Q4 2023 AerSale Corp Earnings Call

Good day, and welcome to east to Inc's fourth quarter and full year 2023 earnings conference call.

Operator: Good day, and welcome to ESOL Inc.'s fourth quarter and full year 2023 earnings conference call. At this time, all participants are in listen-only mode.

At this time, all participants are in listen only mode.

Operator: The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please start and then zero on your telephone keypad. Please note that this conference is being recorded. It is now my pleasure to hand the conference over to Kristen Gallagher. You may begin. Good afternoon.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please stop and then zero on your telephone keypad.

Please note that this conference is being recorded.

It is not a patient to hand, the conference over to Christian Garner good you may begin.

Good afternoon, I'd like to welcome everyone to air sales fourth quarter 2023 earnings call.

Kristen Gallagher: I'd like to welcome everyone to Airsales' fourth quarter 2023 earnings call. Conducting the call today are Nick Finazzo, Chief Executive Officer, and Martin Garmendia, 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, 2023, filed with the Securities and Exchange Commission to be filed on March 8, 2024, and its other filings with the SEC.

Ducting the call today are Nixon ASO, Chief Executive Officer, and Martin Graham, 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.

Both 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 in.

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, 2023 filed with the Securities and Exchange Commission to be filed on March eight 2024, and its other filings.

As with the SEC.

Kristen Gallagher: These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those things 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 in the investor section of the AirSales website at ir.airsales.com. With that, I'll turn the call over to Nick Finazzo. Thank you, Kristen.

These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from dosing to indicated by the forward looking statements on this call.

We will 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 our earnings presentation materials made available on the investors section of the <unk> website.

I R Dot Aircell dot com.

With that I'll turn the call over to Nick for nozzle.

Thank you Kristen good.

Nicolas Finazzo: Good afternoon, and thank you for joining our call today. I'll begin today with a recap of the year and our strategic objectives before turning the call over to Martin to review the numbers in greater detail. The final months of the year deviated meaningfully from our expectations headed into year-end, which entirely stemmed from lower-than-anticipated flight equipment sales in the fourth quarter. As you recall, in the prior quarter, we noted a significant number of flight equipment sales that were slated for delivery in December, which would account for the bulk of our EBITDA for the year. As noted at the time, the schedule of these deliveries is subject to change due to customer acceptance and delivery requirements, which were expected to occur in the fourth quarter.

Good afternoon, and thank you for joining our call today I'll begin today with a recap of the year and our strategic objectives before turning the call over to Martin to review the numbers in greater detail.

The final months of the year deviated meaningfully from our expectations headed into year end, which entirely stemmed from lower than anticipated flight equipment sales in the fourth quarter.

If you recall in the prior quarter, we noted a significant number of flight equipment sales that were slated for delivery in December which would account for the bulk of our EBITDA for the year.

As noted at the time the schedule of these deliveries is subject to change due to customer acceptance and delivery requirements, which were expected to occur in the fourth quarter.

Nicolas Finazzo: In total, we had 28.8 million in flight equipment sales that did not close in 2023 that have thus far closed in the first quarter. We expect the remaining sales that did not materialize in 2023 to close in the first half of 2024 or be returned to available inventory for subsequent sale or lease. Importantly, this is common in our business, and as a public company, we have had quarters that have demonstrated a significant deviation from our original expectations, both on the upside and the downside. As we have discussed, we operate a purpose-built, end-to-end solution that is unique in the industry and gives us a competitive advantage to extract value from assets that our peer group is unable to achieve. This ecosystem allows us to direct assets to the most attractive ROI for our equipment, and we're agnostic to the end use, whether it be through parts sales, aircraft and engine leasing, or flight equipment sales.

In total we had $28 $8 million of flight equipment sales that did not close in 2023 that have thus far closed in the first quarter.

We expect the remaining sales that did not materialize in 2023 to close in the first half of 2024 or be returned to available inventory for subsequent sale or lease.

Importantly, this is common in our business and as a public company. We have had quarters that have demonstrated a significant deviation from our original expectations.

Both on the upside and the downside.

As we have discussed we operate a purpose built end to end solution, which is unique in the industry and gives us a competitive advantage to extract value from assets that our peer group is unable to achieve.

This ecosystem allows us to direct assets to the most attractive ROI for our equipment and we're agnostic to the end use whether it be through parts sales aircraft and engine leasing or flight equipment sales.

With this complex ecosystem comes a significant fixed cost hurdle that we must clear annually at which point, we begin generating significant EBITDA on each incremental dollar of sales.

Nicolas Finazzo: With this complex ecosystem comes a significant fixed cost hurdle that we must clear annually, at which point we begin generating significant EBITDA on each incremental dollar of sale. In the short term, flight equipment sales generate significant revenue, and therefore EBITDA drops as we have already reached our fixed cost hurdle. In the longer term, to the extent we deploy more assets to USM, it will have a similar effect on our financial results, but over an extended period of time. Following the lessons learned in 2023, we recognized the need to provide investors with accurate and insightful inputs into our go-forward performance. Therefore, we're discontinuing our practice of numerical full-year guidance, but we'll continue to provide as much qualitative detail as possible about opportunities and outcomes expected over future periods. Our change in guidance policy should not be interpreted as a change in our bullish view about 2024 and future years' performance, which we are confident we can derive from the diversified airsale platform. Turning to a summary of full year results, our sales declined 18.1% to $334 million.

In the short term flight equipment sales generate significant revenue and therefore EBITDA drop through as we have already reached our fixed cost hurdles.

In the longer term to the extent, we deploy more assets to U S. M. It will have a similar effect on our financials, but over an extended period of time.

Following the lessons learned in 2023, we recognized the need to provide investors accurate and insightful inputs to our go forward performance there.

Therefore, we are discontinuing our practice of numerical full year guidance, but we will continue to provide as much qualitative detail as possible about opportunities and outcomes expected over future periods.

Our change in guidance policy should not be interpreted as a change in our bullish view about 2024 and future Years' performance, which we are confident we can drive from the diversified aircell platform.

Turning to a summary of full year results, our sales declined 18, 1% to $334 5 million.

Nicolas Finazzo: Lower full-year sales were attributable to lower feedstock acquired in 2022, combined with significantly lower flight equipment sales throughout the year, particularly in the first half of 2023, excluding flight equipment sales and the sale of a 737 aircraft and tech ops in 2022, which is not expected to recur. Full-year revenue increased 5.6%, reflective of the strong commercial demand environment we're operating in. Turning to our profitability for the full year, we reported adjusted EBITDA of $12.3 million, compared to $87.4 million in the prior year.

Lower full year sales were attributable to lower feedstock acquired in 2022, combined with significantly lower flight equipment sales throughout the year, particularly in the first half of 'twenty three.

Excluding flight equipment sales and the sale of a 737 aircraft in Tech ops in 2022, which is not expected to recur full year revenue increased five 6% reflective of the strong commercial demand environment, we're operating in.

Turning to our profitability for the full year, we reported adjusted EBITDA of $12 3 million compared to $87 4 million in the prior year.

Nicolas Finazzo: The decline in EBITDA year over year stemmed from reduced volume in the first half of 2023 due to lower feedstock availability, substantially fewer flight equipment sales during the year, and the absence of stronger margins generated in the prior year related to our 757 P2F conversion program. At the segment level, and beginning with asset management, our full-year sales came in at $215.2 million. 2 million, compared to $277.6 million in the prior year.

The decline in EBITDA year over year stemmed from reduced volume in the first half of 2023 due to lower feedstock availability substantially fewer flight equipment sales during the year and the absence of stronger margins generated in the prior year related to our 757 <unk> conversion program.

At the segment level and beginning with asset management, our full year sales came in at 215 point.

$2 million.

<unk> to $277 6 million in the prior year.

Nicolas Finazzo: Lower full-year sales almost entirely stemmed from a reduction in total flight equipment sales and fewer aircraft and engines. Our full-year USM sales partially offset these factors, with a 26.1% growth year over year as we benefited from strong demand and improved feedstock in the second half of 2023. For the full year, we sold 17 engines and 4 aircraft, compared with 15 engines and 12 aircraft in the prior year. Turning to our end markets, commercial demand remains robust as a result of strong airline traffic and capacity, which has now exceeded pre-pandemic levels. This is a formidable tailwind for our business and provides significant demand for our equipment. Importantly, this is a compelling indicator as we've ramped up our asset purchase program in 2023 after a weaker purchasing environment in 2022 that unfavorably impacted our first half of the year. Simply put, with sufficient demand and favorable pricing, our current ability to drive revenue and EBITDA stems from our ability to acquire, service, and deploy equipment back into the market. In the cargo market, conditions remain challenging, as we've reported throughout the year.

Lower full year sales almost entirely stemmed from a reduction in total flight equipment sales and fewer aircraft and engines on lease.

Our full year U S. <unk> sales, partially offset these factors with a 26, 1% growth year over year as we benefited from strong demand and improved feedstock in the second half of 2023.

For the full year, we sold 17 engines and four aircraft compared with 15 engines and 12 aircraft in the prior year.

Turning to our end markets commercial demand remains robust as a result of strong airline traffic and capacity, which has now exceeded pre pandemic levels.

This is a formidable tailwind to our business and provides significant demand for our equipment.

Importantly, this is a compelling indicator as we've ramped up our asset purchase program in 2023 after a weaker purchasing environment in 2022 that unfavorably impacted our first half of the year.

Simply put with sufficient demand and favorable pricing our current ability to drive revenue and EBITDA stems from our ability to acquire service and deploy equipment back into the market.

In the cargo market conditions remained challenging as we've reported throughout the year. We had seven remaining 750 sevens that are being converted and continue to actively market. These aircraft to potential customers.

Nicolas Finazzo: We have seven remaining 757s that are being converted and continue to actively market these aircraft to potential customers. In our USM parts business, airframe and engine parts sales both grew substantially year-over-year, driven by the success of our feedstock program. For the full year of 2023, we acquired $132 million of feedstock and had an additional $72 million under contract at year end. However, the availability of feedstock continues to be negatively impacted by the delay in new OEM production that has forced operators to retain older equipment for longer than is typical. Despite this environment, we've been successful in continuing to acquire feedstock as our purpose-built model was made to extract the maximum value of aircraft in any condition, allowing us to execute on purchases of unserviceable equipment that requires investment and expertise to monetize.

In our U S and parts business airframe and engine parts sales both grew substantially year over year driven by the success of our feedstock program.

For the full year of 2023, we acquired $132 million of feedstock and had an additional 70 $72 million under contract at year end.

The availability of feedstock continues to be negatively impacted by the delay in new OEM production that has forced operators to retain older equipment for longer than is typical.

Despite this environment, we've been successful in continuing to acquire feedstock as our purpose built model was made to extract maximum value of aircraft in any condition, allowing us to execute on purchases of unserviceable equipment that requires investment and expertise to monetize.

In addition, the condition of records for these assets have been challenging as they have not met the robust requirements of the industry for full back to birth trace.

Nicolas Finazzo: In addition, the condition of records for these assets has been challenging, as they have not met the robust requirements of the industry for full back-to-birth trade. This is, again, where our industry know-how and experienced team can add value where others cannot, but has also delayed the timing of closing on some of these feedstock acquisitions. Finally, in our leasing portfolio, full-year sales declined by approximately 50% as we had fewer assets under lease during the year.

This is again, where our industry knowhow and experience team can add value, where others cannot but has also delayed the timing of closing on some of these feedstock acquisitions.

Finally in our leasing portfolio full year sales declined by approximately 50% as we had fewer assets under lease during the year.

Nicolas Finazzo: We had no aircraft in the lease portfolio in 2023 compared to three aircraft in the prior year that were sold at very favorable prices. In 2024, the company plans to increase the engines available for sale and lease based on engines that we purchased in 2023, as well as from engines that are returning to service after maintenance or repair activities that have been completed. Turning to our Tech Ops segment, we reported full-year sales of $119.3 million, compared to $130.9 million in the prior year, which included the sale of our 737 Airaware demonstrator aircraft to a government entity for $23.7 million. Excluding this asset sale,

We had no aircraft in the lease portfolio in 2023 compared to three aircraft in the prior year that were sold at very favorable prices.

In 2024, the company plans to increase of engines engines available for sale and lease based on engines that we purchased in 2023 as well as from engines that are returning to service after maintenance or repair activities that had been completed.

Turning to our Tech Ops segment, we reported full year sales of $119 3 million compared to $130 9 million in the prior year, which included the sale of our 737 are where are aware demonstrator aircraft to a government entity for $23 7 million.

Excluding this asset sale.

Nicolas Finazzo: Segment sales were up roughly 10% year over year as a result of strong demand for our MRO services, particularly at our Goodyear facility. Turning to Engineered Solutions and Airware, I'm very pleased to report that on December 6th, we received our STC from the FAA for Airware, which marks the conclusion of a multi-year development and flight testing process. With the approval, the FAA also determined that AirAware provided a 50% visual advantage over the naked eye, which will be instrumental in helping our customers assess and model the financial returns for the product. Importantly, AirAware is now the only enhanced flight vision system that the FAA has approved for this degree of visual advantage.

<unk> sales were up roughly 10% year over year as a result of strong demand for our MRO services, particularly at our Goodyear facility.

Turning to engineered solutions and are aware I'm very pleased to report that on December six we received our STC from the FAA for <unk>, which marks the conclusion of a multiyear development and flight testing process.

With the approval. The FAA also determined that era, where provided a 50% visual advantage over the naked eye, which will be instrumental in helping our customers assess and model the financial returns for the product.

Importantly, <unk> is now the only enhanced flight vision system that the FAA has approved for this degree of visual advantage.

Nicolas Finazzo: The addressable market for airware is substantial, with more than 6,737 NG aircraft actively flying that would benefit from this product and qualify under the F-8 certification. This market includes very large passenger carriers that represent hundreds of Boeing business jet operators, as well as cargo and government operators. As we concluded the certification process, we also ramped up our go-to-market activities in an effort to secure a launch order and build an order backlog. We're in active discussions across these categories. And as we've detailed in the past, many of the largest players are already familiar with the product through demonstrations and flight testing.

The addressable market for <unk> is substantial with more than 6737, NGL aircrafts actively flying that would benefit from this product and qualify under the FAA certification.

This market includes very large passenger carriers that represent hundreds of units Boeing business jet operators as well as cargo and government operators.

As we concluded the certification process. We also ramped up our go to market activities in an effort to secure a launch order and build and order backlog.

We're in active discussions across these categories and as we've detailed in the past.

Many of the largest players are already familiar with the product through demonstrations and flight testing.

Nicolas Finazzo: Furthermore, I'm pleased to announce that as of today's call, we have written proposals out to five potential launch customers, which span from small to large passenger and cargo carriers. While we expect formal orders to take some time as customers fully assess the benefits and return profile of airware, the proposition is clear and compelling, that the installation of airware will both substantially enhance aircraft safety in sub-optimal weather conditions while providing a compelling ROI to customers through reduced delays, diversions, and fuel cuts. In closing, while 2023 was a challenging year that fell short of our expectations, we remain confident in the long-term prospects for our business. Our unique end-to-end solution provides a durable competitive advantage.

Further I am pleased to announce that as of today's call. We have written proposals out to five potential launch customers, which span from small to large passenger and cargo carriers.

While we expect formal orders to take some time as customers fully assess the benefits and return profile of <unk>.

Proposition is clear and compelling that.

That the installation of <unk> will both substantially enhanced aircraft's safety and suboptimal weather conditions.

All providing a compelling ROI to customers through reduced delays diversions and fuel consumption.

In closing, while 2023 was a challenging year that fell short of our expectations. We remain confident in the long term prospects for our business.

Our unique end to end solution provides a durable competitive advantage.

The recent FAA certification of air where it was a major milestone that unlocks a large and exciting growth opportunity.

Martin Garmendia: The recent FAA certification of airware was a major milestone that unlocks a large and exciting growth opportunity, and we have a robust pipeline of potential launch customers actively evaluating the system. By continuing to execute on our strategic priorities, acquiring attractively priced feedstock, maximizing returns across our asset management channels, and driving adoption of airware. We are positioned to generate significant long-term value for our shareholders. I want to thank our dedicated employees for their hard work and our investors for their continued support. We look forward to updating you on our progress. Now, I'll turn the call over to Martin for a closer look at the numbers. Martin

And we have a robust pipeline of potential launch customers actively evaluating the system.

By continuing to execute on our strategic priorities acquiring attractively priced feedstock maximizing returns across our asset management channels and driving adoption of <unk>.

We are positioned to generate significant long term value for our shareholders.

I want to thank our dedicated employees for their hard work and our investors for their continued support.

Look forward to updating you on our progress in the future.

Now I'll turn the call over to Mark for a closer look at the numbers Martin.

Martin Garmendia: Thanks, Nick. I will start with an overview of our fourth quarter financial performance, followed by our expectations for the business in 2024. Our fourth-quarter revenue was $94.4 million, which included $47.4 million of flight equipment sales. Revenue in the fourth quarter of 2022 was $95.1 million, which included $51.4 million of flight equipment sales. If we exclude flight equipment sales, revenue would have been $47 million and $43.7 million in the fourth quarter of 2023 and 2022, respectively, an increase of 7%. As we have discussed in multiple earnings calls and press releases, our business may, and often does, fluctuate from quarter to quarter based on the timing of flight equipment sales. We believe that investors and analysts should monitor our progress based on asset purchases and sales over the long term. Fourth quarter asset management revenue decreased 4.9% to $64.6 million, largely due to lower flight equipment sales. Leasing revenue for the fourth quarter declined as a result of the planned reduction in the number of aircraft in our leasing portfolio.

Thanks, Nick and I will start with an overview of our fourth quarter financial performance, followed by our expectations for the business in 2024 are.

Our fourth quarter revenue was $94 4 million, which included $47 $4 million of flight equipment sales.

Revenue in the fourth quarter of 2022 was $95 1 million, which included $51 $4 million of flight equipment sales.

If we exclude flight equipment sales revenue would have been $47 million and $43 7 million in the fourth quarter of 2023, and 2022, respectively, an increase of 7%.

As we have discussed in multiple earnings calls and press releases are business may and often does fluctuate from quarter to quarter based on the timing of flight equipment sales, we believe that investors and analysts should monitor our progress based on asset purchases and sales over the long term.

Fourth quarter asset management revenue decreased four 9% to $64 6 million largely due to lower flight equipment sales.

Leasing revenue for the fourth quarter declined.

As a result of the planned reduction in the number of aircrafts in our leasing portfolio.

Martin Garmendia: Fourth-quarter USM parts sales improved from the year-ago period by 27% because of higher demand and availability of feedstock. If we exclude flight equipment sales, asset management revenue would have been $17.2 million in the fourth quarter compared to $16.5 million in the prior-year period, an increase of 3.6 percent. Technical Operations, or Tech Ops, revenue was $29.8 million in the fourth quarter, which was an improvement of 9.7% compared to the fourth quarter of 2022. Tech Ops benefited from better performance from landing gear activities and Roswell on airport MRO activities.

Fourth quarter U S end parts sales improved from the year ago period by 27% because of higher demand and availability of feedstock.

We exclude flight equipment sales asset management revenue would have been $17 2 million in the fourth quarter compared to $16 5 million in the prior year period, an increase of three 6%.

Technical operations, our Tech ops revenue was $29 8 million in the fourth quarter, which was an improvement of nine 7% compared to the fourth quarter of 2022.

<unk> benefited from better performance from landing gear activities and Roswell on airport MRO activities.

Martin Garmendia: Revenue growth from our Roswell facility within Tech Ops was offset by lower revenue at our Goodyear facility due to a greater percentage of intercompany work being performed during the quarter. In the fourth quarter of 2023, gross margin was 25.9% compared to 36% in the fourth quarter of 2022, due to a decline in flight equipment sales, which generally have higher margins and were a lower part of the mix in the fourth quarter of 2023. Fourth quarter selling general and administrative expenses were $25.5 million, of which $3.1 million were from non-cash equity-based compensation expenses, compared to $25.1 million in the fourth quarter of 2022, of which $4.5 million were non-cash equity-based compensation expenses. Losses from operations were $1.1 million in the fourth quarter compared to operating income of $9.1 million in the fourth quarter of 2022. Income tax expense was $2.1 million in the fourth quarter of 2023, compared to $4.1 million in the prior year.

Revenue growth from our Roswell facility within Tech ops was offset by lower revenue at our Goodyear facility due to a greater percentage of intercompany work being performed during the quarter.

In the fourth quarter of 2023 gross margin was 25, 9% compared to 36% in the fourth quarter of 2020 to.

Due to a decline in flight equipment sales, which generally have higher margins and we're a lower part of the mix in the fourth quarter of 'twenty three.

Fourth quarter, selling general and administrative expenses were $25 5 million of which $3 1 million went from noncash equity based compensation expenses compared to $25 1 million in the fourth quarter of 2022 of which $4 5 million were noncash equity based compensation.

<unk> expenses.

Losses from operation was $1 1 million in the fourth quarter compared to operating income of $9 1 million in the fourth quarter of 2022.

Income tax expense was $2 1 million in the fourth quarter of <unk> 23, compared to $4 1 million in the prior year.

Martin Garmendia: Fourth quarter net loss was $2.7 million compared to net income of $9.2 million in the same year period, adjusted for non-cash equity-based compensation, inventory write-downs, mark-to-market adjustments to the private warrant liability, gain on legal settlement, secondary offering, and facility relocation costs. Fourth quarter adjusted net loss was $0.1 million versus adjusted net income of $12.3 million in the fourth quarter of 2022. Fourth quarter diluted loss per share was $0.08 compared to diluted earnings per share of $0.17 in the prior year period, adjusted for stock-based compensation, inventory write-downs, mark-to-market adjustments to the private warrant liability, gain on legal settlement, secondary offering, and facility relocation costs. Fourth quarter adjusted diluted loss per share was two cents versus adjusted diluted earnings per share of 23 cents for the fourth quarter of 2022.

Fourth quarter net loss was $2 7 million compared to net income of $9 2 million in the same year period.

Adjusted for noncash equity based compensation inventory write downs mark to market adjustment to the private warrant liability gain on legal settlement secondary offering and facility relocation costs.

Fourth quarter adjusted net loss was <unk>.

1 million versus adjusted net income of $12 3 million in the fourth quarter of 2022.

Fourth quarter diluted loss per share was <unk> <unk> compared to diluted earnings per share of <unk> 17 in the prior year period.

Adjusted for stock based compensation inventory write downs mark to market adjustments to the private warrant liability gain on legal settlement secondary offering and facility relocation costs fall.

Quarter adjusted diluted loss per share was <unk> <unk> versus adjusted diluted earnings per share of <unk> 23.

For the fourth quarter of 2022.

Martin Garmendia: Fourth quarter adjusted EBITDA was $6 million, compared to $17.7 million in the fourth quarter of 2022. Adjusted EBITDA and related margins were adversely impacted by lower flight equipment sales, which generally have higher margins. Cash used in operating activities was $174.2 million, primarily due to inventory investments of $168.6 million.

Fourth quarter, adjusted EBITDA was $6 million compared to $17 7 million in the fourth quarter of 2022, adjusted EBITDA and related margins were adversely impacted by lower flight equipment sales, which generally have higher margins.

Cash used in operating activities was $174 2 million, primarily due to inventory investments of $168 6 million.

<unk> also continued its investment in feedstock opportunities, which consume most of the available cash as of December 31 2023.

Martin Garmendia: Airsoil continued its investment in feedstock opportunities, which consumed most of the available cash as of December 31, 2023. CARES will end the year with $136.9 million of liquidity, consisting of $5.9 million of cash and available capacity of $131 million on our $180 million revolving credit facility, which can be expanded up to $200 million. As Nick noted earlier, due to the inherent variability in our asset management segment, specifically as it relates to the timing of flight equipment sales, we have decided to discontinue our practice of providing numerical full-year guidance. However, we remain confident that the first half of 2023 was a low point and that 2024 will show improved recovery. This confidence is driven by a strong balance sheet that has over $320 million in inventory that will be deployed in support of leasing USM and flight equipment sales in a favorable aftermarket that has benefited from robust passenger demand and delays in the production of new aircraft.

<unk> ended the year with $136 9 million of liquidity, consisting of $5 9 million of cash and available capacity of $131 million on our $180 million revolving credit facility, which can be expanded up to $200 million.

As Nick noted earlier due to the inherent variability in our asset management segment, specifically as it relates to the timing of flight equipment sales, we have decided to discontinue our practice of providing numerical full year guidance we remain.

Confident that the first half of 2023 was the low point and that 2024 will show improved recovery.

This confidence is driven by a strong balance sheet that has over $320 million in inventory that will be deployed in support of leasing USA, Usn and flight equipment sales and a favorable aftermarket has benefited from robust passenger demand and delays in production of new aircraft.

And our Tech Ops segment, we have been awarded several service agreements with airlines and Oems at our component MRO that will help increase the volume at these shops and will also help us improve operational efficiencies and begin to monetize on the capacity inspect expansion investments we have made.

Our on airport MRO has continued to remain strong fueled by demand for maintenance work supporting the robust passenger demand.

Martin Garmendia: In our tech ops segment, we have been awarded several service agreements with airlines and OEMs at our component MROs that will help increase the volume at these shops and will also help us improve operational efficiencies and begin to monetize on the capacity expansion investments we have made. Our on-airport MROs continue to remain strong, fueled by demand for maintenance work, supporting robust passenger demand.

Lastly, with the SEC in hand, we have entered the commercialization phase of are aware and we are working on securing orders that will provide revenue predictability over many years and.

In conclusion, excluding flight equipment sales our business volume increase in 2023 as commercial markets continued their recovery and demand remains robust.

We were successful in closing on $131 9 million of feedstock in 2023 and have agreements to acquire an additional $83 million to date.

Operator: Lastly, with the SEC in hand, we have entered the commercialization phase of Airware, and we are working on securing orders that will provide revenue predictability over many years. In conclusion, excluding flight equipment sales, our business volume increased in 2023 as commercial markets continued their recovery and demand remained robust. We were successful in closing on $131.9 million of feedstock in 2023 and have agreements to acquire an additional $83 million to date, which marks a sharp recovery from the low volume of acquisitions completed in 2022 that partially contributed to softer 2023 revenue. While we were disappointed more of the flight equipment sales did not close at the end of 2023, it is important to note that all of these assets are still available for sale or lease, with 28 million sales that have already closed in 2024, and the rest expected to generate revenue later in the year.

Which marks a sharp recovery from the low volume of acquisitions completed in 2022 that partially contributed to softer 2023 revenues.

While we were disappointed more of the flight equipment sales did not close at the end of 2023. It is important to note that all of these assets are still available for sale or lease with $28 million of sales that have already closed in 2024, and the rest expected to generate revenue later in the year or.

Our balance sheet remains healthy with more than $136 9 million of liquidity available to fund our business and we will continue to direct capital to the highest risk adjusted returns for our shareholders.

With that operator, we are ready to take questions.

Thank you, ladies and gentlemen, Keith Smith.

Quick question.

These special stall and then one on your telephone keypad.

A confirmation tone will indicate taken on easing the question queue.

You may please.

<unk> to lead the question queue.

For participants, making use of specie for finish it may be necessary to pick up the handset before pressing this takeda.

Our first question comes from.

Operator: Our balance sheet remains healthy, with more than $136.9 million of liquidity available to fund our business, and we will continue to direct capital to the highest risk-adjusted returns for our shareholders. With that operator, we are ready to take questions. Thank you. Ladies and gentlemen, please note that if you'd like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate that a line is in the question queue. You may press star 2 to leave the question queue.

Susan.

Please go ahead.

Hey, good afternoon, Nathan Martin Thanks for the questions.

Good afternoon afternoon Bert.

Nick maybe just start on the on the delays I guess the last three quarters has been sort of things just keep moving to the right. I mean, I think from a lot of your peers. We're hearing a pretty good story on the aftermarket on demand sort of seems like an environment, where if you have assets that can be monetized pretty quickly can you just talk about what's happened maybe.

What your visibility is does the guidance change indicate your visibility has become lower and it seems like you're still acquiring quite a bit of assets like how does that play into your view here, okay. When I got to break those questions down.

Bert William Subin: For participants making use of speaking equipment, it may be necessary to pick up the handset before pressing the star key. Our first question comes from Bert Subin of Slifol. Please go ahead.

Nicolas Finazzo: Hey, good afternoon, Nick and Martin. Thanks for the questions. Good afternoon.

As far as delays in.

And the assets that we were expecting to close in the fourth quarter that have shifted you want me to explain that.

Bert William Subin: Afternoon, Bert. Nick, maybe we can start on the delays. I guess the last three quarters have been sort of things just keep moving to the right. I mean, I think for me, a lot of your peers were hearing a pretty good story about the aftermarket on demand, which seems like an environment where if you have assets, they can be monetized pretty quickly. Can you just talk about what's happened? Maybe what your visibility is?

Yes, I mean, I guess <unk> seen some consistent shift so I'm just curious that in.

Why you have seen delays and maybe what happens from here.

It's not one thing it's.

It's a whole number of factors some of the things that we've seen that that.

Have extended the purchasing and sales time of these assets are the condition of the records that were getting from.

Nicolas Finazzo: Does the guidance change indicate your visibility has become lower? And it seems like you're still acquiring quite a bit of assets. Like, how does that play into your view here? Okay, I've got to break those questions down.

Various operators as as we've seen from.

Some recent events, where there has been fraudulent paperwork produced on an records. The scrutiny that goes into these aircraft records is just increasing its not necessarily.

It comes from.

Regulatory requirements today, but it comes from just a much higher level of scrutiny and back to birth trades and what's good for an airline to operate on an airplane and maintained records that's suitable to the FAA or to their local.

Nicolas Finazzo: As far as delays in the assets that we were expecting to close in the fourth quarter, that have shifted. Do you want me to explain that? Yeah, I mean, I guess you've seen some consistent shifts. So I'm just curious about that and why you've seen delays and maybe what will happen from here. It's not one thing. It's a whole number of factors that have extended the purchasing and sale time of these assets, the condition of the records that we're getting from various operators, as we've seen from some recent events where there has been fraudulent paperwork produced on records. The scrutiny that goes into these aircraft records is just increasing. It's not necessarily direct, you know, comes from regulatory requirements today, but it comes from, you know, just a much higher level of scrutiny and back-to-birth trace.

Hey.

Local regulatory agency may not be suitable if we acquire the aircraft and then we're trying to sell it to somebody else or going to another airline.

<unk>.

The condition of records has been a mess airlines are selling equipment, even leasing companies are selling equipment to us the records our message.

A lot of time to clean it up and candidly nobody has enough resources to clean it up it's just very very very time consuming and has just gotten worse. So that's one reason the.

The other with respect to deliveries as we approach year end.

It's always tough when you come up on holidays to get everybody focused on what it takes to get to closing.

Nicolas Finazzo: And what's good for an airline to operate an airplane and maintain records that are suitable for the FAA or for their local CAA, local regulatory agency, may not be suitable if we acquire the aircraft and then we try to sell it to somebody else or give it to another airline. So the condition of the records has been a mess. Airlines are selling equipment. Even leasing companies are selling equipment to us. The records are a mess. It's taking a lot of time to clean them up. And candidly, nobody has enough resources to clean it up. It's just very, very, very time-consuming. And it's just gotten worse.

Now.

We had our entire team focused on it and made sure that nobody helping you took nobody went home for the holidays. If there was any possibility that we could get any one of these assets delivered as we had scheduled to be delivered in the last quarter of the year.

Unfortunately that doesn't always we don't always get that same level of cooperation when somebody is buying something I mean, when theyre selling it.

Everybody focuses on it but one year.

But when you're buying something you don't necessarily have the same the same focus so I think that a number of the deals that we didnt close in the last quarter could have closed if we would've had better attention from our buyers I'm not going to necessarily blame them, but.

Nicolas Finazzo: So that's one reason. The other is with respect to deliveries as we approach year end. It's always tough when you come up on holidays to get everybody focused on what it takes to get a closure.

It's important for both parties to execute a transaction.

Do you expect to get cooperation from both parties.

Nicolas Finazzo: Now, we had our entire team focused on it and made sure that nobody went home for the holidays if there was any possibility that we could get any one of these assets delivered as we had scheduled them to be delivered in the last quarter of the year. Unfortunately, that doesn't always happen; we don't always get that same level of cooperation when somebody's buying something. I mean, when they're selling it. Everybody focuses on it, but when you're...

Particularly becomes problematic at the end of the year, because despite what everybody says they'll do it.

It comes to Christmas time, and new year's Nobody wants to work everybody has things to do and again, that's not on air sales side, everybody here did what we needed to do to get things delivered other.

Other issues such as Horoscope reports we.

We do a borescope multiple other people do borescope of engines prior to delivery.

And to the spine next sky looks at it sticks a borescope in an area that of an engine that is not designed to be looked at buying something thats been an anomaly goes back to the OEM. The OEM. This is why did you look there we have no parameters for that so if you've got a problem.

Nicolas Finazzo: But when you're buying something, you don't necessarily have the same focus. So I think that a number of the deals that we didn't close in the last quarter could have closed if we had had better attention from our buyers. I'm not going to necessarily blame them, but it's important for both parties to execute a transaction.

Then youre going to have to fix it and so take an engine that was in serviceable that was serviceable to everybody and you look in an area of the engine that there is no manual that tells you what the service ability limit is and all of a sudden you've got an engine thats rejected and requires us to go into a shop.

Nicolas Finazzo: You expect to get cooperation from both parties. That particularly becomes problematic at the end of the year. Despite what everybody says, they'll do it. You know, when it comes to Christmas time and New Year's, nobody wants to work.

That doesn't always killer deal for US we have replacement engine. So we can offer a replacement engine, but that also requires cooperation from the lessee.

Nicolas Finazzo: Everybody has things to do. And again, that's not an air sales side. Everybody here did what we needed to do to get things delivered, other issues such as the horoscope report. We did a bore scope; multiple other people did bore scopes of engines prior to delivery. Engine's fine; next guy looks at it, sticks the borescope in an area of the engine that is not designed to be looked at, finds something that's an anomaly, and goes back to the OEM.

The buyer to look at.

At the records on a timely basis and to be in a position to accept an alternate asset so.

Not all of them, but thats just kind of a.

A little bit of.

A few examples of the kind of things that caused us to lose.

Some closings at the end of the year.

Just got pushed out.

And it's just exacerbated at the end of the year.

Because you just have no recovery time.

Got it okay.

Yes, as we think through 'twenty four sort of limited information out there, but I guess, the MRO business Youre expanding U S. M is doing very well I mean, those businesses together should generate something north of 20 million of EBITDA I would think.

Nicolas Finazzo: The OEM says, "Why did you look there? We have no parameters for that, so if you've got a problem, then you're going to have to fix it." And so, take an engine that was serviceable for everybody, and you look in an area of the engine where there's no manual that tells you what the serviceability limit is, and all of a sudden, you've got an engine that's rejected and requires it to go into a shop. But that doesn't always kill a deal for us. We have replacement engines, so we can offer replacement engines, but that also requires cooperation from the lessee or the buyer to look at the records on a timely basis and to be in a position to accept an alternate asset. So that's not all of them, but that's just kind of a few examples of the kind of things that caused us to lose some closings at the end of the year that just got pushed out, and it's just exacerbate I got it.

And then I guess you are still investing in an era, where so thats, maybe slightly down from that and you're already selling some of your whole assets have a lot for sale is there any sort of parameters.

<unk> guidance, but is there any way to think about EBITDA and you did over $87 million last year in and around $12 million and 23. So it's just it's a big jump in terms of trying to hammer out expectations.

Yeah.

I understand.

And as you see the.

Amount of revenue, we need to generate to cover our fixed overhead.

Once we hit that that's where it becomes.

Everything falls to the bottom line and we just don't know that at the beginning of the year. We can we can.

Bert William Subin: Okay. I guess as we think through 24, there's sort of limited information out there, but I guess the MRO business you're expanding, USM, is doing very well. I mean, those businesses together should generate something north of 20 million in EBITDA, I would think. And then I guess you're still investing in AeroWare, so that's maybe slightly down from that. And you're already selling some of your whole assets and have a lot for sale. Are there any sort of parameters?

We can estimate it based on our prior experience and we look back five years, and we said well geez how did we perform previously where we didn't know exactly what we're going to buy we had assumptions we didn't know exactly what we're going to sell.

And that's not new to us.

We've been in that situation every year since we've had this company.

But as we look back five years, we actually did pretty well on our on our estimates.

Where we would end up at.

Nicolas Finazzo: You're not giving guidance, but is there any way to think about EBITDA? I mean, you did over 87 million last year and around 12 million at 23. So, it's a big jump in terms of trying to hammer out expectations. Yeah. You know, I understand, and as you see, the amount of revenue we need to generate to cover kind of our fixed overhead. Once we hit that, that's where it becomes. You know, everything falls to the bottom line, and we just don't know that at the beginning of the year. We can estimate it based on our prior experience. And, you know, we look back five years, and we say, well, geez, how did we perform? Previously, when we didn't know exactly what we were going to buy, we had assumptions; we didn't know exactly what we were going to sell. And that's not new to us.

At the end of each year based on a lot of information that we didn't have at the beginning of the year. This year was worse this year for all this.

Year was worse as far as our ability to predict where we would end up.

For a number of the factors I just mentioned on why some of these delays occurred in closing, but there are but there are other factors that exist in the industry. Today. This is a very different.

We havent experienced an industry with this level of problems.

I don't know when I don't recall it I mean, when you look at all of the issues Boeing is going through with the certification re certification of the Max.

Other issues that have come up recently regarding.

7379 issue or the Max nine Airbus with the problems Thats, having on its geared turbofan and that just seems to be prolonging.

When you have an expectation there'll be over 600 <unk> hundred 20 is grounded so what that's done is that what.

That has made predicting the availability of feedstock to be very difficult. Because these are circumstances that we haven't experienced before so.

Nicolas Finazzo: I mean, we've been in that situation every year since we started this company. But as we look back five years, we actually did pretty well on our estimates of where we would end up at the end of each year based on a lot of information that we didn't have at the beginning. This year was worse, all things considered, this year was worse as far as our ability to predict where we would end up, for a number of the factors I just mentioned and why some of these delays occurred in closing, but there are other factors that exist in This is a very different, I don't, we haven't experienced an industry with this level of problem. I don't know when it will happen. I don't recall.

So and and these these these are.

Situations change during the year. So as we are at the beginning of the year, we're trying to make a determination of how much feedstock and we buy.

These events that are unusual and we havent seen them before.

It really difficult to predict how much we're going to buy couple that with.

When we buy something we generally look at it as.

As we're going to purchase.

At the price at which we can make sense parting it out and we always believe partying. It out is the lowest value we could get out of the flight equipment that we buy.

As we acquire this flight equipment.

Nicolas Finazzo: I mean, when you look at all the issues Boeing is going through, certification, recertification of the MAG, and other issues that have come up recently regarding 7. The Max 9 Airbus, with the problems it's having with its geared turbofan, and that just seems, to be, prolonging the time you have an expectation there will be over 600 A320s grounded, has made predicting the availability of feedstock very difficult because these are circumstances that we haven't experienced before. And these situations change during the year, so at the beginning of the year, we're trying to make a determination of how much feedstock we can buy. These events that are unusual, and we haven't seen them before, make it really difficult to predict how much we're going to buy.

We may have thought OLED, it's going into our part out machine and that would be easier to predict because we can calculate how long it will roughly take us to get it through the repair cycle, although thats, even been problematic lately because of an extended repair cycle time.

Putting all that aside if you can predict when it gets through the repair cycle than you can predict with some specificity as when youll generate revenue on a go forward basis from USA.

But that's not what typically happens what typically happens is we look at it we said it will we're going to sell this as you know I'm going to keep these parts and I am going to rebuild an engine and I'm going to take that engine I'm going to put that inch not on lease or.

If the market opportunity is better to sell it I'm going to sell it.

And being able to predict which of those avenues, we're going to pursue to monetize that investment is.

Fluid it changes as we acquire the material.

It changes based on market demand during the year and it changed base changes based on the condition of the assets when we when we actually get it in our hands because.

Nicolas Finazzo: Couple that with, When we buy something, we generally look at it we're going to purchase at the price at which we can make sense parting it out. And we always believe parting it out is the lowest value we can get out of the flight equipment that we buy. As we acquire this flight equipment, we may have thought, oh, it's going into our part-out machine.

Lot of this you don't really know until you physically get the assets and you have an opportunity to start looking at it and see where the true value is in the metal that you bought.

It's all of those factors that just make it really really difficult to forecast on a go forward basis and it's why is why we really feel that it's not in the investors' interests for us again.

Nicolas Finazzo: And that would be easier to predict because we can calculate how long it will roughly take us to get it through the repair cycle, although that's even been problematic lately. Extended Repair Cycle. Putting all that aside, if you can predict when it gets through the repair cycle, then you can predict with some specificity when you'll generate revenue on a go-forward basis from USM. But that's not what typically happens.

Very specific guidance.

However.

Directionally, how should how should how should our investors feel about what the prospects of the company are on a go forward basis, clearly you have to point to available.

Inventory and.

Fixed asset so what do we have to sell or lease at any different level.

Nicolas Finazzo: What typically happens is we look at it, and we say, well, we're going to sell this as USM. No, I'm going to keep these parts, and I'm going to rebuild an engine. Now I'm going to take that engine, and I'm going to put that engine out on a lease, or...

Have to look at the investments we've made on the MRO side and expanding on our accessory side.

For pneumatics capability, which we have yet to receive which we have yet to complete and get a benefit from.

Tripling the size of our structural components shop, which is which we are almost there, but we have yet to receive a dime's worth of incremental revenue from tripling the size of our building because we're not quite finished with it yet or.

Nicolas Finazzo: If the market opportunity is better to sell it, I'm going to sell it, and being able to predict which of those avenues we're going to pursue to monetize that investment is fluid. It changes as we acquire the material. It changes based on market demand during the time of the auction. And it changes based on the condition of the assets when we actually get them in our hands. Because a lot of this you don't really know until you physically get the assets and you have an opportunity to start looking at them and seeing where the true value is in the metal that you bought. So, it's all those factors that just make it really, really difficult to forecast on a go-forward basis, and that's why we really feel that it's not in the investor's interest for us to give, you know, very specific guidance.

Our millington facility, which is about to come online and we've made an investment in that.

But we have yet to see any return on that because that's that's.

<unk> will be up and running here in the next quarter, but is not yet up and running and contributing.

The development of all the capability, we've got on the landing gear side.

We.

For the first time in the history of that landing gear business have been receiving.

Contracts from <unk>.

Airlines and Oems to overhaul their landing gear, which is producing.

A significant amount of recurring revenue that we can point to and say and now we can forecast that out more accurately because it's not.

Nicolas Finazzo: However... Directionally, how should our investors feel about what the prospects of the company are on a go-forward basis? Clearly, you have to point to available inventory and fixed assets. What do we have to sell or lease at any different levels?

We'll fight for every landing gear you could get it's we have recurring contracts and by the way that that is not just on the landing gear side, but we're seeing that on the accessory side as well.

On the on airport MRO side.

Our issue there is besides millington.

Nicolas Finazzo: You have to look at the investments we've made on the MRO side, in expanding our accessory side for pneumatics capability, which we have yet to complete and get a benefit from, tripling the size of our structural component shop, which we are almost there with, but we have yet to receive a dime's worth of incremental revenue from tripling the size of our building because we're not quite finished with it. Our Millington facility is about to come But we have yet to see any return on that because that facility will be up and running here in the next quarter, but it's not yet up and running and contributing to the development of all the capability we've got on the landing gear side.

Which is yet to come online is just building up the labor the labor force to accommodate the demand.

We're in good shape on that we still have lots of room to grow.

But we've got to get more mechanics to be able to do that.

So maybe just to clarify there and one last question in terms of the clarification.

I know theres a lot of uncertainty, but if I just look at the assets you have for sale in the things that are happening in the MRO and <unk> side of things.

Is there a <unk>.

Possible outcome, where your EBITDA could look like 22 and 24.

I don't I'm not going to answer that I don't know.

Martin.

Given our.

Alright, I think the best place to note and we've noted this in all the calls is to look at that inventory balance it's $329 million. That's almost twice what we had at the beginning of last year overall, that's going to give us opportunities to do several things not only can we support the U S set aside where its demand is robust, but we can also look in putting an.

Nicolas Finazzo: We..., for the first time in the history of that landing year, have been receiving contracts from airlines and OEMs to overhaul their landing gear, which is producing... a significant amount of recurring revenue that we can point to and say, and now we can forecast that out more accurately because it's not, you know, go fight for every landing gear you can get. It's, you know, we have recurring contracts. And by the way, that is not just on the landing gear side, but we're seeing that on the accessories side as well. On the on-airport MRO side. Our issue there is...

Assets back on our leasing pool, specifically on the engine leasing side of which with the issues on the geared turbofan, there's very high demand overall, so we're going to have an opportunity to deploy capital and start making revenue in that site and as always we'll continue to see opportunities to do whole asset trading.

Nicolas Finazzo: Besides Millington, which has yet to come online, is just building up the labor force to accommodate the... We're in good shape on that. We still have lots of room to grow, but we've got to get more mechanics to be able to. So maybe just to clarify there, and one last question, in terms of clarification, I know there's a lot of uncertainty, but if I just look at the assets you have for sale and the things that are happening on the MRO and USM side of things, is there a plausible outcome where your EBITDA could look like 22 and 24? I don't even, I'm not going to answer that.

It's opportunistic and as that becomes the highest use of the overall asset the real challenge that we have from forecasting as we have all of these great avenues to monetize these assets and sometimes we need to make a determination on hey based on the current factors. This is really the best approach from a long term return aspect, that's what really gives us difficulty in trying to forecast specific <unk>.

Overall numbers to give you the analysts and the investors, but pointing at that amount of capital deployment in a market where the this material is in high demand I think gives us some pretty good confidence and belief that we will be able to improve our performance in 2024.

Martin Garmendia: Martin, do you have anything to add? I mean, Bert, I think the best place to note, and we've noted this in all the calls, is to look at that inventory balance. It's $329 million. That's almost twice what we had at the beginning of last year overall.

Got it and just my last question on the <unk> side. Nik you said there was five proposals out there can you just tell us what that means and <unk>.

Martin Garmendia: That's going to give us opportunities to do several things. Not only can we support the USM side, for which demand is robust, but we can also look at putting assets back on the leasing pool, specifically on the engine leasing side, for which, with the issues with the geared turbofan, there's very high demand overall. So we're going to have an opportunity to deploy capital and start making revenue on that side. And, as always, we'll continue to see opportunities to do whole asset trading as it's opportunistic and as that becomes the highest use of the overall asset. The real challenge that we have from forecasting is that we have all of these great avenues to monetize these assets, and sometimes we need to make a determination on whether, based on the current factors, this is really the best approach from a long-term return perspective.

Your expectation that revenues, maybe more at 25 plus setup.

Okay. So we have we have.

Demonstrated.

Our system.

Whether it be through live flights or through looking at our video or in person meetings and giving them a good explanation to five different airlines.

All five of those and made a written proposal as to here's.

Here's how we would go about here's the pricing and here's what we can do for delivery.

And and.

We're negotiating with those one continues to be the big boy airline that we've been talking to from the very beginning.

Got it thank you.

Youre welcome.

Okay.

The next question comes from Paul Cheng Kennon of TD Cowen. Please go ahead.

Hey, guys.

Good afternoon.

So I was curious if you could talk about the aero where customer traction.

Martin Garmendia: That's what really gives us difficulty in trying to forecast specific overall numbers to give you the analysts and the investors. But pointing at that amount of capital deployment in a market where this material is in high demand, I think gives us some pretty good confidence and belief that we'll be able to improve our performance in 2024. Got it. Just my last question on the airware side, Nick. You said there were five proposals out there. Can you just tell us what that means?

At one point I know it was a while ago, we were talking about maybe 250 unit order.

From one of the customers that was deeply involved in your development of the product.

I was just curious like is that.

Within your five proposals you have out there or are there any like big elephant orders that.

That are part of that five and maybe what is kind of the status of that.

Nicolas Finazzo: And is your expectation that revenues may be more at 25 plus set up? Okay, so we have demonstrated our system, whether it be through live flights or through looking at our video or in-person meetings and giving them a good explanation to five different airlines, and all five of those have made a written proposal as well. Here's how we would go about it, here's the pricing, and here's what we could do for delivery. We're negotiating. One continues to be the big boy airline that we've been talking to from the very beginning. Got it. Thank you. You're welcome. The next question comes from Hardin Cano of T.D. Cohen

That one launch potential launch customer we thought we had so.

What's the holdup at all okay.

Got them right.

Correct, yes, okay great.

No.

Okay. So yes.

The customer that I've referred to as our Big boys that that has a lot of 737 <unk> as we are still talking to.

And we are working on the.

We've given them.

More than one proposal.

We're getting feedback from them on what they need we're trying to get to a point at which.

We can.

Gautam J. Khanna: Please go ahead. Hey guys, how are you doing? Good afternoon. So, um, I was curious if you could talk about the era where customer traction, you know, um, At one point, I know it was a while ago, we were talking about maybe a 250-unit order from one of the customers that was deeply involved in your development of the product. I was just curious, like, within your five proposals that you have out there, are there any like big, kind of elephant orders that are part of that five, and maybe what is the status of that, that one potential launch customer we thought we had? So what's the holdup at all? OK, this is Gautam, right?

Figure out how they can integrate this in their system.

The fastest and most economical way.

Not there yet, but thats what it takes when you get to a point, where our customers indicated they want this system.

It's one thing to say you want it but another thing to actually place an order. So we've heard that they want it all five of these by the way have indicated they want this system.

And once the Big boy once another relatively large international airlines and there are some smaller ones.

So we're still working with them, we're still trying to help them figure out how they're going to get their stimulators.

Modified.

We have we know how to do that now.

Get our flight training manual in their hands, so that they can do their own flight training program, which will come from basically flow from Arclight training program and then the delivery schedule that is going to meet and how theyre going to put them in the airplanes is going to do it while the airplanes are in and our maintenance Jack or theyre going to bring them to our facilities are we going to go to their facility.

Nicolas Finazzo: Correct, yeah. Okay, good. I thought so.

Nicolas Finazzo: Okay, so yes, the customer that I've referred to as our big boy that has a lot of 737NGs is one that we are still talking to, and we're working with them. We've given them more than one proposal. We're getting feedback from them on what they need, and we're trying to get to a point at which we can figure out how they can integrate this into their system the fastest and most economical way. Not there yet, but that's what it takes, you know, when you get to a point where customers indicate that they want the system. It's one thing to say you want it, but it's another thing to actually place an order, hear that they want it.

<unk>. So all of these are details that have to be worked out.

As we get to the point before we get a firm order.

And we're working interest and we're working on all of those.

It does the same I mean, I imagine that same process.

Steve and some of the smaller potential customers right, they're going to have to figure out how to.

Yet the simulators and all that so is it a similar lead time do you think in terms of.

Closing on some of these orders whether its a larger airline or a smaller one or is it just a lot simpler with the smaller airlines.

Sure.

It's.

It's probably will be will be slower with a large airline because more pilots that have to be trained with a smaller airline.

Nicolas Finazzo: All five of these, by the way, have indicated they want the One's the big boy, one's another relatively large international airliner, then there are some smaller ones. So we're still working with them, trying to help them figure out how they're going to get their simulators modified. We know how to do that now, get our flight training manual in their hands so that they can do their own flight training program which will come from, you know, basically flow from our flight training program. And then the delivery schedule, is it going to meet, and how are they going to put them in the airplanes? Is it going to do it while the airplanes are in a maintenance check?

They they actually could do flight training and the airplane, it's expensive, but but for a small airline it may not make sense for them to to pay to have a simulator modified with our system. So we don't know we don't know the answer to that yet that's going to depend on whether how many airplanes as the airlines have and can they just.

Suffice.

Cost of modifying a simulator.

And whether it's simulator.

Operator, we'd be willing to modify their simulator.

So if youre going to do and if you recall when we did flight training for the FAA during our flight testing, we took five pilots who had never received training.

Nicolas Finazzo: Are they going to bring them to our facilities? Or are we going to go to their facilities? So all of these are details that have to be worked out, you know, as we get to the point before we get a firm order, and we're working on all of them. Does that same, I mean, I imagine that same process applies to even some of the smaller potential customers, right? I mean, they're going to have to figure out how to... get the simulators and all that. So is it a similar lead time, do you think, in terms of closing on some of these orders, whether it's a larger airline or a smaller one, or is it just a lot simpler with a smaller airline? And, you know, it's, it's. It probably will be slower with a large airline because more pilots would have to be trained with a smaller airline. They could actually do flight training in the airplane.

Our enhanced flight vision system, we put them through a ground school and we actually took it took them in the airplane and did flight testing.

And the airplane and train them in the airplane that's expensive, but we were able to do that successfully with those five pilots.

Gotcha Okay.

Just to follow up on some of your earlier comments on the increased documentation standards of maintenance history and the like.

Have there been any.

Is it is it obtainable just wondering like is there is.

Is it one of those things, where it's just a matter of time to dot the I's and cross the Ts or is that.

I'm just curious.

It's something different where it's much harder to even obtain the information about might extend.

Nicolas Finazzo: It's expensive, but for a small airline, it may not make sense for them to pay to have a simulator modified with our system. So we don't know the answer to that yet. That's going to depend on how many airplanes does the airline have and can justify it, the cost of modifying a simulator, and Weather Simulator, operator would be willing to modify their simulator. So if you're going to do, and if you recall, when we did flight training for the FAA during our flight test. We took five pilots who had never received training on our enhanced flight vision system. We put them through a ground school, and we actually took them in the airplane, did flight testing in the airplane, and trained them in the airplane.

These assets are actually available for sale if you will.

The.

The information is generally available if you can get somebody to.

Go through their archives.

Go through their records archives and pull the data and what's really frustrating is when we go to buy an airplane or an engine and it's been in the hands of multiple airlines and the airlines still exists and it has records or we have their records.

And there are some gaps in there.

Paperwork, whether it be a non incident statement or.

Or back to birth traceability.

On an LLP lifetime apart.

And we go back to the Airlines and say Hey would you guys. This is what we need you to sign.

And they just say no.

Because we're busy doing other things.

Nicolas Finazzo: Now, that's expensive, but we were able to do that successfully with those five pilots. Okay. And just to follow up on some of your earlier comments on, you know, the increased documentation standards of maintenance history and the like. Have there been any... Is it obtainable? I just wonder. Is it one of those things where it's just a matter of time to dot the i's and cross the t's, or is it... I'm just curious, like, it's something different where it's just much harder to even obtain the information, and that might extend when... These assets are actually available for sale, if you wish. The information is generally available if you can get somebody to go through their archives, go through their records archives, and pull the data.

We sold this airplane, a long time ago and no.

We're not going to fix it.

Now you've got a gap in our records that that horse for most customers they won't buy it some will because it wasn't.

Some of these are not even regulatory requirements. There just requirements that the industry is imposed.

Make the records impeccable perfect no gaps no questions.

But it's also very frustrating so I believe that.

All of the records can be fixed if you get cooperation from the various parties who operated the flight equipment.

And we've been successful.

For the most part I mean.

Rarely do we have something that we say we give up.

And by the way and when we're doing our pricing if we see an engine that has.

Whatever aircraft landing gear that doesn't meet the standards and we we look at it and we say there is no way we can fix that.

We adjust the price. It's okay look these parts aren't going to trace theyre not sellable.

Nicolas Finazzo: And what's really frustrating is when we go to buy an airplane or an..., and it's been in the hands of multiple airlines. And the airline still exists, and it has records, or we have the records. And there are some gaps in the paperwork, whether it be a non-incident statement or back-to-birth traceability on an LLP. Life's not made apart. And we go back to the airline and say, hey, would you guys?

I'm not going to.

You want those parts back I'll give you those parts back when we take the engine apart, but I'm not paying for them and we've done that where we've not.

Not paid for parts that don't have life limited trades.

Traceability and.

And I don't know what they do with them because you don't have the paperwork that goes within the park searches scrap metal.

Oh, that's helpful answer I appreciate it and I may have missed this if you. If you did address it but can you remind us how many 757 aircrafts you still have kind of in the hopper to potentially monetize and where we are in some of those.

Nicolas Finazzo: This is what we need you to sign, and they just say no. Guys, we're busy doing other things. And we sold this airplane a long time ago, and we're not going to... Now you've got a gap in the records that, for most customers, they won't buy it. Some will, because it wasn't...

Nicolas Finazzo: Some of these are not even regulatory requirements. They're just requirements that the industry has imposed to make the records Impeccable Purple. No gaps, no questions. But it's also very frustrating.

Yes, which negotiations are closer at hand, and which are in a little further out.

I wish I could.

Report that we were in great shape on the 750 sevens as far as customer demand right now the cargo market continues to be very soft theirs.

Nicolas Finazzo: So I believe that all the records can be fixed if you get cooperation from the various parties who operate the flight. We've been successful for the most part. Rarely do we have something that we say we give up. And by the way, and when we're doing our pricing, if we see an engine that has, or whatever, aircraft landing gear, that doesn't meet the standards. And we look at it, and we say, there's no way we can fix that.

Seems to be more available aircraft in cargo operators need at this point and that.

That applies to the 757, we do have seven airplanes that are uncommitted at this point, we are talking to airlines for both the lease and potential sale, including <unk>.

Customers that we've already sold aircraft too, but nothing as we have no contracts at this point on those airplanes and.

Nicolas Finazzo: Then we adjust the price. We say, OK, look, these parts aren't going to trace. They're not sellable.

And thats another very difficult.

Thing to project for the balance of this year, because I don't have any real.

Nicolas Finazzo: So I'm not going to. You want those parts back? I'll give you those parts back when we take the engine apart, but I'm not paying the price.

Strong understanding of where the freight market will be as the balance of this year unfolds.

Nicolas Finazzo: And we've done that where, not paid for parts that don't have life-limited trade, traceability. And I don't know what they do with them, because if you don't have the paperwork that goes with them, the parts. They're scrapped. Oh, that's a helpful answer. I appreciate it.

So at this point.

Seven airplanes.

<unk> been converted or finishing conversion.

We're looking for homes for them.

In a tough market the market will recover and those airplanes will be viable again for leasing and sale and we're going to have to wait it out.

Thank you. The next question comes from Ken <unk> of RBC capital markets. Please go ahead.

Nicolas Finazzo: And I may have missed this if you did address it, but can you remind us how many 757 aircraft you still have kind of in the hopper to potentially monetize and where we are on some of those? Which negotiations are closer at hand, and which are a little further out? Yeah, I wish I could report that we were in great shape on the 757s as far as customer demand is concerned. Right now, the cargo market continues to be very soft, and there seem to be more available aircraft than the cargo operators need at this point, and that applies to the 757. We do have seven airplanes that are uncommitted at this point. We are talking to airlines for both the lease and potential sale, including customers that we've already sold aircraft to, but nothing is yet; we have no contracts at this point on those airplanes. And that's another very difficult thing to project for the balance of this year because I don't have any real strong understanding of where the freight market will be as the balance of this year unfolds. So at this point, seven airplanes have either been converted or finishing conversion. We're looking for homes for them in a tough market.

Hey, good afternoon, Nick and Martin.

Okay.

Just maybe wanted to start.

Got it Martin to your point, you've got almost $330 million.

And inventory or assets, you can monetize on the balance sheet.

It sounds like you've got agreements for an incremental <unk> 83 to purchase and you've already sold maybe $30 million or so this quarter.

In the first quarter to date, if I got that right.

I know, it's hard to predict because there's obviously a lot of customer issues, but really two questions. One can you give any more granularity.

Side for maybe the 50 sevens on what sort of broad buckets of what type of assets you hold because.

Are these are these maybe engines, where there just isn't much near term demand or airframe.

And how much could that 330.

How much lower could the inventory balance be exiting 'twenty four.

Nicolas Finazzo: The market will recover, and those airplanes will be viable again for leasing and sale. And we're going to have to wait it out. Thank you. The next question comes from Ken Herbert of ROBC Capital Markets. Please go ahead.

The thing goes according to plan, considering you're obviously still committing capital to to feedstock.

Yes, I'd say the majority of the inventory that we have on hand is engine related and we have ensured that our demand we have CFM 56 tier six cities.

Kenneth George Herbert: Hey, good afternoon, Nick and Martin. Thank you. Hey, I just maybe wanted to start. You've got, Martin, to your point, you've got almost $330 million sort of in inventory or assets you can monetize on the balance sheet. It sounds like you've got agreements for an incremental $83 million to purchase, and you've already sold maybe $30 million or so this quarter, in the first quarter to date, if I got that right. I know it's hard to predict, and there's obviously a lot of customer issues, but really two questions. One, can you give any more granularity, aside from maybe the five-sevens, on what sort of broad buckets of what type of assets you hold? Because, are these maybe engines where there just isn't much near-term demand or airframe? And how much lower could the inventory balance be at exiting 24 if everything goes according to plan, considering you're obviously still committing capital to feedstock?

<unk> 11, so I think thats really going to put us in a position to not only support <unk> sales, but opportunities in the leasing market to do that customized type of leases that we do short term in nature getting a much higher return than the typical sub 1% monthly lease rate factors that a pure play leasing company.

Would be able to obtain a smaller portion of that inventory is airframe materials again supporting the 737 and southern 507 overall platforms and again that material is in high demand to continue to service. Those overall fleet. So we feel good about those those opportunities Ken as I mentioned earlier, the real challenges here.

What what Avenue do we take to monetize these were seeing a pretty good leasing market and when we look at that from a long term perspective, those returns are attractive obviously.

Martin Garmendia: The majority of the inventory that we have on hand is engine-related, and we have engines that are in demand. We have CFM56, CF680, and RB211s, so I think that's really going to put us in a position to not only support USM sales but opportunities in the leasing market to do the customized type of leases that we do, short-term in nature, getting a much higher return than the typical sub-1% monthly lease rate factors that a pure-play leasing company would be able to obtain. A smaller portion of that inventory is airframe material, again, supporting the 737 and 757 overall platforms, and again, that material is in high demand to continue to service those overall fleets, so we feel good about those opportunities. Ken, as I mentioned earlier, the real challenge here is what avenue do we take to monetize these?

With the availability of with limited.

Kind of assets being available for sale. These assets are also demanding a premium for much from a trade perspective. So again, we're always looking at what is the best long term kind of view, an objective and thats really whats driving us kind of pulling that overall guidance because we wanted to be opportunities opportunistic we want to be able to knock that maximize that and not be.

Kind of kind of triggered to meeting a specific quarterly or year to date number.

Okay. Thanks, Martin I mean, I can appreciate the desire to sort of maximize the return, but just considering.

The EBITDA in 'twenty three and.

Martin Garmendia: We have a pretty good leasing market, and when we look at that from a long-term perspective, those returns are attractive, obviously, with the availability of or limited assets being available for sale. These assets are also demanding a premium from a trade perspective, so again, we're always looking at what is the best long-term view and objective, and that's really what's driving us to pull that overall guidance because we want to be opportunistic; we want to be able to maximize that and not be kind of triggered to meet a specific quarterly or year-to-date number. Okay, thanks, Martin. I can appreciate the desire to sort of maximize the return. But just considering sort of the EBITDA in 2023, and a question we get a lot, I mean, maybe, at what point would you maybe have a bit of a greater sense of urgency around some of this monetization of these assets to just, you know, make room for inventory, maybe just accelerate the, you know, accelerate the push off the balance sheet a bit. Let me answer that. Beep.

And a question we get a lot I mean, maybe at what point would you maybe have just.

Maybe a bit of a greater sense of urgency around some of this monetization of these assets to just just make room for inventory maybe just accelerate.

Accelerate the push off the balance sheet a bit.

Alright, let's say.

Let me answer that.

<unk>.

<unk>.

We sell what we have more or less 70, seven's aside we sell.

We sell what we have available when it's ready for sale.

So the demand is there there's very strong demand in the marketplace for U S for four engines the.

The issue is.

Getting it through the getting it through the system and getting it available for sale and dealing with all of the.

Dynamics in the market today about long lead times for for any type of work, whether it be repairing and engine repairing a piece part.

Overhauling and aircraft.

Sure.

So the.

There is a sense of urgency I can assure you Ken on getting this getting whatever we have.

<unk> made ready for sale.

The issue isn't that.

Net.

But we're not prioritizing.

Make ready nature of.

Whatever it takes to get these assets available for sale.

We are prioritizing at some of the decisions, we make however could be longer such as taken.

Nicolas Finazzo: We sell what we have, more or less, 757s aside, we sell what we have available when it's ready for sale. So there is demand, very strong demand in the marketplace for USM aircraft and engines. The issue is... Getting it through the system and getting it available for sale, dealing with all of the dynamics in the market today about, you know, long lead times for any type of work, whether it be repairing an engine, repairing a piece of part, or overhauling an aircraft. So there is a sense of urgency, I can assure you, Ken, on getting whatever we have made ready for sale. And the issue isn't that they were not prioritized, the make ready nature of it. Whatever it takes to get these assets available for sale, we're... We are prioritizing it.

Engine parts that we pulled out of an engine or aircraft that we bought and deciding that we could turn this and by the way. This is a struggle.

Every day and we could sell it as U S M to somebody else, that's overhauling and engine.

And would love to get their hands on.

On the.

Coveted life limited parts that we have that we were able to pull from an engine we bought for part out and some of the other parts out there to get a low cost engine that they would then build and supply their customer.

So we'll pull those and now we lose a short term sale.

And that goes into work and it goes into an engine and then we run that through the whole process of getting getting the engine overhaul.

And.

Instead of having an immediate sale from our part that we had already announced now its in the repair process of getting an engine done.

And then we're done with that.

Sitting with well do we sell it because the market is really red Hot on this engine type today, and we can get a premium over what we think we could get in the short run.

Nicolas Finazzo: Some of the decisions we make, however, could be longer, such as taking engine parts that we pulled out of an engine or aircraft that we bought and deciding that, yeah, we could turn this, and by the way, this struggle, we have every day, and we could sell it as USM to somebody else that's overhauling it and would love to get their hands on it, coveted life-limited parts that we have that we were able to pull from an So we'll pull those, and now we lose a short-term sale. And that goes into the work. And it goes into an engine.

Or do we go the long route which is to put the engine on lease.

<unk>.

It's not that there's not a sense of urgency its debt.

It's dead.

The quickest return is not always the best return and where we have a long term view of.

<unk>.

Of building up this company's profitability and not taking and not doing things in the short term that will impact the business over the long run now I know that thats not.

What investors want to hear because everybody wants to see short term returns as do we but.

But we consistently look to do what's best for the business and we don't focus on just the short term.

Yes, no I appreciate that and I guess you are.

As a public company, you're obviously, having to walk a very fine line between.

Managing near mid and long term expectation. So definitely appreciate that I guess as I think about again.

The carrying value or the inventory on the balance sheet.

Nicolas Finazzo: And then we run that through the whole process of getting the engine overhauled. And instead of having an immediate sale from a part that we had ready, now it's in the repair process of getting an engine done. And then we're done with that, and we're fighting with, well, do we sell it because the market is really red hot for this engine type today, and we can get a premium over what we think we could get in the short run? Or do we go the long route, which is to put the engine on the road? So, it's not that there's not a sense of urgency; it's that the quickest return is not always the best.

As this becomes available and as you look to monetize it.

Back to one of the earlier questions is there any reason to think that this value wouldn't support that.

Gross margins, we saw in 'twenty, one 'twenty two.

Yeah.

Well some of the margins we saw in 'twenty, one and 'twenty two related to our 757 program, which really which had a pretty exceptional margin.

So I wouldn't expect youre going to see the same 40 plus percent margins that we're seeing on some of them Mark correct me, if I'm wrong as to what the margins were but.

The average around 40.

Pretty exceptional margin on our 747 57 transactions that was.

Nicolas Finazzo: And we're, you know, we have a long-term view of building up this company's profitability and not doing things in the short term that will impact the business over the long run. Now, I know that investors want to hear because everybody wants to see short-term returns, as do we. But we consistently look to do what's best for the business, and don't focus on just. Yeah, no, Nick, I appreciate that.

We were able to take advantage of a very unique time in the market and we have the assets available. So I don't think at that level, but consistently margins that we have seen over the history of the company and we targeted 25% margin also coincidentally targets 25, IRR those continue to be our target minimum target thresholds.

And we've been successful over time in reaching those.

Perfect.

We can't continue that.

Okay perfect. Thanks, guys I'll pass it back there Okay Youre welcome.

Kenneth George Herbert: And I guess it's your, as a public company, you're obviously having to walk a very fine line between sort of managing your mid and long term expectations. So definitely appreciate that. I guess, as I think about, again, the carrying value or the inventory on the balance sheet, as this becomes available, and as you look to monetize it, back to one of the earlier questions, is there any reason to think that this value wouldn't support, you know, the kind of gross margins we saw in 21 and 22? Well, some of the margins we saw in 21 and 22 related to our 757 program, which really, which had So I wouldn't expect you're going to see the same 40-plus percent margins that we were seeing on some of them. Martin, correct me if I'm wrong as to what the margins were. You're correct. They average around 40.

Thank you. Our final question comes from Sam <unk> of <unk> Securities. Please go ahead.

Hey, good evening does on for Mike Mauler. This evening, thanks for taking the question.

I guess thinking about all of the inventory that you guys have on hand.

I'm just kind of curious I guess first of all how much of that you mentioned a lot of the issues.

Has it been station in terms of getting those things through and sold to customers.

So I guess first of all how much of that inventory would you say is.

Just ready to go right now versus much lots and things need to overcome and then in addition to that.

Can you kind of issues you guys have discussed so far are really the only thing or is there anything else going on that might kind of lead to.

Delays in getting it out the door.

Martin do you have a.

You have the numbers on whats available.

Nicolas Finazzo: Yeah, a pretty exceptional margin on our 757 transactions. We were able to take advantage of a very unique time in the market, and we had the assets available. So I don't think at that level, but consistently, margins that we have seen over the history of the company, we target a 25 percent margin and also coincidentally target 25 IRR. Those continue to be our minimum target thresholds, and we've been successful over time in reaching those. Perfect, thank you.

Yeah overall, what's already available today, yeah overall available that we have that that potentially will go into leasing U S M or whole assets would be about almost about over $200 million of that of that overall inventory.

Then the notion will be whether it goes into the leasing portfolio or it goes into trading will ultimately it goes into the U S and bucket overall, but thats whats ready available the rest of the material.

Kenneth George Herbert: Okay. Perfect. Thanks, guys. I'll pass it back there.

Sam Struthsaker: Okay. You're welcome. Thank you. Our final question comes from Sam Struthsaker of Trust Securities. Please go ahead.

<unk> is obviously an inventory be in process and as Ken noted earlier, we have an additional $80 million of inventory. That's that's been awarded that is going to close in the first half of the year.

Sam Struthsaker: Thank you. Hey, good evening, guys. I'm on for Mike Ciarmoli this evening.

Martin Garmendia: Thanks for taking the question. I guess I'm thinking about all of the inventory that you guys have on hand. I'm just kind of curious, I guess, first of all, how much of that you mentioned a lot of the issues that you guys have been facing in terms of getting those things fully through and sold to customers. So, I guess, first of all, how much of that inventory would you say is, you know, just ready to go right now versus might still have some things you need to overcome? And then, in addition to that, are these the kind of issues you guys have discussed so far really the only things, or is there anything else going on that might kind of lead to..., you know, delays in getting it out the door? Martin, do you have the numbers on what's available? Yeah, overall. What's available now?

Okay. That's very helpful. And then on the engine inventory do you guys have any metrics on I guess, how much of that is parts versus four engines.

That is part of the that's part of it again the challenge of kind of doing the overall forecasting. These all asset opportunities are Nick gave a perfect example, we can get an engine that we can sell some of these SaaS moving parts in the market would love and take them out of our hands extremely quickly, but the right decision there is to really get the engine and rebuild it.

But again as we've noted kind of earlier, we're truly agnostic on how we monetize that overall asset. It's just looking for the highest return.

Martin Garmendia: Yeah, the overall available that we have that potentially will go into leasing USM or whole assets would be about, almost about over $200 million of that overall inventory. Again, the notion will be whether it goes into the leasing portfolio or it goes into trading, or ultimately it goes into the USM bucket overall. But that's what's ready and available; the rest of the material is obviously in inventory being processed. And as Ken noted earlier, we have an additional $80 million of inventory that's been awarded that is going to close in the first half of the year. Okay, that's very helpful. And then on the engine inventory, do you guys have any metrics on, I guess, how much of that is parts versus full engines?

Understood. That's helpful. And then one more would be I think you guys mentioned you were seeing some potentially longer term contracts more stability was that really just the landing gear and accessories contracts and you guys alluded to or is there. Some more there than you guys are looking at.

Yeah that comment was specifically related to our component.

<unk>, we've had some pretty significant wins and 23, both with airlines and one particular OEM on giving us pretty much a line of sight on specific overall business. So that is going to improve our volume that we're running through those units. It's also going to allow us to do use the greater capacity that we have available in those.

Martin Garmendia: That is part of the challenge of kind of doing the overall forecasting, these whole asset opportunities, and Nick gave a perfect example. We can get an engine that we can sell some of these fast-moving parts, and the market would love them and take them out of our hands extremely quickly. But the right decision there is to really get the engine and rebuild it. But again, as we've noted kind of earlier, we're truly agnostic on how we monetize that overall asset. It's just looking for the highest return.

In those units and we've noted earlier, we've actually been making investments to increase capacity and a lot of our businesses. So all of those investments are starting to bear fruit. These contracts are going to start using that debt capacity and that capability. That's also going to improve efficiencies and is operating those units. So.

Martin Garmendia: And then one more would be, I think you guys mentioned you were seeing some potentially longer-term contracts, more stability. Was that really just the landing gear and the accessory contracts that you guys alluded to? Or is there some more there that you guys are looking at?

So we're going to have a good a good strong start in 2024 as these contracts start maturing that will also give us greater visibility into kind of recurring revenue patterns, but as we did note those were wins in 2023. So we will start seeing exactly how those contracts perform in 2004.

Martin Garmendia: Yeah, that comment was specifically related to our component MROs. We've had some pretty significant wins in 23, both with airlines and one particular OEM, giving us pretty much a line of sight on specific overall business. So that is going to improve the volume that we're running through those units. It's also going to allow us to use the greater capacity that we have available in those units. And as we noted earlier, we've actually been making investments to increase capacity in a lot of our businesses. So all of those investments are starting to bear fruit. These contracts are going to start using that capacity and that capability. That's also going to improve efficiencies in us operating those units. So we're going to have a good, strong start in 2024. As these contracts start maturing, that'll also give us greater visibility into the kind of recurring revenue patterns. But as we did note, those were wins in 2023. So we'll start seeing exactly how those contracts perform in 24.

Great. That's very helpful. Thank you guys.

Youre welcome.

Ladies and gentlemen, we have reached the end of the question and answer session I will now hand, as it makes Jonathan Okay Jimi mall.

Okay, well. Thank you again for listening to our call today and for your interest in Air sale. We look forward to updating you again next quarter.

Good evening.

Thank you ladies and gentlemen that concludes today's <unk>, Inc. Thank you for attending and you may now disconnect your lines.

Okay.

Okay.

Yes.

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Sam Struthsaker: Great. That's very helpful. Thank you, guys, www.gautam.com, Ladies and gentlemen, we have reached the end of the question and answer session. I will now hand over to Nick Finazzo for closing remarks. Okay, well, thank you again for listening to our call today and for your interest in Aircel. We look forward to updating you again next quarter. Good evening. Thank you. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines, www.gautam.com ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?

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