Q1 2021 AerSale Corp Earnings Call
Greetings and welcome to the Air sales first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. The question and answer session will follow the four months away from patients.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being of course I will now turn the conference over to your host Christina Cheng. Thank you you may begin.
Good morning, I'd like to welcome everyone to air sales first quarter 2021 earnings call conducting the call today are Nick Panozzo, Chief Executive Officer, and Martin from India, Chief Financial Officer.
Before we discuss this quarters results, we want to remind you that all statements made on this call that do not relate to matters of historical fact should be considered forward looking statements within the meaning of the federal securities laws, including statements regarding our current expectations for the business.
Our financial performance.
These statements are neither promises nor guarantees, but involve known and unknown risks uncertainties and other important factors that may cause our actual results performance or achievements to be materially different from any future results factor.
The factors discussed with the risks in the risk factors section of the company's annual report on form 10-K for the year ended December 31, 2020, 'twenty falls with the US Securities and Exchange Commission SEC.
March 16th 'twenty, 'twenty, one and its other filings with the SEC.
Including its quarterly report on form 10-Q for the period ended March 31st Twenty-twenty wanted to be filed with the SEC.
These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward looking statements on this call.
We'll also refer to non-GAAP measures that we view as important in assessing the performance of our business.
A reconciliation of those non-GAAP metrics to the nearest GAAP metric can be found in the earnings presentation materials made available on the investors section of the air So website at IR Dot Aircell dot com with that I'll turn the call over to Nick Panozzo.
Okay.
Thanks, Christine good morning to everyone on the line and thank you for joining our call today I'll begin with brief comments about air sale and our strategy followed by an overview of the quarter operational updates and progress on major programs and initiatives.
I'll, then turn the call over to Martin for a closer look at the numbers for.
For those of you unfamiliar with the air sale, we operate a purpose built fully integrated multi dimensional aftermarket aviation model that includes part procurement flight equipment sales and leasing MRO FAA certification and aircraft storage and decommissioning. This allows us to keep a close pulse on the market.
<unk> attractive flight asset purchase opportunities and deliver a higher overall value to our customers as we touch every part of the aircraft maintenance cycle.
Our battle tested model has proven very effective even under extreme stress in the industry as we've demonstrated during the COVID-19 pandemic.
As the effects of COVID-19 resulted in the massive reduction of flight capacity by the airlines are aircraft storage facilities quickly filled up with decommissioning work and storage maintenance revenue, helping to offset much of the decline in routine MRO work and used serviceable material U S M part sales.
Further insight gained from firsthand observation of passenger aircraft coming out of service has allowed us to quickly pivot our efforts to cargo aircraft debt remained in high demand throughout the pandemic the.
This allowed us to identify feedstock opportunities to serve the freighter market specifically through our 24 aircraft Boeing 757 fleet acquisition announced last year and expansion of our passenger to freighter conversions being performed at our Goodyear, Arizona MRO.
We're currently scheduled to convert five of the aircraft acquired using the industry preferred precision aircrafts cargo conversion kit.
The first completion expected later this month and under contract for sale to of Canadian cargo operator.
Conversions two three and four are also under LOI and in the lease documentation phase with the U S cargo operator.
We're in discussions with multiple additional customers for our fifth conversion with scheduled cargo completion in the first quarter of 2022.
As we acquire or repair more engines, we have an option with precision to purchase up to five more cargo conversion kits to modify aircrafts 19 through 23, potentially leaving only one of the original 24 aircraft fleet for part out.
Our capacity to acquire a large fleet of aircraft performed cargo conversions secure coveted precision cargo conversion kits and find the cargo customers for aircraft converted on spec differentiates us from our peers and provides yet another high margin revenue outlet for the Companys flight equipment.
As we review our business results there are a few important things to keep in mind.
We generally don't focus on quarterly year over year analysis to assess our financial performance, which youll notice throughout our commentary.
The rationale for this is simple our asset management acquisition in flight equipment sale of businesses are one of the cornerstones of our success and account for large transactions at a regular times throughout the year.
As we discuss our results will make it a point to update our investors on these key transactions from both the current year and prior year periods. More importantly, we believe relevant indicators for our business performance, our asset acquisitions and activities the outlook for flight equipment sales throughout the year progress on engineered.
Solutions, STC development and contracts and the underlying performance of our MRO business.
With that in mind, we're performing well and as expected in 2021 with first quarter consolidated sales of $58 4 million sales in the prior year with $57 1 million sales levels in 2021 2021 had been primarily supported by $13 8 million of flight equipment sales.
Continued demand for aircraft storage maintenance and strong MRO demand, which was offset by lower leasing from aircraft, whose leases expired combined with lower U S. M parts sales volume, which is still under pandemic related pressure.
Turning to profitability, our first quarter 2021, adjusted EBITDA was $16 5 million or 28, 2% of sales compared to $9 4 million or 16, 5% of sales in the prior year.
Higher adjusted EBITDA margin. During this period was attributable to strong cost controls and higher gross margin mix.
The period also included $6 4 million of cares Act proceeds which did not occur in the prior quarter and are not excluded because we cannot reduce the associated labor cost for the year to remain in compliance with cares Act grant restrictions.
On the specific quarters that include cares Act proceeds it does create a lift of margin performance.
To dig into the specifics by segment and beginning with asset management during the quarter, we sold $13 8 million of flight equipment representing of the sale of one Boeing 737, 800 N G airframe and to Pratt and Whitney PW 4000 engines to cargo operators and one Pratt and Whitney PW 4000 engine for parts.
As we took advantage of market dynamics, where there was strong interest in purchasing whole engines in support of U S N needs.
Our aircraft in leasing revenue was down compared to the prior year as the result of three Boeing 747 passenger aircraft leases that expired.
We decided not to invest in returning the aircraft of service as we concluded they have a higher value as whole engines U S. F. The U S M airframe and engine parts.
Of the 12 general electric in Pratt and Whitney engines removed from these three seven and four sevens. The serviceable ones have been added to our engine lease pool and the engines needing extensive repairs and the airframes will become feedstock for our U S. M parts business as we take advantage of strong demand in this platform from cargo operators.
This reduces our fleet aircraft lease fleet to just four aircraft two passenger and two freighter all of which have been performing well.
This aircraft portfolio of reduction is not a coincidence over the past several years, we have been anticipating a market downturn and had been strategically reducing our leased aircraft fleet.
Unlike pure play aircraft leasing companies post COVID-19, we have not had to forgive rent in order to keep the aircraft on lease as such all of our flight equipment is generating an acceptable amount of revenue keeping our balance sheet clean with no debt and plenty of capacity to add more flight equipment assets, who are the portfolio as the industry recovers.
We continue to market for asset purchases and believe that opportunities will become more attractive in the back half of 2021. Once the airlines are able to resume more normalized service levels and can better assess their fleet requirements.
Regarding our 24 aircraft Boeing 757 fleet acquisition program. We've made good progress on either of the sale or lease of the first 18 aircraft.
And the balance of our asset management business, we're seeing an uptick in the U S. M part sales as carriers gear up for a stronger anticipated summer, but overall volume is still down from pre pandemic levels were.
We're also challenged in this business by limited feedstock availability at attractive prices. However, we expect this dynamic will become more favorable over the next 18 months.
Turning to our Tech ops business total sales in the quarter were quite strong and driven by continued demand at our aircraft storage locations along with high demand for MRO as airlines begin to re commission aircraft.
Aircraft storage maintenance has been a strong offset to lower pandemic related volume in other parts of our business. We do expect our facilities to remain full even as some aircrafts are recommissioned as storage demand has far exceeded the capacity and an extended recovery will continue to fill any vacancies for some time.
Reviewing the product development side with the engineered solutions, we produce highly specialized products that comply with regulatory mandates and or enhance the safety of commercial aircraft. We're currently marketing three products, including air Safe and air track for which we hold supplemental type certificates S. T six issued by the FAA.
Sale of our existing S. Tcs had net adds strong margins and all of our STC products will serve a customer base of over 16000 aircrafts.
Regarding era, where which is expected to have the largest addressable market of any of our stc's. We made substantial progress towards gaining STC approval and completed additional flight tests with the potential launch customer during the period.
We continue to work with the FAA both in reviewing our proprietary engineering data and performing test flights using our Boeing 737, 800 N G prototype test aircraft.
In summary, after our first full quarter as a public company, we're exactly where we anticipated we would be our MRO facilities are full and our diversified portfolio continues to support our business performance in a dynamic operating environment.
We remain very enthusiastic about the future and look forward to updating our investors in the coming quarters.
Over a year end of the pandemic our employees have shown great flexibility and resiliency of our strong financial performance is the result of their dedication and the multi dimensional and fully integrated business model. We spent the last decade building the diversity of our revenue sources has created a countercyclical hedge enabling your sales.
To thrive in a challenging commercial aviation market.
I'll be back to answer questions in a few moments, but for now I'll hand, it over to Martin for a look at the numbers.
Okay.
Thanks, Nick and I will start with an overview of our financial performance before ending with an update on our guidance.
Our first quarter revenue was $58 $4 million compared to revenue in the first quarter of 2020 of $57 $1 million.
As Nick noted our business may fluctuate from quarter to quarter and year to year based on flight equipment sales and therefore, it is important to monitor our progress based on asset purchases and sales over the long term.
Looking ahead to the rest of the 2021, we continue to work with our customers to finalize the sale of the 24, Boeing 750 Sevens, whose purchase we announced the September we are very pleased to note that we have commitments for 18 of these aircraft contracted or under letters of intent for sale or lease including for passenger to freighter converted aircraft the uncompleted.
At our Goodyear facility.
Disability to sell lease convert and breakdown flight equipment into parts is key to our ability to generate higher margins than our competitors.
First quarter asset management solutions, our Ams revenue was $29 $3 million compared to $38 million in the first quarter of 2020.
Aside from the shift in expected timing of flight equipment sales Ams revenue was lower because revenue from used serviceable material or U S. M declined compared to the first quarter of 2021 of the COVID-19 pandemic was just beginning.
On a positive note margins from U S. M has increased which has partially offset the impact of these declines to net income.
Since the start of the COVID-19, pandemic, we saw fewer opportunities to buy feedstock lower demand for existing inventory and the drop in utilization rates on our flight equipment as you're aware of demand for U S. M overhaul activity and short term engine leasing declined.
Our travel dropped and airlines grounded a significant portion of the global passenger fleet.
However, with the recovery strengthening and passenger air travel beginning to increase, especially as we approach the summer we should benefit from the rising demand for U S. M parts consumption for maintenance and overhaul activity as airlines begin to bring portions of their grounded fleet back online.
Our tech ops segment offset some of the the decline in our asset management solutions volume with total segment revenue up 10, 9% compared to the first quarter of 2020, increasing to $29 $2 million.
Our MRO facilities continued to benefit from the increased maintenance of demand from the fleet groundings that resulted from the pandemic looking forward. We remain confident that we will benefit from the reactivation work heavy maintenance and cargo conversion activity as well as have a strategic advantage in identifying the feedstock for our asset management segment as the commercial passenger mark.
It recovers given the large number of aircrafts utter on airport MRO facilities.
Gross margin increased to 33, 9% in the first quarter of 2021 compared to 26, 8% in the corresponding period in the prior year. This is the result of higher flight equipment sales and increased maintenance storage demand during the quarter.
Selling general and administrative expenses for the first quarter of 2021 were $13 $3 million, which is about $100000 lower than the same quarter last year.
This amount was offset by cares act contributions of $6 $4 million recognized in the first quarter of 2021.
Cost savings and efficiency measures taken during 2020 have helped to offset higher public company costs being incurred in 2021.
Income from operations was $12 $9 million in the first quarter of 2021 compared to $1 $9 million in the first quarter of 2020.
Net income was $10 1 million or $17 three per cent of sales up from $1 1 million or one nine percentage of sales first.
The first quarter, adjusted EBITDA was $16 $5 million or 28, 3% of sales.
From adjusted EBITDA of $9 $8 million or 17, 2% of sales in the corresponding period in the prior year.
Adjusted EBITDA was $7 $1 million higher primarily due to the payroll support program contributions. However, adjusted EBITDA would have been higher even after excluding the payroll support benefit as contributions from flight equipment sales and storage activity offset lower leasing revenues as.
As Nick noted, we do not adjust the payroll support program proceeds out of our numbers as there are associated costs embedded in our operating expenses that are required for receipt of these proceeds.
Cash flow used in operating activities was $14 million in the first quarter of 2021 compared to cash flow provided of $21 $4 million in the corresponding prior year period.
The main driver of cash utilization during the quarter was the acquisition of the flight equipment, primarily related to the Boeing 757 transaction.
At quarter end, <unk> had approximately $20 million of cash on its balance sheet and an undrawn revolver of $150 million. This provides us with ample financial flexibility to fund our asset acquisition priorities in 2021 and beyond.
Finally, our guidance update in summary, we continue to expect revenue of $340 million to $360 million and adjusted EBITDA of $60 million to $70 million in 2021.
This outlook reflects an increase in activity in our asset management segment continued strong demand for an airport MRO services accelerating demand in cargo and e-commerce markets and increased requests for passenger to freighter conversions and other tech us products and services.
We expect the main growth driver of the asset management segment to be the monetization of the Boeing 757 package secured in 2020.
Because of the strong demand for cargo conversion aircraft, we continue to project selling the majority of the available aircrafts in 2021.
For Tech Ops. In addition to the continued contributions from our storage maintenance and component MRO activities. We are on track to commence sales of our air where product in late 2021.
Our projected ranges for 2021 do factor in of possible delay in the start of sales for air where due to uncertainties regarding the pace of initial scale of production activities.
We continue to diligently work on solutions that will allow us to meet anticipated demand for this product from our potential launch customer.
Lastly, since we reported our fourth quarter 'twenty 'twenty and full year 'twenty 'twenty results on March 15th 2021, we were awarded a grant proceeds of $5 $5 million under the American rescue plan.
These proceeds are in addition to the cares Act grant proceeds of $9 $2 million awarded to us in 2020.
This award extends restrictions on the company related to retention of employees, which could result in higher associated operating costs quite to the compliance with the agreement.
In summary over a year into the pandemic our employees have shown great flexibility and resiliency. Our strong financial performance is the result of the dedication and multi dimensional and fully integrated business model. We have spent the last decade building our.
Our continued investment in business units experiencing the greatest demand and beginning at the beginning to pay off the.
The diversity of our revenue sources has created a counter cyclical hedge enabling air sales to thrive in a challenging commercial aviation market. We believe we are well positioned to outperform our competitors as the recovery gains steam in the months ahead.
With that operator, we are ready to take some questions.
At this time, we all the conduct.
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One moment, please open call for questions.
Yeah.
Yeah.
Our first question is from God Tong kind of.
Oh Cowen Please state your question.
Yes that was a good.
Good morning, I had a couple of questions.
First I was curious when you talked about the net.
The selling the majority of the available aircraft 750 Sevens this year.
How many will be available if you will how do we define that.
Well hi, good morning go off of them. This is Nick.
The event, we have 24 total aircraft that were purchasing and the transaction, we announced last year.
We don't believe we have in that package of enough of engines too.
Two basically.
Market all 24 aircrafts. So we think we have enough in the first 18, which basically consists of two airframes that we're selling are sold or are selling and 16 aircraft. We have 32 engines that were either.
Serviceable as part of that transaction or that we're making a serviceable through true rip.
The repairs on those engines to supply the <unk>.
First 18 aircraft additional aircraft will require additional engines, which were in the market for acquiring so available aircraft to US is what we have engines for debt.
Don't have to spend you know major overhauls on cost of a major overhaul on it.
On an RV to 11 is excessive and the benefit of this packages that we were able to pick up a significant number of contingent of times serviceable engines.
That makes sense.
Could you talk a little bit about the acquisition environment equipment acquisition environment.
Theme do you of any bids out there.
Maybe you can characterize how it's changed over the past three or six months.
It doesn't really feel from our perspective that has changed substantially we still feel the tide is coming in as far as equipment, that's going to be available to us at attractive prices. It's not that we're not seeing an increase in volume, but it's not the level of volume that we would've expected at this time.
We think that it's going to take the next six to 18 months before the tight fully comes in and more aircrafts are available for sale are more of a craft I'm sorry are available for purchase.
The pricing of this equipment coming out of aircraft leasing companies continues to remain.
The levels at which we feel comfortable acquiring that equipment because aircraft are parked we think that leasing companies have yet to.
Determine whether they should we should hold those aircrafts or continued or basically bite the bullet and and.
So all of the aircraft at their current value.
Having said that there are of aircrafts coming out of leasing companies that have.
One of engine that might be unserviceable in an airframe and what we're finding is the the leasing companies are holding onto engines because they can keep their book cause higher on engines and disposing of the unserviceable engines that require significant maintenance.
<unk> of the airframes, which would require significant maintenance to retard the service so for US we see the opportunity on both the airframe side and the unserviceable engines side, because that's what we've been built to refurbish or part out and monetize.
Now with respect to the airlines the <unk>.
Airlines to remain focused on.
The.
Oh, no recovering aircraft that had been put into storage.
Performing the maintenance they need to put them back into service and price.
Are you trying to figure out what their future fleet plans are the market continues to remain day.
The passenger market continues to remain <unk>.
Severely depressed, even though it is improving.
And the airlines don't have.
Really the focus at this point to figure out what they should sell theyre more focused on putting our aircraft back in the air to service their what they believe what I believe we all believe will be of summer surge in travel.
So we're not also seeing yet the amount of aircraft that we would have expected to come out of the airlines because they can't focus on it.
We feel that as the market starts to recover and the airlines will have time to focus on their fleet disposition or their excess fleet needs more aircraft will become available from the airlines that will be at prices that make sense for aircell to acquire and then redistribute redistributed to the marketplace using our machinery.
That makes sense of them.
Last one from me on Aero, where any update to the certification plan.
Is it still expected in the second quarter of them you mentioned some potential supply constraints.
The elaborate on those.
Okay.
Okay. So we had a we had a had a very nice conversation with our counterpart at Universal.
And as a result of their discussions with their parent company with respect to supply side of my concern on the supply side was alleviated I've been assured debt Elbit slash universal can make whatever equipment is necessary to supply the needs for our potential launch customer than anyone else.
I have no control over that and I take that at face value of the supply constraint is not going to be an issue from the air sales side, we're already gearing up to produce the kits required for our potential launch customer we have.
We basically put in place all of the infrastructure to do that we are discussing with our subcontractors the availability of material or any work that we choose to subcontract out.
With respect to the development stage of era, where I think it's unrealistic at this point to assume we could complete.
And get FAA certification at this time by the end of the second quarter. The reason I say that is one we didn't fully appreciate because we didn't fully understand how complicated it was for Albert to do the software modifications to the system for us.
Two.
Prepare the conversion kits to extract the data from the flight deck to modify the the aircraft too.
Corporate the components that all of it supplied us that didn't seem to be difficult.
In comparison to the what we didn't appreciate is how difficult and time consuming it is to modify the software to make sure that all of the symbology of that comes out of the flight deck displays correctly and the head wearable display.
I think that we've learned it's in the ordinary course of business for them to take this long we just didn't have a good appreciation for it. So we were off in our projections thinking that that would move as fast as we were able to move but it's a different business. It takes different timing to complete the process and they won't be able to.
To elbit universal won't be able to complete their software testing until we finish with the FAA any modifications to the system.
When we did our first set of flight testing with the FAA made about a dozen FAA people on the airplane.
There were a few minor items that came up that we think are simple to fix and they won't take long to fix but until we fix those and retest the aircraft and give it to Albert to do the software testing, which is going to add six to eight more weeks to this process.
We're not going to be able to get certification completed until that's completed so I think debt in the best case, we're more looking at the end of the third quarter and potentially at the very beginning of the fourth quarter to receive FAA certification.
Okay and does the.
The customer the launch customer order flow.
All of the certification or will they actually place the order contingent order EBIT band.
But you I believe availability.
I I believe we'll get a contingent order subject to having.
This approved by the FAA in advance.
Thank you very much guidance.
Youre welcome.
Our next question is from Peter Skibinski Other all index Global Advisors. Please state your question.
Hey, good morning, guys.
Hey, Nick kind of kind of a top level question similar to <unk> second question I just wanted to get your perspective.
Presumably you know kind of going through the the worst downturn in commercial history I would presume your goal would be the buy more assets than probably you guys ever have just because of the depths of the downturn. So I guess a is that has that kind of your goal. The understanding you expect pricing to improve over the forward roughly 12 months.
And do you guys feel like you have the financing in place to buy to acquire a large number of assets over that timeframe.
The answer is yes, and not necessarily true that we have all of the financing available to acquire.
A large fleet of assets you know hundreds of millions of dollars. However, we are in discussions with multiple financial parties that do have the capital to acquire hundreds of millions if not billions of dollars of assets, where we would work with those parties.
To use their financial resources to acquire the package, we would take a piece of it we would manage it and we would therefore receive the kind of returns that we would typically expect by us deploying our capital and still permitting or financial buyer to receive an outsized return that they couldn't do on their own in this space.
Okay, Okay got it.
Just to add to that we do have of $150 million available on the revolver, we sat with $20 million of cash at the end of the quarter, we're actually gonna be monetize in the set of five 7% in the remaining of the periods. So we're gonna have cash coming in.
Net overall periods. So it will give us additional capital to be able to redeploy in addition of additional sources and ex us.
No. It's very helpful. Because I just I know, sometimes you guys might monetize he has over 10 years or longer. So I'm just trying to think over an entire cycle. How you know how the how the assets could play out so, but that's great color I appreciate it.
And we also of I'll I'll further add we also expect as as we have the requirement to hold more assets says we're replenishing our portfolio of credit facility will be adjusted to reflect a higher carrying value of aircraft and engines on lease.
Okay. Okay.
Thanks, guys.
Youre welcome.
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On the Cleveland Ali Paul for additional question.
Our next question is from Ken Herbert of Canaccord. Please state your question.
Yeah.
Hey, good morning, Nick and Martin.
Hi.
Nick your comments sounded like.
Like you've clearly seen some positive or more recent positive strength in the cargo market with the conversions and everything else do you view coming out of sort of COVID-19 at the high level. The cargo markets are structurally different than previously and to what extent do you see potential risk to the cargo markets as belly.
The capacity incrementally comes back online.
Yeah.
I don't see it being structurally different.
Again, we've been discussing the if you consider the.
The e-commerce market booming being structurally different than yes.
That's a that's something that's evolved over the past decade.
What what's exacerbating or actually what is fostering the the freight market. Today again is the lack of belly capacity on passenger aircrafts. So.
We do expect debt the cargo market will return to more normalcy adjusted for the booming ecommerce market as the as the passenger airlines recover but thinking about wide body mark the wide body market. The wide body market has been the one carrying the wide body passenger market has been the <unk>.
Being the greatest amount of cargo and that market continues to remain severely impacted by COVID-19 as wide body traffic is way down so.
So until the international wide body market recovers, which will follow which will follow the resolution of the pandemic and of the majority of the world being vaccinated are free of COVID-19.
It's going to continue in our opinion to be up to be of boom for for the the cargo Airlines and.
And we don't see that there's going to be any significant change in that for for several years now as that changes and I've mentioned before we will refocus our shift of our strategy on the passenger side of the business.
But to us it doesn't matter, whether we're selling equipment to the passenger side or the freighter side previously we did the deal with many freighter customers as we as we are doing okay. As you've heard from the transactions that we've announced that shift is now very focused on the freighter side of the business.
So our ability to kind of pivot and move from one business segment, which is the passenger side to the cargo side.
It makes us really agnostic to what's happening in the industry, whether it's the cargo side of this booming or of the freight or the passenger side of this booming.
Okay very helpful.
Can you talk about the the sequential trends you saw from the fourth quarter two of the calendar first quarter in either.
The U S M ore or the MRO businesses are you seeing.
I know U S M. You've talked about the lack of feedstock is limited growth there, but maybe.
In terms of unmet demand in the the.
Requirements that we've seen from the fourth quarter of the first quarter.
So we are seeing as I mentioned, we are seeing an uptick in demand for material.
Availability has still been scared of says of at attractive prices as I previously discussed.
One of the things that is different at this time is typically our repair cycle is 45 days per cent of used serviceable material out of its feels like it's doubled at this point.
And therefore.
Therefore, we have demand for some used serviceable material of it for some of your service of material on the engine side, we can't get the parts side of the shop.
So until the until the ghost engine shops are those parts of component shops recover and bring back their employees, we're going to continue to experience of lag between the availability of our youth services of all material and the ability to put that used serviceable material in the market post repair.
So we are seeing demand uptick, but we are but it is being slowed by the the long Lake the long lead time for parts.
Servicing.
And just finally, when you think about pricing within the U S M.
As we get to a situation in the in the summer, where we see utilization go up.
You get a sense that airlines from a pricing standpoint might be a little more or pricing could be a little easier just depending upon the urgency at the airlines or what are the trends you're seeing on U S M pricing into the spring and summer.
We don't we don't see a significant change in pricing pricing has been consistent we haven't seen of any significant reduction in the parts of that that people need to buy.
So I can't tell you that we've seen or expect to see a significant pricing and the material that generally moves quickly now as more.
Oh by the way of material comes onto the market pricing on that will soften and.
As more as the supply of that material exceeds the demand, but for the stuff that we put value on we continued to see strong demand subject to availability and as aircraft recover I'm sorry, as the as the industry recovers and Theres more aircraft flying that demand parts.
The the stop the typically moves will continue to move and we believe it will continue to move it at good at consistently consistent pricing, if not increasing pricing because it because with what the effects of COVID-19 and what it's done to the industry. We're not seeing we're not seeing anything go down in pricing.
Cost of material repair.
It is not going down it's if anything staying consistent I would expect at some point there'll be some upward pressure on material pricing for repairs not seeing it yet, but we'd expect to see that over time. So if material cost of repair is going to go up cost of materials kind of go up inflationary costs, which were not seeing yet eventually.
Kick in so we do expect to see a.
We don't expect to see a softening in pricing to the contrary, we expect to see pricing hold and eventually pricing will will escalate.
Great. Thank you very much from the time.
You're welcome Ken.
We have reached the end of the question and answer session I will now turn the call back over to the next one out of that for closing remarks.
Yeah.
Again, ladies and gentlemen, thank you for listening to our call. This morning and for the great questions from got them paid and can.
We look forward to speaking you all to you all next quarter. Thanks again.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Yeah.
Okay.