Q3 2023 AerSale Corp Earnings Call
Good day and welcome to the S. L Inc. Third quarter 2023 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question. Please press Star then one.
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I would now like to turn the conference over to Jackie Carlin, Vice President of marketing and Communications. Please go ahead.
Good afternoon, I'd like to welcome everyone to air sales third quarter 2023 earnings call conducting the call today are Nick Fernando <unk>, Chief Executive Officer, and Martin Germann, India, Chief Financial Officer.
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.
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.
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 for the year ended December 31, 2022 filed with the Securities and Exchange Commission SEC on March.
Seven 2023, and its other filings 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 Aircell website.
I R Dot aircell dot com with that I'll turn the call over to Nick for an ASO.
Thank you Jackie.
Good afternoon, and thank you for joining our call today I'll begin with a brief overview of the quarter and provide operational updates before turning the call over to Martin to review the numbers in greater detail.
Our consolidated third quarter results improved notably over the second quarter and the prior year in total we reported sales of $92 5 million, an increase of 81% against third quarter 'twenty two to 2022 sales of $51 million.
This increase was largely the result of flight equipment sales in the period, which included $38 9 million of engine sales.
Sequentially sales increased as we were able to monetize the strong levels of feedstock acquired over the past 12 months, which included both engine and aircraft flight equipment sales during the period.
While we're pleased to see the increased volume third quarter results trailed our internal forecast expectations as several additional flight equipment sales slated for the third quarter are now expected to close in the fourth quarter.
As we do each quarter I would like to remind investors that our quarterly results tend to be lumpy because of the timing of flight equipment sales there.
Therefore, assessing full year time periods and feedstock acquisition rates are both better analytical tools to our performance then year over year or sequential revenue pattern.
Turning to profitability adjusted EBITDA in the third quarter was $1 9 million compared to a loss of <unk> 5 million in the year ago period.
The improvement in EBITDA performance was the result of higher flight equipment sales during the period and better U S M volume.
At the segment level and beginning with asset management third quarter sales were $65 1 million compared to just $20 6 million in the prior quarter and the prior year's quarter.
Higher sales compared to 2022 reflected the monetization of feedstock acquisitions with the growth stemming from increased flight equipment and U S. M part sales, partially offset by lower revenues from our leasing portfolio.
In the current year, we sold seven engines and one pizza West converted 757 aircraft during the period compared with two engines and no aircraft in the prior year.
In addition to the flight equipment sales delivered in the third quarter. There are two aircrafts a highly modified 737 800 and a P to fs converted 757 aircrafts, we expected to deliver in the third quarter that are now expected to be delivered in the fourth quarter.
Looking forward with the aircraft and engines planned for delivery in the fourth quarter, we anticipate a solid finish to the year for flight equipment sales with an additional 18 in the pipeline expected to close before year end.
Turning to an update on the cargo market conditions continued to be unfavorable as higher interest rates and lower air cargo demand create a dramatically different backdrop than what we experienced during and immediately following the pandemic when consumer demand for physical goods peaked.
To date, we've sold eight aircraft under our 757 <unk> conversion program and currently have an additional 10 aircraft and inventory waiting for delivery or conversion.
Consistent with our communication last quarter, given the current end market conditions. We anticipate these will take longer to place than originally forecasted at the start of the year and expect a higher mix of aircrafts will be leased instead of soul.
In our U S and parts business airframe and engine parts sales nearly doubled compared to the prior year, which is the direct result of the success of our feedstock acquisition program converting to sales.
Year to date, we've closed on approximately $130 million of feedstock with a total of 200 million acquired or under contract.
This compares to the first nine months of 2022, which included just $34 million of feedstock.
Elevated feedstock levels drove higher sales in the third quarter, which is expected to continue in the fourth quarter and into 2024.
Finally in our leasing portfolio, we had no aircraft and seven engines on lease during the period.
<unk> to one aircraft and 17 engines in the year ago period.
Because we're continuously monitoring the best and highest use of our flight equipment. We opportunistically sold some of these assets, which provide a higher return profile than continuing to lease.
And our Tech Ops segment, we reported sales of $27 4 million compared to $30 4 million in the third quarter of 2022.
Lower sales resulted from fewer aircraft in storage and the completion of several large customer programs at our Aerostructures and landing gear facilities.
This work at our landing gear shop has since been replaced by a larger long term program with a major U S airline that began in the fourth quarter.
At our Aerostructures shop, we're onboarding new customers to fill the additional capacity made available after moving into our new building, which is almost triple the size of our current facility.
Turning to engineered solutions, we are near the conclusion of the FAA approval process of our enhanced flight vision system era, where.
At this time all tests have been completed and we're working through documentation review and completion of final checklist items in anticipation of issuance of the STC by the FAA.
In addition in late October we announced that we received FAA approval for a 50% visual advantage over the naked eye, which will make arrow, where the first and only product available with this level of visual advantage we.
We're proud of this award as it validates the primary benefit of the benefit of are aware offering a compelling value proposition to our customers as the system enhances safety lowers operating costs by minimizing weather related delays in fuel consumption and provides associated environmental benefits by lowering carbon.
Emissions.
Turning to capital allocation, we have a healthy almost unlevered balance sheet, enabling continued funding of our acquisition programs to sustain business growth too.
To date, we've acquired roughly $130 million of feedstock and ended the quarter with approximately $175 million of liquidity consisting of cash on our balance sheet and remaining revolver capacity further.
Further as we continue to monitor monetize the feedstock already acquired we anticipate an increase in free cash flow generation net of any additional feedstock purchases.
In conclusion, our third quarter results have shown significant improvement over the previous quarter and the same period last year.
Our growing feedstock availability is driving better quarterly performance and flight equipment sales.
Given the success of our feedstock acquisition program in 2023, resulting in a significant volume of inventory. We currently have available to convert to sales. We anticipate this trend to continue into the foreseeable future.
We anticipate a strong fourth quarter as we finished the year with flight equipment sales expected to continue their positive momentum.
I would like to thank our employees for their dedication to air sale and their efforts in delivering on our commitments to all stakeholders.
Now I'll turn the call over to Martin for a closer look at the numbers Martin.
Nick I will start with an overview of our third quarter financial performance and end with our updated guidance for 2023.
Third quarter revenue was $92 5 million, which included $44 8 million in flight equipment sales consisting of seven engine and a P to fs converted Boeing 757 aircraft.
Revenue in the third quarter of 2022 was 51 million and included $2 7 million of flight equipment sales consisting of only two engines and no aircraft.
As we have pointed out during multiple earnings calls flight equipment sales may significantly vary from quarter to quarter, and we believe monitoring our progress based on asset purchases and sales over the long term is a more appropriate measure of progress.
Third quarter asset management revenue rose to $65 1 million because of the increase in flight equipment sales I, just mentioned U S and part sales were up from the year ago quarter, because of higher demand and availability of feedstock, which was partially offset by lower revenue from leasing.
Tech ops revenue was down nine 8% to $27 4 million in the third quarter from $30 4 million in the third quarter of 2022.
Our tech ops business was adversely impacted by fewer customer aircraft in storage as compared to prior periods and weaker contribution from our Aerostructures and landing gear facilities.
This was partially offset by greater revenue associated with increased on airport MRO capacity dedicated to customer aircraft, which was enabled by outsourcing the pizza web conversions of our 757 aircraft.
Third quarter gross margin was 25, 4% compared to 34% in the third quarter of 2022.
Primarily driven by the mix of flight equipment sales.
Selling general and administrative expenses were $25 4 million in the third quarter of 2023, which included $3 2 million of noncash equity based compensation expenses.
Selling general and administrative expenses were $24 million in the third quarter of 2022 and included $4 4 million of noncash equity based compensation expenses the.
The increase in selling general and administrative expenses were primarily driven by higher costs related to era, where development and facility expansions.
Third quarter loss from operations was $1 9 million and $8 5 million in the third quarter of 2022.
Net loss was <unk> 1 million in the third quarter compared to 9 million in the third quarter of 2022.
Adjusted for noncash equity based compensation Mark to market adjustment to the private warrant liability facility relocation costs inventory reserves and secondary issuance costs. Adjusted net income was <unk> 9 million in the third quarter of 2023.
Adjusted for these same items the third quarter of 22 had an adjusted net loss of $1 9 million.
Third quarter diluted earnings per share was zero compared to diluted loss per share of <unk> 17 in the third quarter of 2022.
Excluding the adjustments mentioned above third quarter adjusted diluted earnings per share was <unk> <unk> compared to adjusted diluted loss per share of <unk> <unk> for the third quarter of 2022.
Adjusted EBITDA was $1 9 million in the third quarter of 2023 compared to a loss of half a million in the prior year period.
The growth in adjusted EBITDA was a result of higher <unk> sales and a greater number of flight equipment sales.
Next in terms of our cash flow metrics cash used in operating activities was $168 1 million, resulting from a gross investment of over $200 million in newly acquired feedstock and make ready costs to prepare inventory for sale.
Which should drive our revenue and earnings going forward.
We ended the quarter with a substantial balance sheet with $174 6 million of liquidity, consisting of $3 2 million in cash and available capacity of $171 4 million on our $108 million revolving credit facility, which can be expanded to $200 million.
Finally, moving to our updated guidance for 2023.
We now expect to generate revenue of $400 million to $420 million and adjusted EBITDA of 40 to 45 million in 2023, our revenue and adjusted EBITDA guidance reflects current expectations for our core business and flight equipment sales slated for delivery before year end.
The exact timing of these flight equipment sales can vary by days or weeks based on a variety of factors. Therefore, it because of the amount of asset sales that are planned to close by the end of the year, but with limited time remaining to do so some of those could roll into the first quarter of 2024.
We are pleased with the recovery in our sales in the third quarter, which was driven by the broad success of our feedstock acquisition program and we remain confident that our purpose built model and excellent execution capabilities will enable us to drive and generate long term value for all of our stakeholders.
With that operator, we are ready to take questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
We are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
Please limit yourself to one question and one follow up.
The first question comes from Budd <unk> from Stifel. Please go ahead.
Hi, Hey, good afternoon and I. Thank you for the question.
Martin you just.
Nick.
Martin can you just said.
You could see some rollover into the first quarter.
I know visibility has been challenging this year.
Some timing delays.
Can you just give us I guess some some commentary on what your visibility is in the fourth quarter or have you sold any of those I guess through today in the quarter.
And as we think about 2024, you've had about $65 million of sales slippage just based on your guidance update which seems to be mostly on the whole asset side.
Can you give us any way to think about how that good or at least how you're thinking about that showing up in 'twenty four.
Yeah, so as far as overall guidance at this point, we actually have anticipated delivery schedule. So that gives us better visibility into the potential flight equipment sales that we have scheduled for the remainder of the year as we did note. There's a lot of different factors, including the customer and their ability to deliver or to take possession of those asked.
Which is why we made the comment that potentially some of those assets.
Move into the fourth quarter. However, right now they all have contractual agreements to end to close this year and we're moving forward to get those closed.
Overall on a positive note. These contracts. These assets are under overall agreement. So if we're not able to close those in the current year, we do expect those to close in the first quarter of 2024.
Okay, and then just on the I guess on the 24 side of that or I guess just to clarify.
Can you say I guess, how many of the 757 you have under contract and then in terms of sort of teeing up expectations for 'twenty four.
Just just where things stand just because theres been so much movement in the timing of asset sales.
Yes as of right now we have one 757 its under contract to be sold in the current year and then we have the remaining 750 sevens that are still being marketed for potential lease or sale.
Okay.
And then just as a follow up.
Like positive commentary on the Aero where front.
I know that people seem like Theyre, probably biting their nails trying to figure out when that is going to happen and it seems like when you got through the final tests and August it was gonna be expected to be a pretty quick process can you just walk us through what's happened over the last six or so weeks.
And I guess, what your best visibility into what happens between now and hopefully an S D C being granted.
So what typically happens is.
Is as youre going through the whole process of obtaining.
Obtaining an STC in anticipation of doing flight testing you submit reports to the FAA all the testing that you've done.
How you how the flight testing is going to come is going to demonstrate that.
The product that you're trying to certify complies with whatever the rules are so you've got a number of reports and if I recall I think we submitted over 50 reports to the FAA for their review and ultimate approval.
Typically.
Data is all finished by the time you start your flight testing, but that did not occur in our case it.
It took the FAA because of the complexity of this certification.
It took the FAA you know many many days to rig return documents to us in some cases as much as six months to get documents back to us because there.
There was a there wasn't certainty as to what type of test we would do.
That would be that would satisfy the FAA. So a lot of back and forth with the FAA on the type of testing that dragged on slightly past <unk>.
Completion of flight testing, but not much because by you know within shortly within several weeks after completion of flight testing the balance of testing that we had to do was completed satisfactorily and now we're just in the documentation phase now in the documentation phase. It's every document is reviewed every word is looked at.
If.
If the FAA doesn't like the way you describe something in a sentence that I should review it will go back will fix it send it back to them. They have to review it again and it's just taken incredibly long theres a lot of people involved at the FAA a lot and again because of the complexity of this at this stage.
We're at now and what we've been working at Sam.
Since I don't know the last five to six weeks or more.
His just see documentation completion, and and and editing that the FAA gives us and says look we need you to fix this and it's minor stuff, but it's just time consuming.
And you know, there's there's really very little for us to do now except finish up the few documents that they've asked us to.
To revise or waiting on their comments on our revisions and then it's a summary, you get them a summary, and say look here's everything you asked us to do here's everything we did here's all the reports that you guys have that we've submitted to you that you've now approved.
And that's it you know there's nothing left at that point for us to do the last very last thing. We do is the summary report.
We're not there yet, but we're not there yet because we don't have all the comments back from the FAA on all the documents we've submitted but we're substantially there there are very few documents compared to the overall amount of documents that are outstanding and that's and I see I see.
Every day, including today I see more and more reports are coming back is signed off.
Thanks, Nick and Thanks, Martin I appreciate the time.
Youre welcome.
The next question comes from Ken Herbert from RBC Capital markets. Please go ahead.
Yeah, Hi, good afternoon, <expletive> and Martin.
Hey, Ken.
Hey, Nick maybe just wanted to follow up on the.
On the.
On the asset.
The asset the asset sales, if I understood correctly, you've committed to 200 million.
I think you've done 130 of that year to date in terms of deploying capital do you expect much upside does that $200 million as we get into the end of the year and maybe if you could just comment on sort of where you're seeing the opportunities and how is the pricing environment out there for the feedstock.
So we do anticipate to grow that $200 million and the balance of the year.
It Hasnt really changed much the type of feedstock that we're acquiring it requires a lot of work.
<unk> to be I think it favors us because we have the capability to extract value out of flight equipment that needs a lot of work.
Versus others that are more financial buyers that they don't have that capacity that they could buy an aircraft on lease but buying an aircraft off lease with two engines that need to be repaired heavy checks et cetera.
Yes.
They don't have the capability to do that they have to farm. It out their costs are higher so that so the opportunity to continue.
<unk> feedstock of the type we've seen all year remains and you know and even though.
This is a little bit counter to this but even though.
The Oems with the geared turbofan problem and even still how long has taken to get all these Max was delivered even though that is keeping the order flight equipment.
And service and depriving us of a you know a.
A big bow wave of of our flight equipment technology flight equipment that we expect it to see by now.
It will come and it will come when the Oems catch up.
But in the interim we're still getting the kind of stuff that fits our business model that we can extract value out of it. So I don't see any change in that you know we as we as we're thinking about we just finished the board meeting as we're thinking about our acquisitions into 24 at this point I don't see any change over what we've seen thus far in 2002.
'twenty three.
See that continuing.
And accelerating as the Oems.
Resolve their problems and start delivering more new aircrafts that have reliable engine.
Yes, I wanted to follow up on the geared turbofan issue because it sounds like on the one hand that would would restrict you know availability of feedstock.
Comments here, but on the other hand is probably really strengthening demand for material to support legacy engines. The CFM 56, and <unk> 25 in particular.
Does how does that net net factor of the geared turbofan issues affect you and are there opportunities that arise from that that you can maybe call out.
We purchased quite a few CFM 56 dash five DS that power of the <unk> hundred 20 CEO.
And.
We bought most of those at parts value thinking that eventually did the amount of engines that went into the shop would would increase and.
And then in the demand for U S M parts for the engine specifically on the older technology <unk> hundred 20.
Would would come back very strong and that's the fact, we're seeing that be the issue. We're having is a lot of the engines that we thought.
We're going to end up is parts turned out to be engines that have good service life left.
And we have customers that are interested in taking those engines, whether it be for purchase or for lease.
Theyre going to deprive us from having the the U S M to to sell that piece part level and we don't care I mean as long as the net value. We receive out of that is is the same or greater than we would get going the long haul for part out you know, we will sell or lease an engine that we bought at part out value.
But I do see that that market is continuing to be strong. The question is can you get engines today and where are they going to come from.
And as I said.
Finding good serviceable engines.
Today very difficult to do I mean, when you're taking low time remaining parts engines and are selling them as whole engines or leasing them as whole engines to people because they can't you know they don't want to spend money on putting engines through the shop.
That's that's telling you that theres going to be less U S. M available to support all the engine shop visits that are that are coming.
Or that are already here as a result of these older technology aircraft staying in service. So yes. There is an upside for the supply of the U S and parts for the supply of whole engine.
The whole engine trading and leasing.
But theres a limited demand of that equipment and so I don't I don't know that we've quantified.
The offset to that.
<unk>.
What what you know what's better for us to have more use of available for sale or more whole assets to lease or sell.
Hum.
I don't know that.
The answer to your question.
I don't know that.
Its helpful. I appreciate that.
There's a lot of moving pieces, there and if I could just one final question maybe for Martin as we think about.
The implied adjusted EBITDA in the fourth quarter is.
Virtually much of the sort of sequential increase expected to come from a whole asset sales or are you expecting maybe more contribution in the fourth quarter.
From from Tech ops from from USA and other parts of the business.
Yeah, I think it's two fold, we definitely expect to see a continuation of improvement in the U S. M side of the overall business, but definitely to the visibility that we have from flight equipment sales that will be the bulk of the overall increase that we have factored it into the guidance number overall.
I want to add to that because I think it's an important.
Important thing to note when.
When we're buying engines at part out value.
And we then turned around and leased or sell them as a whole asset. It really does skew your perception of what our U S business is doing.
If we could we would just be reporting whole asset sales of parts that we have engines, we bought for U S. M. As part of our U S. M life, but the reality is it's not U S. M. It's still a whole engine, but don't be don't be confused by.
By the amount of whole asset sales when we're telling you that most of these assets were bought.
For parts.
And just because we're selling them as whole assets or whole flight equipment doesn't mean that we don't have the opportunity to grow the U S. N business. It's just it's popping up in a different segment is popping up as flight equipment sales rather than U S. M sales.
Got it.
Thanks, Nick Thanks, Martin I'll pass it back Okay Youre welcome.
The next question comes from Michael <unk> from <unk>. Please go ahead.
Hey, good evening guys. Thanks for taking the questions.
Just to stick with that final order.
Are you guys just to stick with that a final thought.
Nick.
Better for you on a whole asset sale or individual piece parts sales I mean, where do you think you can get better returns I mean, obviously, you can move inventory faster with a whole asset sale, but you know given this kind of a tight market.
Look at that equation of individual parts and pricing on parts I mean, what I guess simple question, but what's more valuable for you what generates better returns.
We don't necessarily look at IRR, because a short term.
A short term sale of a of an engine versus the longer term.
Part out process may produce a greater IRR, but it's but the quantum of the of the net revenue it would be much smaller so we have to way forget put IRR aside for the moment simply forget the IRR because we make a much much higher IRR awfully quickly flip engine.
So what we look at as well, what's the dollar value of what we would get if we went long and we parted out the engine and then we had sales of U S. M.
First is what can we get today.
Net of of no additional time, our acquisition costs, what dollar value of our dollar volume can we get today.
We then may factor in a small interest carrying factor in that and if the net result of that is is that we feel that.
With or without interest because I don't think that makes up they get a big enough difference, but even with interest if we feel that we can get the same or more money today selling it as a whole asset versus going to the longer route and selling it as parts, we will almost always choose to sell the asset today, and then be having and Henry struggling with you guys.
As to the amount of whole asset sales, we have because I think that just skus everybody's view of the day.
When you see a lot of asset sales, which produces a lot of volatility and I could straighten that out if I went to longer route but I don't think that's the right answer I think the right answer as we get the same or better money on a short term basis, that's where we go with that's where we go with that okay.
Got it that's helpful and then just looking at.
The feedstock purchases looking at the inventory of <unk>.
Kind of aircraft frames parts.
I think $326 million on the balance sheet, how should we think about that I mean, it sounds like that could grow potentially into the fourth quarter and then just trying to get a sense of.
Now that that inventory winds down and maybe drives cash flow next year and also helps the top line can you can you give us any color there.
Yeah, let's say from the from the U S fence side, we're already starting to see a pickup in overall sales volume, we're probably kind of approaching closer to about about $8 million.
Overall monthly sales to a run rate of about $100 million based on the volume that we have and again, if we keep the assets that we have identified as as as piece parts as piece parts that we could increase that overall volume to $120 million to $140 million of annual sales on the U S same site based on the level of inventory.
And historic.
Kind of disposition rates kind of overall, we're also seeing opportunities to increase our leasing portfolio.
<unk> taken demand on strength in certain platforms, such as the CFM 56, and again, we have those assets a lot of them are being repaired and being ready to be put on lease so with that feedstock youre going to see increases in U S. M youre going to see increases in the leasing portfolio and again, there will always be opportunities to do whole asset sales as well and youll start seeing those benefits.
Flowing through 'twenty four and beyond.
Okay got it and then Martin you kind of hit on it I think you said the $100 million run rate for US Then what was the actual U S. M. A.
Caller amount in a quarter or even if you can give us kind of a year over year I think I think you did close to $20 million in USA last quarter.
Yeah, I think overall for the quarter for USA sales, we were running around let me see I'll give you that probably around $20 million overall okay.
Okay got it.
Last question, Nick just as it relates to are aware.
I know you had pre built some inventory, but how are you thinking about your kind of hardware supplier elbit.
What's going on over there obviously they are having a lot of reserve is call ups and.
Just maybe frame sort of what the.
Any kind of supply chain choke points or getting product.
We've been in contact with Elbit, they've got their own contingency plans in place for events like this with its not I guess, the I guess the tragic part of this is they've never experienced this in the recent in recent times, but they've got their contingency plans in place. They are currently manufacturing product for us we expect to get product.
Liver here imminently, they've got products sitting on the shelf for us.
And we want it so so they're continuing to manufacture and deliver now.
There's no way for me to be able to guess.
Happen in all the eventualities and I and I don't think it's even appropriate for me to comment on on that.
But.
At this point, we're not seeing we're not seeing any effect.
Our ability to get product, but you know who knows who knows depends on what happens in Israel, Yeah. No of course got it.
Alright, good stuff guys I'll jump back in the queue.
Okay.
The next question comes from Jack Haire from T. D. T D. Cowen. Please go ahead.
Hey, guys. This is Jack on for Gautam. Thanks for the question here.
Hey, Yeah, just just kind of honing in here on the Q4 guide.
And I know you mentioned you kind of just.
Taking in that one sort of asset sale in Q4.
I just wanted to see kind of how customer campaigns are going I know you've talked in the past that you are having active discussions so.
Maybe it.
Like at first glance, it seems like Theres more downside or sort of more risks to a pushout, but could there be incremental upside if demand strengthens here like do you have the ability to basically monetize.
Those those.
Those tended inventory you've got.
Or the magnitude you could do in Q4.
So we identified there are 18 individual.
Pizza flight equipment that winter and so I think I'm answering your question that we have scheduled actually planned and.
Scheduled to close between now and the end of the year. So all of those have dates associated with them have delivery conditions, and we're working towards putting those putting that equipment in the hands of our buyers who have to go through their own due diligence process.
And and inspection.
<unk>.
We we have taken into account the time that we have remaining and are confident that if if.
Everybody does what they're supposed to do we will get those assets delivered this year some of them invariably will fall out of this year and they'll they'll they won't close this year for who knows what reason.
We had a closing in one of the quarters, where the customer that was going to send us the monies bank closed on the last day of the quarter. When we were kind of closed now.
We closed ended up we ended up closing the first business day of the second of the next quarter. So we don't anticipate anything like that this quarter and and when identified 18 that doesn't take into account additional assets that keep popping up as opportunities to sell in the near term I mean, even before the end of the year. So.
We may end up closing on 18 of them end up closing on more than 18, we may end up closing on less than 18, what we're telling you is that we've got 18 scheduled to close this year, what's the probability of some of those will move out I think that the probability is some of those will move out how many I can't tell them.
Will we replace that with others that probability is yes, how many I can't tell.
Okay, Yes.
I was kind of asking just specifically in the 75 seven.
We are afraid or I'm, sorry, the 757 in the under is has been under contract.
We had a delivery issue with one of the engines, we thought it would be delivered already we've rectified the delivery issue on the engine, giving them a substitute engine and they are in the final phase of the of the acceptance of the aircraft.
Okay got it so is that incremental to the one you've already got under contract.
I guess like so that that is the one guidance only has $1 750 <unk> sale.
Okay. So.
Okay. No. That's helpful and are there any other campaigns because I think you've got those.
I guess now 10 remaining seven.
<unk> said that I like is there any chance you know those discussions are progressing well or just any color there would be helpful.
So we've got we are negotiating with one to two aircraft today. One is available on next one is not but it's but it's close to delivery.
To be leased and then we have the prospect with the customer that's taking the aircrafts this quarter that they want a second aircraft, but they're not going to talk about that until they get their first aircraft in operation beyond that we don't have anything thats pending.
We have discussions with multiple customers, but we have nothing pending where I can point to and say, okay. We've got to that accounts for potentially.
Leading seven of the aircrafts on uncommitted, but at this point I would tell you that.
<unk> eight aircrafts on committed and.
Well no. It's 10 aircrafts on 10 aircrafts on committed with discussions on two more leaving eight aircraft that we have yet to find homes for and we're working on it but we don't we don't have.
We don't have that type of those yet.
To give you a little color about fourth quarter there'll be there's there's before deliveries of the southern 507. So those arent available right now they are being delivered in this in this Florida deliveries from from cargo conversion, yes of it that will become available yes.
Okay got it yeah from your third party supply, Okay that makes sense and then and then just one last one on <unk>.
Just conviction there with the FAA and whether you know a government shutdown in any case here in the next couple of weeks could have any impact on potential timing there any color would be helpful. Thanks.
Already been told by the certification branch that they will be shut down if the if the government shuts down so I can only I can only speculate that based on the last time that there was a government shutdown at the <unk>.
We can only hold out a couple of weeks. So if if that happens and that's in another 90 days.
If that happens on the 17th and that net last all the way through the end of <unk>.
Of November it still leaves December for them to finish up the paperwork and issue the STC, but that would clearly delayed until December.
And potentially longer.
If.
Well I can't imagine the governmental stay shut down longer than that but you know then then we get into the unfortunate part which is once you get into December you've got epic is taken a vacation you got two holidays between then it.
Certainly Christmas and and.
And and new year's.
And.
Yeah, I mean I was just hoping we're not we're not caught up in that and we're just so close at this point.
But with our law understood.
With a lot of kudos.
Yeah, No I hear you.
Okay. That's it for me Thanks, guys Alright, you're welcome Thanks James.
And we have a follow up question from Bart <unk> from Stifel.
Hey, Thanks for the follow up just on the Air where front I guess, just two real quick questions. Nick is there any sort of possibility in your mind right now the way it thinks stand that you think theres, an STC approval or granting in 2023.
And then aside from the FTC question.
Can you give any color about how conversations are going with future customers of those kicked off or are you waiting for STC.
Okay. So your first question.
Possibility of STC approval in 'twenty three possible.
We've identified what we're going through at this point.
It's out of our control how long the FAA takes to respond to the.
To respond to the revisions that we said we sent back to them.
You'd think that ticket when they when they're asking us to make a minor change they could look at it in a in a couple of days and get back to us in some cases they have in some cases, the guys on vacation sick he's not in he's too busy.
When we're dealing with that and I'm not complaining about the FAA because they've been really they have been.
They have been great to work with in this complex program.
So I can't tell you that that.
That I have.
Any reason to believe that we will get this certified in 'twenty three.
Neither do I have any reason to believe that I won't get it certified in 'twenty three it's just out of its out of our control. We've done everything that the FAA has asked us to do and continues to ask us to do but it's in their hands as to as to the pace and then add potential government shutdown and then the end of the year holidays to it.
It is.
It is a possibility that we will not get it certified in 'twenty three.
Okay, and then just didn't make that definitive because because it could.
Second part was customer outreach.
Oh customer area. So we have been continuing to fly with a number of customers. Both customers that have expressed an interest and had been flying with us all along and and some new customers that are interested.
We continue to get very positive feedback on all of the customers, we pressed them and push them.
And some get set up a little bit and say guys.
Come back to us when you have your STC. So we are getting a little bit of that pushback.
Like.
Okay, you've been talking about this for a long time as we've been telling you guys for a long time.
And customers want to see it.
They got approval great now it definitely changed the attitude of the people we have been dealing with when we got when we finished our flight testing because that let everybody realized that okay. Maybe we don't have the STC, yet, but we better start figuring it out because a lot of work has to be done once the STC.
Approved before airlines are going to start taking it theyre going to have to do revise their flight their flight training manuals potentially changing their simulators.
They're going to have to be discussing with it with their FAA. The implementation of this new technology.
<unk>.
So they know that.
They're interested in they want it and that's what we've heard from a number of customers that are now is the time to start working on it and they are I mean, we're getting a much higher level of activity from our customers.
Ever since we finished the flight testing than we've had.
And the entire time, we've gone through the certification process.
With the exception of one customer that's been with us from the very beginning.
And that's the one that we think is you know call I'm, a big boy customer because it's a big airline.
Very helpful. Thank you Nick.
Youre welcome.
This concludes our question and answer session I would like to turn the conference back over to Nick Panozzo, Chief Executive Officer for closing remarks.
Okay, guys and everyone listening. Thanks for all the good questions look thank you for everyone on the line for joining our call today and for your interest and Ursula.
With the third quarter, we're beginning to see positive results from the investments we've made in feedstock over the past year.
We've judiciously used our balance sheet to overcome supply chain delays and organically build out our infrastructure of people and facilities.
These investments have positioned us well to accelerate growth in this fourth quarter and into the future.
We have confidence in our purpose built multi dimensional and fully integrated business model and we're not discouraged by short term's, earning ball is earnings volatility.
We're leaning into our future and are perfectly situated to thrive in a growing aftermarket.
We are continuing to look at M&A opportunities to cost effectively expand the customers' capacity and capability.
Certification of error, where will come and we expect its commercialization will drive a steady base of recurring revenue well into the future.
We're excited about all the opportunities ahead of us and we are convinced the future is bright for ourselves.
We look forward to keeping you updated on our progress so everyone have a good evening.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.