FTAI Aviation(FTAI)2024-10-31 19:32Financial Data and Key Metrics - Adjusted EBITDA for Q3 2024 was $232 million, up 8% from $213.9 million in Q2 2024 and up 50% from $154.2 million in Q3 2023 [7] - The leasing segment contributed $136.4 million in EBITDA, while the aerospace products segment contributed $101.8 million, with corporate and other segments showing a negative $6.2 million [8] - The company expects annual aviation EBITDA for 2024 to be between $860 million to $875 million, up from the previous guidance of $825 million to $850 million [10] Business Line Data and Key Metrics - The leasing segment generated $122 million in pure leasing EBITDA for Q3 2024, compared to $112 million in Q2 2024 and $102 million in Q3 2023 [9] - The aerospace products segment achieved $101.8 million in EBITDA with a 34% margin, up 12% from Q2 2024 and up 135% from Q3 2023 [10] - The company sold $20.7 million book value of assets for a gain of $14.3 million in Q3 2024, with more sales expected in Q4 [9] Market Data and Key Metrics - The company onboarded 19 new customers in Q3 2024, a record quarter for new customer acquisition [18] - The V2500 engine program has secured commitments from two large North American airlines for over 20 engines in the next few years [22] - The company is expanding its field service team globally to offer complete installation and service, enhancing customer experience [19] Company Strategy and Industry Competition - The company is focusing on organic growth in the CFM56 and V2500 engine markets, which are the largest engine markets globally [34] - The acquisition of the Montreal facility (FTAI Canada) has increased production capacity from 30 modules per quarter in 2023 to 75 modules per quarter in Q3 2024, with a target of 100 modules per quarter by 2025 [15] - The company is pre-ordering parts to mitigate supply chain risks, with working capital increasing by $120 million from Q2 to Q3 2024 [37] Management Commentary on Operating Environment and Future Outlook - Management believes the business model is sticky, with customers unlikely to revert to traditional engine maintenance methods due to cost and time savings [13] - The company is confident in achieving $500 million in leasing EBITDA for 2024, including $50 million in gains from asset sales [9] - Management expects the CFM56 engine platform to remain in service for a long time, supporting the company's long-term growth strategy [16] Other Important Information - The company announced its 38th dividend as a public company, with a $0.30 per share dividend to be paid on November 25, 2024 [7] - The company is working on insurance settlements, with expected recoveries of around $150 million, which will be net income [62] - The company is considering a stock split but has not yet made a decision [64] Q&A Session Summary Question: How does FTAI's business model look in a normalized world, and what is the duration of the CFM56 platform? [12] - Answer: The company believes its business model is sticky, with customers unlikely to revert to traditional maintenance methods. The CFM56 platform is expected to remain in service for a long time [13][16] Question: How many new customers were onboarded, and how do they ramp up? [17] - Answer: The company onboarded 19 new customers in Q3 2024, with new customers typically ordering 1-2 modules initially and repeat customers ordering 5-10 modules [18] Question: What is the progress on the V2500 engine program? [21] - Answer: The V2500 program is progressing well, with engines coming out of the shop on target. The LATAM program has started, and two large North American airlines have committed to over 20 engines [22] Question: What are the implications of Chromalloy's FAA approval for V2500 blades? [25] - Answer: The approval is seen as positive, indicating confidence in the FAA's rigorous process and potential for future CFM56 part approvals [26] Question: Why did the aerospace segment EBITDA margin decline to 34%? [29] - Answer: The decline was due to low-margin legacy contracts inherited from the FTAI Canada acquisition, which are expected to run off by the end of 2024 [30] Question: How is the company managing supply chain risks? [36] - Answer: The company is pre-ordering parts and increasing inventory to mitigate supply chain disruptions, with working capital increasing by $120 million from Q2 to Q3 2024 [37] Question: What is the pipeline for large leasing opportunities? [38] - Answer: The company is seeing opportunities for 20-30 aircraft deals, with advancements expected in Q4 2024 [39] Question: What is the backlog and margin sustainability in the aerospace products segment? [42] - Answer: The backlog is growing, with 66% of volume from repeat customers. Margins are expected to increase due to cost reductions and pricing advantages [43][44] Question: What is the average green time on engines being acquired? [51] - Answer: The company is focusing on acquiring run-out engines that need shop visits, as green time is more expensive now [52] Question: What is the status of insurance settlements? [60] - Answer: The company expects total recoveries of around $150 million, with some settlements already in progress [62] Question: Is the company considering a stock split? [63] - Answer: The company is open to considering a stock split if it can be shown to enhance shareholder value [64] Question: What is the margin differential between field and non-field services? [67] - Answer: Field services are more about increasing module velocity rather than margin, with typical field service events costing $50,000 to $70,000 [67] Question: What is the maintenance CapEx being deployed for? [68] - Answer: The $60 million to $80 million in maintenance CapEx is used to keep engines in the leasing portfolio in service [68]