Q4 2021 AerSale Corp Earnings Call
Greetings and welcome to the Air Show Corporation fourth quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone.
Greetings, and welcome to Aircel Corporation's 4th Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Kristen Gallagher, Director of Human Resources. Thank you, ma'am. You may begin.
Keypad as a reminder, this conference is being recorded I would now like to turn this conference over to your host Ms. Christine Gallagher director of Human resources. Thank you Ma'am you may begin.
Kristen Gallagher: Good afternoon, I'd like to welcome everyone to AirSales fourth quarter and full year 2021 earnings call conducting the call today are Nick Finazzo, Chief Executive Officer and Martin Garmendia, Chief Financial Officer.
Good afternoon, I'd like to welcome everyone to air Steel's fourth quarter and full year 2021 earnings call conducting the call. Today are next Finazzo, Chief Executive Officer, and Martin Gum, India, Chief Financial Officer before we discuss this quarter's results we want to remind you that all statements.
Kristen Gallagher: Before we discuss this quarter's 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 and our financial performance.
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 and our financial performance.
Kristen Gallagher: 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.
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.
Kristen Gallagher: Important factors that can cause actual results to differ materially from forward-looking statements are discussed in the risk factors section of the company's annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission and its other filings with the SEC.
Important factors that could cause actual results to differ materially from forward looking statements are discussed in the risk factors section of the company's annual report on Form 10-K , and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission and its other filings with the SEC These filings identify and <unk>.
Kristen Gallagher: 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.
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.
Kristen Gallagher: We'll also refer to non-GAAP measures that we view as important in assessing the performance of our business.
Well 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 Aircell website at IR Dot Aircell dot com with.
Kristen Gallagher: A reconciliation of those non-GAAP metrics to the nearest GAAP metric can be found in the earnings presentation materials made available on the investor section of the AirSale website at ir.airsale.com. With that, I'll turn the call over to Nick Fenazzo.
That I will turn the call over to Nick Finazzo.
Nick: Thank you, Kristen. Good afternoon to everyone on the line and thank you for joining our call today. I'll begin with a brief overview of the quarter and full year followed by operational updates and progress. We're making on our key objectives. I'll then turn the call over to Martin to.
Thank you Kristen and good afternoon to everyone on the line and thank you for joining our call today I'll begin with a brief overview of the quarter and full year, followed by operational updates and progress we're making on our key objectives. I'll then turn the call over to Martin to review the numbers.
Martin Garmendia: We finished the year strong with total fourth quarter revenue of $116.8 million, which more than doubled the prior year period of $49.4 million.
We finished the year strong with total fourth quarter revenue of $116 8 million, which more than doubled the prior year period of $49 4 million.
Martin Garmendia: Strength in the quarter was largely related to progress on our 757 freighter conversion program along with other flight equipment sales, which collectively accounted for $73.1 million of our fourth quarter sales.
Strength in the quarter was largely related to progress on our 757 freighter conversion program along with other flight equipment sales, which collectively accounted for $73 1 million of our fourth quarter sales.
Martin Garmendia: We also benefited from an improving commercial aerospace market as airlines continued to recover from pandemic lows.
We also benefited from an improving commercial aerospace market as airlines continue to recover from pandemic lows.
Martin Garmendia: These gains versus the prior year were partially offset by a decrease in sales in our TechOps segment as we reallocated resources in our Goodyear facility to support the 757 freighter conversion program. I will elaborate more on this strategy.
These gains versus the prior year were partially offset by a decrease in sales in our tech ops segment.
We reallocated resources in our Goodyear facility to support the $75 seven freighter conversion program.
I will elaborate more on this strategy in a moment.
Martin Garmendia: We also reported strong profitability during the quarter, with an operating profit of $19.8 million compared to a $26,000 loss in the prior year.
We also reported strong profitability during the quarter with an operating profit of $19 8 million compared to a $26000 loss in the prior year adjusted.
Martin Garmendia: adjusted EBITDA during the quarter was $28.6 million, or 24.5% of total sales, and set a single-quarter company record.
Adjusted EBITDA during the quarter was $28 6 million or 24.5% of total sales and set a single quarter company record.
Martin Garmendia: Higher profitability resulted from the strength of our 757 cargo conversion program coupled with an improving operating environment.
Higher profitability resulted from the strength of our 757 cargo conversion program, coupled with an improving operating environment.
Martin Garmendia: Our full year 2021 results also set a single year record for financial performance, with total sales of $340.4 million, an increase of more than 60% year-over-year.
Our full year 'twenty 'twenty. One results also said a single year record for financial performance with total sales of $340 4 million, an increase of more than 60% year over year.
Martin Garmendia: Adjusted EBITDA for the full year was $89.3 million, an increase of 72% year-over-year.
Adjusted EBITDA for the full year was $89 3 million, an increase of 72% year over year.
Martin Garmendia: We are proud that we demonstrated exceptional growth and performance in our first year as a public company, exceeding the commitments we made to investors in our SPAC transaction in 2020.
We are proud that we demonstrated exceptional growth and performance in our first year as a public company exceeding the commitments we've made to investors in our spec transaction in 2020.
Martin Garmendia: This truly sets Aircel apart from most other companies that went public.
This truly sets <unk> apart from most other companies that went public.
Martin Garmendia: by combining with a SPAC and speaks to the underlying power of our purpose-built end-to-end model.
By combining with the stack and speaks to the underlying power of our purpose built end to end model.
Before getting into segment level details I'd like to make a couple of comments regarding the Russian invasion of Ukraine.
Martin Garmendia: Before getting into segment-level details, I'd like to make a couple of comments regarding the Russian invasion of Ukraine.
Martin Garmendia: As is most of the global community, we're shocked and deeply saddened by these events and are supportive of actions taken to end the violence.
As is most of the global community, we were shocked and deeply saddened by these events and are supportive of actions taken to end the violence.
Martin Garmendia: To that end, we're fully compliant with the sanctions, which have impacted our ability to lease flight equipment or supply parts to airlines flying into Russia, which I will detail throughout my remarks.
To that end, we're fully compliant with the sanctions, which have impacted our ability to lease flight equipment or supply parts to airlines flying into Russia, which I will detail throughout my remarks.
Martin Garmendia: We expect its effect to be limited to less than 5% of our preliminary 2022 consolidated sales budget.
We expect its effect to be limited to less than 5% of our preliminary 2022 consolidated sales budget.
Martin Garmendia: Turning to segment specifics and beginning with asset management, in the fourth quarter, we sold $73.1 million of flight equipment that included three aircraft and four engines.
Turning to segment specifics and beginning with asset management in the fourth quarter, we sold $73 1 million of flight equipment that included three aircrafts and four engines.
Martin Garmendia: I want to reiterate that flight equipment sales, such as the 757 program, are an important part of our business, feedstock, and overall strategy.
I want to reiterate that flight equipment sales such as the 757 program are an important part of our business feedstock and overall strategy.
Martin Garmendia: It is critical to our competitive advantage to fully use our end-to-end solution to acquire and ultimately direct these assets to their best and highest use to earn the greatest return on investment, whether it be as whole flight equipment, leases, or feedstock to our customers.
It is critical to our competitive advantage to fully use our end to end solution to acquire and ultimately direct these assets to their best and highest use to earn the greatest return on investment whether it be as whole flight equipment leases or feedstock to our customers.
Martin Garmendia: These large flight equipment sales can be lumpy and should be assessed by both the feedstock going into them and the long-term performance of these programs.
These large flight equipment sales can be lumpy and it should be assessed by both the feedstock going into them and the long term performance of these programs.
Martin Garmendia: I am pleased to report that we retained sufficient feedstock aircraft and conversion slots.
I am pleased to report that we retain sufficient feedstock aircraft and conversion slots to continue expanding our 757 freighter conversion program through 2023, giving us good visibility in our current guidance period that Martin will elaborate on further in his remarks.
Martin Garmendia: to continue expanding our 757 Freighter Conversion Program through 2023, giving us good visibility in our current guidance period that Martin will elaborate on further in his remarks.
Martin Garmendia: Within our used serviceable material, or USM, parts business, airframe and engine parts sales were at or higher than prior year levels as airline demand improved.
Within our used serviceable material or U S. M parts business airframe and engine parts sales were at or higher than prior year levels as airline demand improved.
Martin Garmendia: Although feedstock availability has steadily increased over the year, we remain highly disciplined and only execute on those opportunities where our multi-dimensional integrated business model allows us to achieve outsized returns on these acquisitions compared to our peers.
Although feedstock availability has steadily increased over the year, we remain highly disciplined and only execute on those opportunities where our multi dimensional integrated business model allows us to achieve outsized returns on these acquisitions compared to our peers.
Martin Garmendia: During the fourth quarter of this year, 2021, our leasing revenue increased compared to the prior year period due to strong utilization of our leased assets.
During the fourth quarter of this year 2021, our leasing revenue increased compared to the prior year period due to strong utilization of our leased assets. Additionally regarding the recent war in the Ukraine sanctions against Russia have created minimal exposure that will impact our lease programs.
Martin Garmendia: Additionally, regarding the recent war in Ukraine, sanctions against Russia have created minimal exposure that will impact our lease programs in 2022.
In 2022.
Martin Garmendia: In total, we had two airplanes and two engines on lease to global airlines that operated these assets in Russia.
In total we had two airplanes and two engines on lease to global Airlines that operated these assets in Russia.
Martin Garmendia: As mandated by the sanctions, we terminated the leases for these assets.
As mandated by the sanctions.
We terminated the leases for these or these assets.
Martin Garmendia: Our lessees have been very cooperative and we were able to regain control of these assets quickly, except for one engine which we expect to regain control of imminently.
Our lessees had been very cooperative and we were able to regain control of these assets quickly.
Sept for one engine, which we expect to regain control of imminently.
Martin Garmendia: The unplanned forced termination of these leases will create a modest headwind to our 2022 performance.
The unplanned forced termination of these leases will create a modest headwind to our 2022 performance.
Martin Garmendia: as these assets will not be actively generating revenue until we are able to secure a new lessee or identify other ways to monetize these assets throughout our system.
As these assets will not be actively generating revenue until we are able to secure a new lessee or identify other ways to monetize these assets throughout our system.
Martin Garmendia: The remaining two aircraft we have on lease are performing as required under their leases.
The remaining two aircraft we have on lease are performing as required under their leases.
Martin Garmendia: We will continue hunting for asset purchases and expect attractive opportunities in 2022 as airlines assess their fleets following more normalized service levels.
We will continue hunting for asset purchases and expect attractive opportunities in 2022 as airlines assessed their fleets following a more normalized service levels.
Martin Garmendia: In our tech-op segment, total third-party sales were down 27.5% to 23.2 million.
In our Tech Ops segment total third party sales were down 27, 5% to $23 two mentioned $23 2 million.
Martin Garmendia: As I mentioned a few moments ago, lower sales were entirely the result of our strategic reallocation of resources to intercompany activities in support of the 757 Freighter Conversion Program.
As I mentioned, a few moments ago lower sales were entirely the result of our strategic reallocation of resources to intercompany activities in support of the 757 freighter conversion program.
Martin Garmendia: Demand for MRO activities from airlines remains strong, but our analysis indicates that we can generate higher returns through supporting the 757 program in the short term.
Demand for Emma MRO activities from Airlines remains strong, but our analysis indicates that we can generate higher returns through supporting the 757 program in the short term.
Martin Garmendia: This also presents us with a strong offsetting growth opportunity as this program winds down later this year as it will free up hangar space and labor to work on customer aircraft.
This also presents us with a strong offsetting growth opportunity as this program winds down later this year as it will free up hangar space and labor to work on customer aircraft.
Martin Garmendia: Moving to engineered solutions, we continue to see incremental demand for our existing AirSafe product STCs, which include the 737 Classic and NG, the 757, which received FAA approval last month, 767 and 777, and the Airbus A318, 19, 20, and 21 family of aircraft.
Moving to engineered solutions, we continue to see incremental demand for our existing aerospace product S. T. CS which include the 737 classic and N. G. The 757, which received FAA approval last month, 767, and Triple seven and the Airbus <unk> hundred 18.
<unk> 19, 2020 one family of aircraft.
Martin Garmendia: AirSAFE serves as a fuel tank flammability reduction, otherwise known as the FTFR alternative, to a nitrogen inerting system installed by Boeing and Airbus in new aircraft.
Aerospace serves as a fuel tank flammability reduction otherwise known as the F. T F. Our alternative to a nitrogen and hurting system installed by Boeing and Airbus in new aircraft.
Martin Garmendia: AirSafe consists of a military-specification, reticulated polyurethane foam system that achieves the technical requirements mandated by the FTFR.
Aerospace consists of a military specification reticulated polyurethane foam system that achieves the technical requirements mandated by the F. T F R.
Martin Garmendia: In addition to the requirements of the FTFR, an airworthiness directive has been issued which mandates separation of the fuel quantity indication system in an aircraft center fuel tank which, for the 757, has a mandatory compliance date of May 2022.
In addition to the requirements of the S. T F R and airworthiness directive has been issued which mandates separation of the field quantity indication system in an aircraft Centerfield peg, which for the 757 has a mandatory compliance date of May 2022.
Martin Garmendia: We have also continued our work on product development and FAA approval of AeroWear, our advanced technology enhanced flight vision system incorporating a military-style head wearable display that allows pilots to see through poor weather conditions.
We have also continued our work on product development and FAA approval of Arrow, where our advanced technology enhanced flight vision system, incorporating a military style head wearable display that allows pilots to see through poor weather conditions.
Martin Garmendia: We are progressing towards certification, with updated development timelines suggesting that this work should be completed by early May 2022.
We are progressing towards certification with the updated development timelines, suggesting that this work should be completed by early May 2022.
Martin Garmendia: We continue to believe FAA approval will be granted in 2022, but have only included modest airware sales this year to account for the ramp-up phase to commercialize this product once the Supplemental Type Certificate for airware is issued to air sale by the FAA.
We continue to believe FAA approval will be granted in 2022, but have only included modest era, where sales this year to account for the ramp up phase to commercialize this product once the supplemental type certificate for era, where is issued to aircell by the FAA.
We remain enthusiastic about the market potential for error were and continue to see this product as the largest market opportunity in our history and a potential to transform our business we.
Martin Garmendia: We remain enthusiastic about the market potential for Airware and continue to see this product as the largest market opportunity in our history and a potential to transform our business.
Martin Garmendia: We expect Airware's enhanced flight vision technology to become the desired technology on commercial aircraft, with its ability to improve safety, offer an attractive return on investment to airlines, and reduce the carbon footprint of flight operations by minimizing flight delays caused by poor weather conditions, airport diversions, and airport traffic congestion.
We expect air wears enhanced flight vision technology to become the desired technology on commercial aircraft with its ability to improve safety offer an attractive return on investment to airlines and reduce the carbon footprint of flight operations by minimizing flight delays caused by poor weather conditions Airport diverge.
<unk> and air Airport traffic congestion.
Martin Garmendia: In our view, it's not a matter of if the FAA will grant us an STC for airware or if the market will ultimately embrace the safety and flight enhancement features it offers that we believe are unparalleled to any other solution in the industry, it's just a matter
In our view it.
It's not a matter of if the FAA will grant us an S STC for air where or if the market will ultimately embrace the safety in flight enhancement features that offers that we believe are unparalleled to any other solution in the industry.
It's just a matter of when.
Speaker Change: Before turning the call over to Martin, I would like to touch a bit on the macro environment.
Before turning the call over to Martin I would like to touch a bit on the macro environment, where.
Martin Garmendia: We're gaining confidence the worst of the pandemic-related disruptions are behind us, and a more steady and prolonged recovery is poised to emerge in 2022 and beyond.
We're gaining confidence the worst of the pandemic related disruptions are behind us and a more steady and prolonged recovery is poised to emerge in 2022 and beyond.
Martin Garmendia: Governments around the world are rapidly lifting restrictions, and consumers are eager to begin traveling after more than two years of restrictions.
Governments around the world are rapidly lifting restrictions and consumers are eager to begin travelling after more than two years of restrictions.
Martin Garmendia: This benefits airsale as airlines recommissioned parked aircraft and higher systems capacity increases the need for MRO.
This benefits are sale as airlines Recommissioned parked aircraft and higher systems capacity increases the need for MRO.
Martin Garmendia: There are also continued opportunities in the freighter markets, and we're seeing an increase in aircraft reactivations and aircraft made available for sale.
There are also continued opportunities in the freighter markets and we're seeing an increase in aircraft reactivation and aircraft made available for sale.
Martin Garmendia: We're on track to monetize our Boeing 757 investment through 2022 and 2023.
We're on track to monetize our Boeing 757 investment through 2022 and 2023.
Martin Garmendia: Over the long term, airsail is perfectly positioned.
Over the long term.
Are sale is perfectly positioned.
Martin Garmendia: We operate a purpose-built, fully-integrated, multidimensional, adaptive aftermarket aviation model that includes part procurement, flight equipment sales and leasing, MRO, FAA certifications, and aircraft storage and decommissioning.
We operate a purpose built fully integrated multi dimensional adaptive aftermarket aviation model that includes part procurement flight equipment sales and leasing MRO, FAA certifications and aircraft storage and decommissioning.
Martin Garmendia: Our unique model enables us to closely monitor the market, capitalize on opportunities in advance of our peers, and drive internal and external value to all our stakeholders.
Our unique model enables us to closely monitor the market and capitalize on opportunities in advance of our peers and and drive internal and external value to all our stakeholders.
Martin Garmendia: This model led to our record results in 2021 and issuance of 2022 guidance that demonstrates growth off that base.
This model led to our record results in 2021 and issuance of 2022 guidance that demonstrates growth off that base.
Martin Garmendia: We stand ready to capitalize on all market opportunities and are further supported by a strong balance sheet with over $130 million in cash as of year-end.
We stand ready to capitalize on all market opportunities and are further supported by a strong balance sheet with over $130 million in cash as of year end.
Martin Garmendia: no debt, and a $150 million undrawn revolver.
No debt and $150 million Undrawn revolver. This.
Martin Garmendia: This allows us to deploy capital quickly for both asset acquisition and potential M&A opportunities.
This allows us to deploy capital quickly for both asset acquisition and potential M&A opportunities.
Martin Garmendia: At this time, I will turn the call over to Martin for a closer look at the numbers. Martin? Thanks, Nick.
At this time I will turn the call over to Martin for a closer look at the numbers Martin Thanks.
Thanks, Nick.
Martin Garmendia: I will start with an overview of our fourth quarter financial performance and end with our guidance for 2022.
I will start with an overview of our fourth quarter financial performance and end with our guidance for 2022 or.
Martin Garmendia: Our fourth quarter revenue was $116.8 million, which included $73.1 million of flight equipment sales.
Our fourth quarter revenue was $116 8 million, which included $73 1 million of flight equipment sales.
Martin Garmendia: Revenue in the fourth quarter of 2020 was $49.4 million and did not include any flight equipment sales.
Revenue in the fourth quarter of 'twenty 'twenty was $49 4 million and did not include any flight equipment sales as a reminder, our business may fluctuate from quarter to quarter and year to year based on flight equipment fails and therefore, it is important to monitor our progress on asset purchases and sales over the long.
Martin Garmendia: As a reminder, 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 on asset purchases and sales over the long term.
Term.
Martin Garmendia: Fourth quarter asset management solutions, or AMS revenue, increased to $93.6 million from $17.4 million in the fourth quarter of 2020, mainly due to the flight equipment sales mentioned previously.
Fourth quarter asset management solutions, or EMS revenue increased to $93 6 million from $17 4 million in the fourth quarter of 2020, mainly due to the flight equipment sales mentioned previously.
Martin Garmendia: Consumption of USM parts for maintenance improved through the quarter as airlines returned aircraft into operation against the backdrop of an upswing in air travel.
Function of U S M parts for maintenance improved through the quarter as airlines returned aircraft into operation against the backdrop of an upswing in air travel.
Martin Garmendia: We remain on track to monetize the remaining 15 Boeing 757 aircraft through 2022 and 2023, with the majority of them being monetized in 2022.
We remain on track to monetize the remaining 15, Boeing 757 aircrafts through 2022 and 'twenty 'twenty three with the majority of them being monetized in 2022.
Martin Garmendia: Fourth quarter revenue from TechOps was $23.2 million compared to $32 million in the fourth quarter of 2020.
Fourth quarter revenue from Tech ops was $23 2 million compared to $32 million in the fourth quarter of 2020.
Martin Garmendia: During our third quarter earnings call, we mentioned that we were reallocating resources away from third party work to support our cargo conversion line for our 757 aircraft at our Goodyear facility.
During our third quarter earnings call. We mentioned that we were reallocating resources away from third party work to support our cargo conversion mine for our 757 aircrafts at our Goodyear facility.
Martin Garmendia: This process continued through the fourth quarter, leading to lower revenue. However, this reallocation allowed us to realize higher margins from the sale of three 757 cargo conversions in 2021.
This process continued through through the fourth quarter, leading to lower revenue. However, this reallocation allowed us to realize higher margins from the sale of 3757 cargo conversions in 2021.
Going forward, we expect to benefit from a pickup in MRO volume due to the ongoing re commissioning of commercial aircraft and greater demand for U S. M parts consumption for overhaul activity.
Martin Garmendia: Going forward, we expect to benefit from a pickup in MRO volume due to the ongoing recommissioning of commercial aircraft and greater demand for USM parts consumption for overhaul activity.
Martin Garmendia: fourth quarter gross margin was 37.8% compared to 26.6% in the fourth quarter of 2020.
Fourth quarter gross margin was 37, 8% compared to 26, 6% in the fourth quarter of 2020.
Martin Garmendia: the improvement was largely due to a greater mix of high-margin flight equipment sales.
The improvement was largely due to a greater mix of high margin flight equipment sales.
Selling general and administrative expenses were $24 4 million in the fourth quarter compared to $15 million in the fourth quarter of 2020, mainly on account of higher payroll expenses, we did not receive any proceeds from the payroll support program in the fourth quarters of 2021 and 2020.
Martin Garmendia: Selling general and administrative expenses were $24.4 million in the fourth quarter compared to $15 million in the fourth quarter of 2020, mainly on account of higher payroll expenses.
Martin Garmendia: We did not receive any proceeds from the payroll support program in the fourth quarters of 2021 and 2020.
Martin Garmendia: In addition, we incurred $3.8 million of non-cash stock-based compensation in the fourth quarter compared to $1 million in the fourth quarter of 2020.
In addition, we incurred $3 8 million of noncash stock based compensation in the fourth quarter compared to 1 million in the fourth quarter of 2020.
Martin Garmendia: income from operations was $19.8 million in the fourth quarter of 2021 compared to a loss from operations of $26,000 in the fourth quarter of 2020.
Income from operations was $19 8 million in the fourth quarter of 2021 compared to a loss from operations of 26000 in the fourth quarter of 2020.
Martin Garmendia: Net income was $11.2 million in the fourth quarter, compared to $0.3 million in the fourth quarter of 2020.
Net income was $11 2 million in the fourth quarter compared to <unk> 3 million in the fourth quarter of 2020.
Martin Garmendia: Adjusted for non-cash, stock-based compensation, inventory write-offs, unrealized loss in investment, and mark-to-market adjustments to the warrant liability, adjusted net income was $22.3 million.
Adjusted for noncash stock based compensation inventory write offs unrealized loss on investment and mark to market adjustments to the warrant liability adjusted net income was $22 3 million.
Martin Garmendia: Diluted Earnings Per Share was $0.21 for the fourth quarter and is not comparable to the fourth quarter of 2020 due to the public listing of air sale on December 23, 2020.
Diluted earnings per share was 21 for the fourth quarter and is not comparable to the fourth quarter of 2020 due to the public listing of air sale on December 23rd 2020.
Martin Garmendia: Excluding the impacts of the non-cash items noted above, adjusted diluted earnings per share was $0.32 for the fourth quarter of 2021.
Excluding the impacts of the noncash items noted above adjusted diluted earnings per share was 32 <unk> for the fourth quarter of 2021.
Martin Garmendia: Fourth quarter adjusted EBITDA was $28.6 million, or 24.5% of revenue, while adjusted EBITDA in the corresponding period in 2020 was $3 million, or 6.1% of revenue.
Fourth quarter, adjusted EBITDA was $28 6 million or 24, 5% of revenue while adjusted EBITDA in the corresponding period in 2021 3 million or six 1% of revenue.
Martin Garmendia: Higher revenue and favorable sales mix comprising of a larger portion of higher margin flight equipment sales drove the improvement in adjusted EBITDA.
Higher revenue and favorable sales mix, comprising a larger portion of higher margin flight equipment sales drove the improvement in adjusted EBITDA.
Martin Garmendia: Cash flow provided by operating activities was $79.1 million in 2021 compared to $12.2 million of cash flow used in operating activities in 2020.
Cash flow provided by operating activities was $79 1 million in 2021 compared to $12 2 million of cash flow used in operating activities in 2020.
Martin Garmendia: The main driver of increased cash generation during the year was stronger overall operating income and increase in deposits related to 2022 flight equipment sales.
The main driver of increased cash generation during the year was stronger overall operating income and increase in deposits related to 2022 flight equipment sales.
Martin Garmendia: At year-end, Aircel had approximately $130.2 million of cash on its balance sheet and an undrawn revolver of $150 million.
At year end aerosol had approximately $132 million of cash on its balance sheet and an undrawn revolver of $150 million with our strong financial profile and debt free balance sheet, we are ready to execute on potential asset acquisitions and M&A opportunities going forward.
Martin Garmendia: With our strong financial profile and debt-free balance sheet, we are ready to execute on potential asset acquisitions and M&A opportunities going forward.
Martin Garmendia: Finally, moving to our guidance for 2022 and summary.
Finally, moving to our guidance for 2022 and summary.
Speaker Change: As Nick mentioned, we have several identifiable items that will be impacted by the current war in Ukraine, and including these headwinds, we are issuing our guidance for $420 million to $450 million in revenue, and $80 million to $90 million in adjusted EBITDA.
As Nick mentioned, we have several identifiable items that will be impacted by the current war in Ukraine, and including these headwinds we are issuing our guidance for 420 million to $450 million in revenue.
<unk> 80 million to 90 million in adjusted EBITDA.
Speaker Change: In providing this guidance, we are also mindful that as these events develop, it may impact the global commercial aerospace industry and related macroenvironment, including and not limited to supply chain disruptions, expanding sanctions, and an impact on flight activity due to higher fuel prices.
In providing this guidance. We are also mindful that as these events develop it may impact the global commercial aerospace industry and related macro environment, including and not limited to supply chain disruptions expanding sanctions and an impact on flight activity due to higher fuel prices.
Speaker Change: Given the recency of these events and the unpredictability of how their impact may ultimately unfold, we have not specifically taken into account these factors in providing this guidance beyond taking into consideration the identifiable impacts of which we are already aware of.
Given the recency of these events and the unpredictability of how their impact may ultimately unfold, we have not specifically taking into account. These factors in providing this guidance beyond taking into consideration the identifiable impacts of which we are already aware of further this guidance is based on an improvement in the company.
Speaker Change: Further, this guidance is based on an improvement in the company's AMS segment, ongoing demand for its on-airport MRO services, accelerating demand in cargo and e-commerce markets, an increased request for passenger-to-freighter conversions, and other tech ops products and services.
Ams segment ongoing demand for its an airport MRO services accelerating demand in cargo and e-commerce markets and increased requests for passenger to freighter conversions and other tech ops products and services.
Speaker Change: The ongoing and continued monetization of the Boeing 757 fleet acquisition is expected to be the predominant driver of the AMS segment.
The ongoing and continued monetization of the Boeing 757 fleet acquisition is expected to be the predominant driver of the Ams segment Eric.
Speaker Change: Aircel expects to sell the majority of the remaining Boeing 757s in 2022 as a result of strong demand for cargo converted aircraft.
<unk> expects to sell the majority of the remaining Boeing 750 Sevens in 2022 as a result of strong demand for cargo converted aircraft.
Speaker Change: As Nick noted, we have only included modest ERAWARE sales this year to account for the ramp-up phase to commercialize this product once the Supplemental Type Certificate for ERAWARE has been issued.
As Nick noted we have only included modest era, where sales this year to account for the ramp up phase to commercialize this product once the supplemental type certificate for Arrow, where has it been issued.
In summary.
Speaker Change: our internal adjustments and superior execution over the last year against the backdrop of the pandemic have yielded success.
Our internal adjustments and superior execution over the last year against the backdrop of the pandemic have yielded success.
Speaker Change: In addition to being more resilient, we are also now on a stronger operational and financial footing. We have thrived in this challenging commercial aviation market with the diversity of our revenue sources creating a counter-cyclical hedge. We look forward to continuing our work.
In addition to being more resilient. We are also now in a stronger operational and financial footing. We have thrived in this challenging commercial aviation market with the diversity of our revenue sources, creating a counter cyclical hedge we look forward to continuing to generate.
Speaker Change: internal, and external stakeholder value as we seek to achieve our goals over the next few years. With that, Operator, we are
Internal and external stakeholder value as we seek to achieve our goals over the next few years.
With that operator, we are ready to take some questions.
Speaker Change: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one.
At this time, we'll be conducting a question and answer questions. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: pets. A confirmation film will indicate your line is in the question.
Confirmation tone will indicate your line is in the question queue. You May pass Star two if you would like to remove your question from the queue for participants using speaker equipment may be necessary to pick up.
Speaker Change: You may press star two if you would like to remove your question from the queue.
Speaker Change: speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment while we
Well I think let's start here one moment, while we poll for questions.
Speaker Change: First question comes in the line of Gautam Khanna with how and you may proceed with your question.
First question comes from the line of Telecom.
With Cowen you May proceed with your question.
Okay.
Yeah.
Gautam Khanna: Thank you very much guys. Hey, I was wondering if you could elaborate on the Russian exposure. So that 5% or less, is that in the sales guide?
Thank you very much guys, Hey, I was wondering if you could elaborate on the Russian exposure. So.
That 5% or less is that in the sales guide.
Gautam Khanna: Is that already reflected or is that potentially incremental?
Is that already reflected or is that potentially incrementally negative to it.
Speaker Change: No, we have already removed anything that was specific that we knew, so we removed the impact of the leases and of some airspace kits that has been removed out of our guidance. What we have not removed is any impacts to the micro environment that could happen from the continuing escalation of the Russia event.
No we have already removed anything that was specific that we knew so we removed the impact of the leases and some aerospace kits that has been removed out of our guidance. What we have not removed is any impacts to the micro.
Environment that could happen from the continuing escalation of the Russia event.
Speaker Change: Okay, got it. And then on AeroWare, if you could just kind of elaborate on what the timeline is, you mentioned Q2, sort of what the remaining...
Got it and then on the Aero, where if you could just kind of elaborate on what the timeline as you mentioned in Q2.
What the.
Remaining items are in terms of getting our products certified and then what you would expect thereafter with respect to orders.
Speaker Change: in terms of getting the products certified and then what you'd expect thereafter with respect to.
And the like.
Speaker Change: So we continue to wait for software validation by our partner on this. That is proceeding in the ordinary course.
So we can Tim Hi, Gautam, it's Nick So we continue to wait.
Wait for software validation by our partner on this that is.
Receding.
The ordinary course of business, it's taking long because it's complicated but it is it is a it is moving steadily we believe that all identified issues with the software had been rectified and we're completing validation the expectation as we have received from our partner is that that'll be completed.
Speaker Change: It's taking long because it's complicated, but it is moving steadily. We believe that all identified issues with the software have been rectified and we're completing validation. The expectation, as we've received from our partner, is that that will be completed by early May. We will then do our reporting to the FAA. Hopefully, in the interim, we will have done our test flying because in order to get the STC, you've got to test fly the aircraft finally before...
By early May we will then do our reporting to the FAA hopefully in the interim we will have done our test flying because in order to get the STC.
Got a test fly the aircraft finally before the that they will issue the the.
Speaker Change: The FAA will issue the supplemental type certificate. We believe that the test flying and the validation can be done concurrently, so we're not having to wait until we complete the validation before we do the test flying.
Supplemental type certificate, we believe that the test flying in the validation can be done concurrently so we're not having to wait until we complete the validation before we do the test flying.
Speaker Change: And once test flying is complete, we then submit our final report, including the test data to the FAA, I would guess.
And wants to test flying is complete we then submit our final report, including the test data to the FAA I would guess if we if our validation is completed by early May we do we've done our test flying we do our reporting.
Speaker Change: If our validation is completed by early May, we do, we've done our test flying, we do our reporting sometime in May, hopefully earlier than later.
Sometime in May hopefully earlier than later, but.
Speaker Change: If it's done in May, we submit everything to the FAA, and then.
If it's done in May we submit everything to the FAA and then we're just in a wait mode. We will have completed and done everything that we have to do to get this system certified by the FAA and it'll just be a wait until we can get the FAA to give.
Speaker Change: We're just in a wait mode. We will have completed and done everything that we have to do to get this system certified by the FAA, and it'll just be a wait until we can get the FAA to
Speaker Change: give us the resources to complete the certification process.
Give us the resources to complete the certification process.
Speaker Change: I, we have no way to assess at this point how long that will take. Typically, something like that would take 30 to 60 days. That would be our expectation barring.
We have no way to assess at this point, how long that will take typically something like that would take 30 to 60 days.
That would be our expectation barring.
Speaker Change: You know barring something else that would distract the FA from putting resources on it
Barring something else that would distract the FAA from putting resources on it.
Speaker Change: Things have taken longer with the FAA over the past several years because predominantly the FAA has been working out of their houses, so there's been limited availability to interact with other members of the FAA face-to-face. That's definitely slowed things down.
Things have taken longer with the FAA over.
Over the past several years because predominantly the FAA has been working out of out of their houses. So theres been limited availability to interact with other members of the FAA.
Face to face that's definitely slowed things down.
Hopefully that is resolving itself as more and more people are going back into the office and so are you know we remain optimistic that the FAA will will put energy and focus on this and that we can get this completed by the FAA within a few months after we submit our final documentations.
Speaker Change: Hopefully, that is resolving itself as more and more people are going back into the office. And so we remain optimistic that the FAA will put energy and focus on this and that we can get this completed by the FAA within a few months after we submit our final documentation.
Speaker Change: Okay, and you did make a comment about airspace and sort of the may
Okay, and you did make a comment about air Snape from sort of the may.
Speaker Change: Timeline. I'm just curious what happens after May. So once that does that open up a new
Timeline out I'm just curious what happens after me so once it does that open up a new.
Speaker Change: markets potentially, or I'm just curious how the May date.
Markets potentially or I'm, just curious how the how the may date matters on Arizona.
Speaker Change: On the May date for, let's say, 757, the compliance date is May. So by May, all 757 passenger aircraft have to have a compliance method for these fuel quantity indication system separation. AirSafe obviously complies with that, and we now have certification of that.
On the on the May date for let's say 757. The compliance required date is may so by May all 757 passenger aircraft have to have.
Appliance method for these fuel quantity indication system separation are safe, obviously complies with that and we now have certification of that so by May all aircraft that are active and operating in passenger service has to have that system in it now that's not in every jurisdiction as aircraft moved from jurisdictions that don't have their requirement into.
Speaker Change: So by May, all aircraft that are active and operating in passenger service have to have that system in it. Now, that's not in every jurisdiction. As aircraft move from jurisdictions that don't have their requirement into jurisdictions that have the requirement, that will also spur sales of our AirSafe product. We had a number of sales of AirSafe products for airlines that fly into Russia.
Jurisdictions that have their requirement that will also spur sales of our aerospace product. We had a number of sales of aerospace product for airlines that fly into Russia current Russian sanctions prohibit us from selling those aircraft I'm sorry, those kids today now we have sought.
Speaker Change: Current Russian sanctions prohibit us from selling those aircraft, I'm sorry, those kits today. Now, we have sought, I take it back, we are seeking approval from OFAC to sell those kits to airlines that even if, even though those airplanes may fly into Russia on the basis that they're a safety item, we don't know whether OFAC would grant that approval. If they don't grant that approval, those sales will be delayed, and by the way, they're not in our forecast.
I take it back we are seeking approval from <unk> to sell those kids too.
Airlines that even if even though those airplanes may fly into Russia on the basis that that or a safety item. We don't know whether OPEC would grant that approval. If they don't grant that approval those sales will be delayed and by the way they're not in our forecast those sales will be delayed until such time as those aircrafts come out of Russia aircrafts are.
Speaker Change: Those sales will be delayed until such time as those aircraft come out of Russia. Aircraft are coming out of Russia.
Coming out of Russia. Despite.
Speaker Change: what may happen, leave a lot of airplanes in there, and as those aircraft come out of Russia that don't have the kit installed in them, the next operator that takes them is likely going to need the kit, and we'll have the opportunity to do those sales. As Martin mentioned a few minutes ago.
What may happen.
Leave a lot of airplanes in there and as those aircrafts come out of Russia that don't have the kit installed in them.
The operator, the next operator that takes them is likely going to need the kit and will have the opportunity to do those sales as Martin mentioned, a few minutes ago. We don't have sales the sales that we pulled out of our budget that we intended to sell into airlines that we're operating in to Russia, we have pulled out and they don't appear in our <unk>.
Speaker Change: We don't have sales. The sales that we pulled out of our budget, that we intended to sell into airlines that were operating into Russia, we've pulled out and they don't appear in our forecast for the balance of the year. Doesn't mean we won't have sales, just means that we took them out. So we have no, we don't have visibility of that yet.
Forecast for the balance of the year doesn't mean, we won't have sales just means that we took them out. So we have no we don't have visibility of that yet.
Got it and just one last one on the 757 monetization you mentioned the bulk of them will be done this year that were remained 15.
Speaker Change: Got it. And just one last one on the 757 monetization. You mentioned the bulk of them will be done this year. That will remain 15 of the 15. Any.
Of the 15 any sense for.
Speaker Change: kind of how those phase through the year and, you know, how much, are you thinking 12, 13 of them get monetized this year or is it?
Kind of how those phase through the year and you know how much but.
Are you thinking.
<unk> 13 of them get monetize this year or is it.
Eight just over half I know you said the majority or the bulk of it I'm. Just curious you know timing and magnitude. This year just so we can have a greater.
Speaker Change: the bulk of it. I'm just curious, you know, timing and magnitude this year, just so we
Speaker Change: Okay, so we have three aircraft that we are that are undergoing conversion right now One is almost complete expected that we'll deliver it to a lessee and sell it to a leasing company Within the next 30 days We have two other ones that we're doing conversions on that will follow on in the second and third quarter
Okay. So we have three aircrafts that we are that are undergoing conversion right. Now one is almost complete expected that we'll deliver it to a lessee and sell it to a leasing company within the next 30 days, we have two other ones that we're doing conversions on that will follow on in the second and third quarter.
Speaker Change: And we have two airplanes that we have committed to a Chinese operator that will get them converted in China themselves.
And we have two two airplanes that are that we have committed to a Chinese operator that will get them converted in China themselves.
Speaker Change: This this would be an existing Chinese operator that we've already sold airplanes to these would be the last two aircraft We would deliver to them
This would be an existing Chinese operator that we've already sold airplanes to these would be the last two aircraft, we would deliver to them that would leave that would take 10 airplanes that we will have delivered this year will leave five left we have placed a.
Speaker Change: That would leave that would take 10 airplanes that we will have delivered this year will leave five left.
Speaker Change: We have placed a commitment or we've made a commitment with Precision to have Precision do, not us, Precision to do.
A commitment or we have made a commitment with precision to have precision do not us precision to do six more cargo conversions, whether they'd be in China or.
Speaker Change: six more cargo conversions, whether they be in China or if they find another domestic facility because of the gap between the availability of kits.
If they find another domestic facility because of the gap between the availability of kits. We basically have committed all of the available kids all the available cargo conversion kits available firm precision through 2023, and as I said, we've got a commitment for six we have five airplanes, we're counting on at least acquiring one more within <unk>.
Speaker Change: We basically have committed all of the available kits, all the available cargo conversion kits available from Precision through 2023. And as I said, we've got a commitment for six. We have five airplanes. We're counting on at least acquiring one more with an option to go to 10.
Option to go to 10, so our expectation is we'll continue we'll sell the balance of our airplanes when as converted freighters in 2023 as those airplanes start the conversion process by a third party in.
Speaker Change: So our expectation is we'll continue, we'll sell the balance of our airplanes as converted freighters in 2023 as those airplanes start the conversion process by a third party in the last quarter of this year. And we'll carry all through 2023. And if we go to 10, they'll probably carry us again into 2024.
In the last quarter of this year and will carry into 'twenty all through 2023, and if we go to 10, they'll probably curious again again into 2024.
Great. Thank you very much.
Youre welcome Gotham.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to Mr. Nicholas.
Speaker Change: Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Mr. Nicholas Bonazzo for closing remarks.
Remarks.
Okay as always thank you for listening to this call today and for your interest in air sale.
Nicholas Bonazzo: Okay, as always, thank you for listening to this call today and for your interest in AirSail.
Nicholas Bonazzo: We're very pleased with our progress to date and excited about the future.
We're very pleased with our progress to date and excited about the future.
Have a good evening everyone.
This concludes today's conference you may disconnect your lines at this time.
Nicholas Bonazzo: conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.
Thank you for your participation or the rest of the rebel.
Okay.
Nicholas Bonazzo: you
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