Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $297.4 million for Q3 2025, up 28% from $232 million in Q3 2024, and in line with Q2 2025 results [18][19] - Adjusted free cash flow for Q3 was $268 million, contributing to a year-to-date total of $638 million, on track to meet the revised goal of $750 million for 2025 [14][16] - The aerospace products segment generated $180.4 million in EBITDA with a margin of 35%, reflecting a 77% increase year-over-year [9][19] Business Line Data and Key Metrics Changes - Aerospace products segment saw a significant increase in EBITDA, reaching $180 million, up from $101.8 million in Q3 2024 [9][19] - The leasing segment posted approximately $134 million in adjusted EBITDA, with pure leasing component at $122 million for Q3 [20][21] - The company refurbished 207 CFM56 modules in Q3, a 13% increase from the previous quarter, and is on track to produce 750 modules in 2025 [10][13] Market Data and Key Metrics Changes - The company is targeting a total portfolio size of approximately 375 aircraft, with full capital deployment anticipated by mid-2026 [7] - The market for aircraft engine assets is characterized by a significant number of older aircraft being sold by lessors, creating opportunities for the company to acquire assets [35][36] Company Strategy and Development Direction - The company aims to pivot to an asset-light model focused on aerospace products and strategic capital, expecting substantial growth in free cash flow [15][16] - The successful launch of the Strategic Capital Initiative (SCI) is expected to create significant value and position the company for long-term earnings growth [5][7] - The company plans to continue launching additional SCI partnerships each year, enhancing returns for equity partners [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a market share of 25% in the engine aftermarket maintenance sector in the coming years [10] - The company anticipates total business segment EBITDA of $1.525 billion in 2026, up from the original estimate of $1.4 billion [17] - Management highlighted the importance of maintaining strong relationships with airline customers and the benefits of their Maintenance Repair Exchange (MRE) model [39][40] Other Important Information - The company announced an increase in the quarterly dividend from $0.30 to $0.35 per share, marking its 42nd dividend as a public company [15] - The acquisition of ATOPS for approximately $15 million is expected to enhance production capacity and operational efficiency [12][30] Q&A Session Summary Question: Financial implications of the upsizing of SCI - Management indicated that the upsizing will accelerate growth under SCI, potentially increasing its contribution to aerospace products volume from 20% to 25% [25][26] Question: Details on the ATOPS acquisition - The ATOPS acquisition is aimed at increasing production capacity ahead of needs, with a focus on synergy with existing facilities [28][30] Question: Availability of aircraft engine assets - Management noted that there is a significant supply of older aircraft being sold by lessors, providing opportunities for acquisition [35][36] Question: Treatment of SCI in financials - The 19% equity portion of SCI will be reflected in the equity income line and will also generate servicing revenue [40][41] Question: Guidance for 2026 - Management expects growth in both volume and margin, driven by new and existing customer orders [68][70] Question: Management and performance fees for SCI - The asset management fee is market-based, typically around 1% of total assets, with incentive compensation tied to performance [76][77] Question: Long-term partnerships and margin impact - Future deals are expected to be similar to existing large programs, with margins improving as customer orders increase [84][86]