q2, a 33% increase from the previous quarter [11] Market Data and Key Metrics Changes - The company estimates its market share at 9%, approximately double from the previous year, with a long-term goal of reaching 25% [8] - The global demand for prebuilt engines and modules is increasing, providing a flexible and cost-effective alternative to traditional maintenance [9] Company Strategy and Development Direction - The company aims to expand its aerospace products margins to over 40% by 2026 through various strategies, including new procurement programs and the introduction of PMA parts [10][11] - The acquisition of Pacific Aerodynamic is expected to enhance operational efficiencies and further differentiate the company's offerings in the market [12] - The company is actively reviewing M&A opportunities to further enhance its capabilities and market position [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the aerospace market, driven by the aging of aircraft and engines, which increases maintenance needs [18] - The company anticipates substantial growth in free cash flow in the coming years as it completes its pivot to an asset-light business model [14] - Management highlighted the positive reception from airline customers regarding their engine maintenance solutions, emphasizing the cost and risk advantages [41] Other Important Information - The company announced its 41st dividend as a public company, amounting to $0.30 per share, to be paid on August 19, 2025 [7] - The company has closed on additional equity partners for its Strategic Capital Initiative (SCI) and expects to invest $4 billion through the partnership [16] Q&A Session Summary Question: What are the margin improvements expected for Aerospace products in 2026? - Management indicated that margin improvements could be between 5 to 10 percentage points due to various factors, including new serviceable materials and PMA parts [25][26] Question: Can you elaborate on the Pacific Aerodynamic acquisition and its impact? - The acquisition is expected to save $50,000 per shop visit, leading to a payback period of about six months, enhancing the company's repair capabilities [27][28] Question: What is the customer reception of the modules and the potential for repeat business? - Customer feedback has been positive, with airlines recognizing the cost and risk advantages of outsourcing engine maintenance [41][42] Question: How does the company plan to address technician shortages? - The company has developed a training academy and immersive learning experiences to attract and train young technicians [48][50] Question: What is the outlook for the Strategic Capital Initiative? - Management is optimistic about the SCI's performance and plans to decide on a second initiative in the near future, given the current success [67][68] Question: What is the company's strategy regarding PMA parts? - The company is awaiting FAA approval for key PMA parts, which are expected to significantly contribute to cost savings [75] Question: How does the company view the value of legacy engines in the coming years? - Management expects a slowdown in growth but believes that market share gains and OEM price increases will drive future growth [104][106]