Q2 2026 AerSale Corp Earnings Call

August 6, 2026

Operator: Hello. Thank you for standing by. At this time, I would like to welcome everyone to the AerSale Inc. Second Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Jackie Carlon, Senior Vice President of Marketing and Communications. You may begin.

Speaker #1: Hello, and thank you for standing by. At this time, I would like to welcome everyone to the AerSale Inc. second quarter 2026 earnings conference call.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad.

Speaker #1: If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Jacqueline Carlon, Senior Vice President of Marketing and Communications.

Speaker #1: You may begin.

Speaker #2: Good afternoon. I'd like to welcome everyone to AirSale's second quarter, 2026 earnings call. Conducting the call today are Nick Finazzo, Chief Executive Officer, and Martin Garmendia, Chief Financial Officer.

Jackie Carlon: Good afternoon. I'd like to welcome everyone to AerSale's Q2 2026 earnings call. Conducting the call today are Nicolas 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.

Speaker #2: 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.

Speaker #2: 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.

Jackie Carlon: 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 31 December 2025, filed with the Securities and Exchange Commission, SEC, on 10 March 2026, and its other filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward-looking statements on this call. We'll also refer to non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of those non-GAAP metrics to the nearest GAAP metric can be found in the earnings presentation materials made available on the Investors section of the AerSale website at ir.aersale.com. After prepared remarks, we will open the call for questions.

Speaker #2: 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, 2025, filed with the Securities and Exchange Commission (SEC) on March 10, 2026, and its other filings with the SEC.

Speaker #2: These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward-looking statements on this call.

Speaker #2: We'll also refer to non-GAAP measures that we view as important in assessing the performance of our business, a reconciliation of those non-GAAP metrics to the nearest GAAP metric can be found in the earnings presentation materials, made available on the Investors section of the AirSale website, at ir dot airsale.com.

Speaker #2: After the prepared remarks, we will open the call for questions. With that, I'll turn the call over to Nick Finazzo.

Jackie Carlon: With that, I'll turn the call over to Nicolas Finazzo.

Speaker #3: Thank you, Jacqueline. Good afternoon, everyone. Thank you for joining us today. I'll begin with a review of our second quarter financial and operational performance including key developments during the quarter, and then discuss the actions we're taking to advance our strategic priorities.

Nicolas Finazzo: Thank you, Jackie, and good afternoon, everyone. Thank you for joining us today. I'll begin with a review of our Q2 financial and operational performance, including key developments during the quarter, and then discuss the actions we're taking to advance our strategic priorities. I'll then turn the call over to Martin to walk through the financials in more detail. This quarter, we continued to focus on executing our strategic priorities, monetizing our asset base, scaling our MRO operations, and growing recurring revenue streams to achieve more consistent earnings. We made progress against these priorities, giving me confidence in our momentum heading into H2. That said, both revenue of $70.9 million and adjusted EBITDA of $2.2 million came in below the prior year period. These results reflect timing, not trajectory. There were no flight equipment sales for the quarter, masking incremental improvements across most of our business units.

Nick Finazzo: Thank you, Jackie, and good afternoon, everyone. Thank you for joining us today. I'll begin with a review of our Q2 financial and operational performance, including key developments during the quarter, and then discuss the actions we're taking to advance our strategic priorities. I'll then turn the call over to Martin to walk through the financials in more detail. This quarter, we continued to focus on executing our strategic priorities, monetizing our asset base, scaling our MRO operations, and growing recurring revenue streams to achieve more consistent earnings. We made progress against these priorities, giving me confidence in our momentum heading into H2. That said, both revenue of $70.9 million and adjusted EBITDA of $2.2 million came in below the prior year period. These results reflect timing, not trajectory. There were no flight equipment sales for the quarter, masking incremental improvements across most of our business units.

Speaker #3: I'll then turn the call over to Martin to walk through the financials in more detail. This quarter, we continue to focus on executing our strategic priorities.

Speaker #3: Monetizing our asset base, scaling our MRO operations, and growing recurring revenue streams to achieve more consistent earnings. We made progress against these priorities giving me confidence in our momentum heading into the second half.

Speaker #3: That said, both revenue of 70.9 million and adjusted EBITDA of 2.2 million came in below the prior year period. These results reflect timing not trajectory.

Speaker #3: There were no flight equipment sales for the quarter. Masking incremental improvements across most of our business units. Disregarding flight equipment sales, overall revenue decreased 4.2% year over year from lower USM sales.

Nicolas Finazzo: Disregarding flight equipment sales, overall revenue decreased 4.2% year-over-year from lower USM sales. H1 margins were negatively impacted by a number of factors, including the cost of standing up new capacity and capabilities at Goodyear, Millington, and Landing Gear as we prepare for the increased revenue opportunities that will follow. We view these as investments in future earnings power, not structural cost increases, and we're already seeing the operating leverage begin to improve. In anticipation of heavy maintenance work, largely related to the Spirit Airlines shutdown, we continued to carry additional labor at our Goodyear facility that weighed on margins. This work has been slower to develop than we first expected, but we're starting to see an increase in stored aircraft at the facility that will accelerate growth in H2 of the year.

Nick Finazzo: Disregarding flight equipment sales, overall revenue decreased 4.2% year-over-year from lower USM sales. H1 margins were negatively impacted by a number of factors, including the cost of standing up new capacity and capabilities at Goodyear, Millington, and Landing Gear as we prepare for the increased revenue opportunities that will follow. We view these as investments in future earnings power, not structural cost increases, and we're already seeing the operating leverage begin to improve. In anticipation of heavy maintenance work, largely related to the Spirit Airlines shutdown, we continued to carry additional labor at our Goodyear facility that weighed on margins. This work has been slower to develop than we first expected, but we're starting to see an increase in stored aircraft at the facility that will accelerate growth in H2 of the year.

Speaker #3: First half margins were negatively impacted by a number of factors, including the cost of standing up new capacity and capabilities at Goodyear, Millington, and Landing Gear, as we prepare for the increased revenue opportunities that will follow.

Speaker #3: We view these as investments in future earnings power, not structural cost increases, and we're already seeing the operating leverage begin to improve. In anticipation of heavy maintenance work largely related to the Spirit shutdown, we continue to carry additional labor at our Goodyear facility that weighed on margins.

Speaker #3: This work has been slower to develop than we first expected. But we're starting to see an increase in stored aircraft at the facility that will accelerate growth in the second half of the year.

Speaker #3: In Millington, our new CRJ-700/900 multi-line maintenance program drove higher MRO revenue this quarter. But as noted, startup costs from the ramp-up still weigh on margins.

Nicolas Finazzo: In Millington, our new CRJ700-900 multi-line maintenance program drove higher MRO revenue this Q2. As noted, startup costs from the ramp-up still weigh on margins, and we're already seeing significant improvement in labor efficiency and turn times. We expect both facilities to contribute to stronger results in H2 as volume continues to build and these operations gain scale and efficiencies. In Landing Gear, we received gear for two key customer programs during the quarter, including 737 MAX and 787, and that progress gives us increased confidence in the long-term trajectory of this business as volume continues to build. That momentum extends across the business, and we expect a meaningfully stronger H2. On the leasing side, we placed our fourth 757 converted freighter on lease in July and executed a lease for a fifth, which is scheduled for delivery this month.

Nick Finazzo: In Millington, our new CRJ700-900 multi-line maintenance program drove higher MRO revenue this Q2. As noted, startup costs from the ramp-up still weigh on margins, and we're already seeing significant improvement in labor efficiency and turn times. We expect both facilities to contribute to stronger results in H2 as volume continues to build and these operations gain scale and efficiencies. In Landing Gear, we received gear for two key customer programs during the quarter, including 737 MAX and 787, and that progress gives us increased confidence in the long-term trajectory of this business as volume continues to build. That momentum extends across the business, and we expect a meaningfully stronger H2. On the leasing side, we placed our fourth 757 converted freighter on lease in July and executed a lease for a fifth, which is scheduled for delivery this month.

Speaker #3: And we're already seeing significant improvement in labor efficiency and turn times. We expect both facilities to contribute to stronger results in the second half as volume continues to build and these operations gain scale and efficiencies.

Speaker #3: In Landing Gear, we received gear for two key customer programs during the quarter, including 737 MAX and 787, and that progress gives us increased confidence in the long-term trajectory of this business as volume continues to build.

Speaker #3: That momentum extends across the business, and we expect a meaningfully stronger second half. On the leasing side, we placed our fourth 757 converted freighter on lease in July and executed a lease for a fifth, which is scheduled for delivery this month.

Speaker #3: This leaves just two freighters from our P2F conversion program to monetize, and we're working on multiple opportunities for this remaining flight equipment. These transactions will support the improvement in earnings and add available liquidity in the second half.

Nicolas Finazzo: This leaves just two freighters from our P2F conversion program to monetize, and we're working on multiple opportunities for this remaining flight equipment. These transactions will support the improvement in earnings and add available liquidity in H2. While we remain focused on growing our recurring revenue base through leasing and MRO, we're also deliberately executing on select flight equipment sales that provide higher margin realization, improved returns, and a shortened monetization cycle. That has meant dedicating additional cash in the near term to get this material ready to sell, and we expect to recover those investments plus the associated returns in H2 of the year.

Nick Finazzo: This leaves just two freighters from our P2F conversion program to monetize, and we're working on multiple opportunities for this remaining flight equipment. These transactions will support the improvement in earnings and add available liquidity in H2. While we remain focused on growing our recurring revenue base through leasing and MRO, we're also deliberately executing on select flight equipment sales that provide higher margin realization, improved returns, and a shortened monetization cycle. That has meant dedicating additional cash in the near term to get this material ready to sell, and we expect to recover those investments plus the associated returns in H2 of the year.

Speaker #3: While we remain focused on growing our recurring revenue base through leasing and MRO, we're also deliberately executing on select flight equipment sales that provide higher margin realization.

Speaker #3: Improved returns and a shortened monetization cycle. That has meant dedicating additional cash in the near term to get this material ready to sell. We expect to recover those investments, plus the associated returns, in the second half of the year.

Speaker #3: This is evidenced by several wins secured during and subsequent to quarter end, which include a 737 aircraft sale to the US Marshals Service for $35 million, in addition to several engines, which we expect to close in the late third or early fourth quarter.

Nicolas Finazzo: This is evidenced by several wins secured during and subsequent to quarter end, which include a 737 aircraft sale to the U.S. Marshals Service for $35 million, in addition to several engines, which we expect to close in late Q3 or early Q4. Let me now turn to segment performance in order to provide more insight into the results. In our Asset Management Solutions segment, leasing remained a key driver. Leasing revenue grew approximately 50% year-over-year to $12.4 million, reflecting an expanded engine and freighter lease portfolio. We ended the quarter with 18 engines and three 757 freighters on lease, compared with 16 engines and one freighter a year ago. Higher lease rates and improved utilization continued to lift asset yields and support our goal of building a larger, more consistent recurring revenue base.

Nick Finazzo: This is evidenced by several wins secured during and subsequent to quarter end, which include a 737 aircraft sale to the U.S. Marshals Service for $35 million, in addition to several engines, which we expect to close in late Q3 or early Q4. Let me now turn to segment performance in order to provide more insight into the results. In our Asset Management Solutions segment, leasing remained a key driver. Leasing revenue grew approximately 50% year-over-year to $12.4 million, reflecting an expanded engine and freighter lease portfolio. We ended the quarter with 18 engines and three 757 freighters on lease, compared with 16 engines and one freighter a year ago. Higher lease rates and improved utilization continued to lift asset yields and support our goal of building a larger, more consistent recurring revenue base.

Speaker #3: Let me now turn to segment performance in order to provide more insight into the results. In our asset management segment, leasing remained a key driver.

Speaker #3: Leasing revenue grew approximately 50% year over year to $12.4 million, reflecting an expanded engine and freighter lease portfolio. We ended the quarter with 18 engines and 3 757 freighters on lease, compared with 16 engines and 1 freighter a year ago.

Speaker #3: Higher lease rates and improved utilization continued to lift asset yields and support our goal of building a larger more consistent recurring revenue base. This growth will also benefit from the addition of currently owned engines that are completing the repair cycle, as well as the revenue from the remaining 757 freighters.

Nicolas Finazzo: This growth will also benefit from the addition of currently owned engines that are completing the repair cycle, as well as the revenue from the remaining 757 freighters. This growth was offset by lower USM revenue, which reflects in part lower feedstock acquired in H1 compared to the prior year. Feedstock acquisitions for Q2 were $5.6 million, down from $27.1 million a year ago as we stayed disciplined in pricing in a hyper-competitive acquisition market. In addition, as we noted in Q1, we consumed USM material that could have been sold to build serviceable flight equipment for sale or lease, as this reallocation will enable us to realize higher returns than by simply selling the material as USM piece parts. In our TechOps segment, revenue grew nearly 9% to $33.8 million.

Nick Finazzo: This growth will also benefit from the addition of currently owned engines that are completing the repair cycle, as well as the revenue from the remaining 757 freighters. This growth was offset by lower USM revenue, which reflects in part lower feedstock acquired in H1 compared to the prior year. Feedstock acquisitions for Q2 were $5.6 million, down from $27.1 million a year ago as we stayed disciplined in pricing in a hyper-competitive acquisition market. In addition, as we noted in Q1, we consumed USM material that could have been sold to build serviceable flight equipment for sale or lease, as this reallocation will enable us to realize higher returns than by simply selling the material as USM piece parts. In our TechOps segment, revenue grew nearly 9% to $33.8 million.

Speaker #3: This growth was offset by lower USM revenue, which reflects in part lower feedstock acquired in the first half of the year compared to the prior year.

Speaker #3: Feedstock acquisitions for the second quarter were $5.6 million, down from $27.1 million a year ago, as we stayed disciplined in pricing in a hyper-competitive acquisition market.

Speaker #3: In addition, as we noted in the first quarter, we consumed USM material that could have been sold to build serviceable flight equipment for sale or lease, as this reallocation will enable us to realize higher returns than by simply selling the material as USM piece parts.

Speaker #3: In our Tech Ops segment, revenue grew nearly 9% to $33.8 million. Growth was led by the continued ramp-up of our long-term CRJ-700 and 900 multi-line maintenance program at Millington, additional storage volume at Goodyear, and higher Landing Gear and Aerostructures activity.

Nicolas Finazzo: Growth was led by the continued ramp-up of our long-term CRJ700 and CRJ900 multi-line maintenance program at Millington, additional storage volume at Goodyear, and higher landing gear and aerostructures activity. Demand for our AerSafe product also remains strong and is expected to peak in Q3 of this year, ahead of the FAA's November 2026 compliance deadline for the Fuel Tank Flammability Airworthiness Directive. TechOps margins this quarter decreased due to softer throughput at our accessory shop, as well as due to the ramp-up costs previously noted for Goodyear and Millington. These factors are exaggerated at this reduced volume level. However, as the operations continue to scale, margins will improve as utilization increases.

Nick Finazzo: Growth was led by the continued ramp-up of our long-term CRJ700 and CRJ900 multi-line maintenance program at Millington, additional storage volume at Goodyear, and higher landing gear and aerostructures activity. Demand for our AerSafe product also remains strong and is expected to peak in Q3 of this year, ahead of the FAA's November 2026 compliance deadline for the Fuel Tank Flammability Airworthiness Directive. TechOps margins this quarter decreased due to softer throughput at our accessory shop, as well as due to the ramp-up costs previously noted for Goodyear and Millington. These factors are exaggerated at this reduced volume level. However, as the operations continue to scale, margins will improve as utilization increases.

Speaker #3: Demand for our AirSave product also remained strong, and is expected to peak in the third quarter of this year. Ahead of the FAA's November 2026 compliance deadline, for the fuel tank flammability airworthiness directive.

Speaker #3: Tech ops margins this quarter decreased due to softer throughput at our accessory shop, as well as due to the ramp-up costs previously noted for Goodyear and Millington.

Speaker #3: These factors are exaggerated at this reduced volume level. However, as the margins will improve as utilization increases. We also made changes across tech to tech ops across our sales organization this quarter, to sharpen our commercial focus and better align coverage with our highest opportunity accounts and we expect these changes to support improved throughput and margin recovery in the second half.

Nicolas Finazzo: We also made changes to TechOps across our sales organization this quarter to sharpen our commercial focus and better align coverage with our highest opportunity accounts, and we expect these changes to support improved throughput and margin recovery in H2. Turning to our enhanced flight vision product, AerAware, we remain engaged with U.S. regulators and industry participants to highlight AerAware's unique capabilities to enhance situational awareness and support safer flight operations. We believe the growing regulatory and legislative focus on ADS-B In and pilot situational awareness supports the long-term opportunity for AerAware as operators increasingly evaluate solutions designed to improve flight safety. A head-wearable display, such as AerAware, offers meaningful advantages over existing technologies, which we believe will have decades of utility. Stepping back, our priorities for the remainder of 2026 are unchanged.

Nick Finazzo: We also made changes to TechOps across our sales organization this quarter to sharpen our commercial focus and better align coverage with our highest opportunity accounts, and we expect these changes to support improved throughput and margin recovery in H2. Turning to our enhanced flight vision product, AerAware, we remain engaged with U.S. regulators and industry participants to highlight AerAware's unique capabilities to enhance situational awareness and support safer flight operations. We believe the growing regulatory and legislative focus on ADS-B In and pilot situational awareness supports the long-term opportunity for AerAware as operators increasingly evaluate solutions designed to improve flight safety. A head-wearable display, such as AerAware, offers meaningful advantages over existing technologies, which we believe will have decades of utility. Stepping back, our priorities for the remainder of 2026 are unchanged.

Speaker #3: Turning to our enhanced flight vision product Aeroware, we remain engaged with US regulators and industry participants to highlight Aeroware's unique capabilities to enhance situational awareness and support safer flight operations.

Speaker #3: We believe the growing regulatory and legislative focus on ADS-BN and pilot situational long-term opportunity for Aeroware as operators increasingly evaluate solutions designed to improve flight safety.

Speaker #3: A head wearable display such as Aeroware offers meaningful advantages over existing technologies, which we believe will have decades of utility. Stepping back, our priorities for the remainder of 2026 are unchanged, first, increase the number of assets deployed in our lease pool, including placing our remaining 757 freighters.

Nicolas Finazzo: First, increase the number of assets deployed in our lease pool, including placing our remaining 757 freighters. Second, continue to strategically monetize our inventory. Third, fill available capacity across our MRO network. Fourth, improve operational profitability as our recent expansion initiatives gain scale. Execution of these priorities will lead to higher profits and a more consistent revenue stream going forward. With an active leasing pipeline and expanded operational capabilities and a clear path to monetize the inventory we built, we believe AerSale is well positioned to deliver improved and more consistent earnings going forward. With that, I'll turn the call over to Martin.

Nick Finazzo: First, increase the number of assets deployed in our lease pool, including placing our remaining 757 freighters. Second, continue to strategically monetize our inventory. Third, fill available capacity across our MRO network. Fourth, improve operational profitability as our recent expansion initiatives gain scale. Execution of these priorities will lead to higher profits and a more consistent revenue stream going forward. With an active leasing pipeline and expanded operational capabilities and a clear path to monetize the inventory we built, we believe AerSale is well positioned to deliver improved and more consistent earnings going forward. With that, I'll turn the call over to Martin.

Speaker #3: Second, continue to strategically monetize our inventory. Third, build available capacity across our MRO network. And fourth, improve operational profitability as our recent expansion initiatives gained scale.

Speaker #3: Execution of these priorities will lead to higher profits and a more consistent revenue stream going forward. With an active leasing pipeline, expanded operational capabilities, and a clear path to monetize the inventory we've built, we believe AerSale is well positioned to deliver improved and more consistent earnings going forward.

Speaker #3: With that, I'll turn the call over to Martin.

Speaker #2: Thanks, Nick. And good afternoon, everyone. I'll walk through our second quarter results in more detail and then cover cash flow. The second quarter was $70.9 million, compared with $107.4 million in the prior year period.

Martin Garmendia: Thanks, Nick, and good afternoon, everyone. I'll walk through our Q2 results in more detail and then cover cash flow and liquidity. Total revenue for Q2 was $70.9 million, compared with $107.4 million in the prior year period. The decline was driven primarily by the absence of flight equipment sales this quarter, which totaled $33.4 million a year ago, related to eight engines sold. As we remind investors each quarter, flight equipment sales can vary meaningfully from period to period, and performance is best assessed over time with a focus on feedstock acquisition, the monetization of those investments, and profitability trends. Excluding flight equipment sales, revenue was down 4.2%, as lower USM sales offset the continued growth in leasing and MRO. Adjusted EBITDA was $2.2 million, or 3.1% of revenue, compared with $18.3 million, or 17% of revenue in the prior year period.

Speaker #2: The decline was driven primarily by the absence of flight equipment sales this quarter, which totaled $33.4 million a year ago, related to 8 engines sold.

Speaker #2: As we remind investors each quarter, flight equipment sales can vary meaningfully from period to period, and performance is best assessed over time with a focus on feedstock acquisition, the monetization of those investments, and profitability trends.

Speaker #2: Excluding flight equipment sales, revenue was down 4.2% as lower USM sales offset the continued growth in leasing and MRO. Adjusted EBITDA was $2.2 million or $3.1% of revenue compared with $18.3 million or $17% of revenue in the prior year period.

Speaker #2: The decline was driven primarily by the absence of flight equipment sales in the current period. Turning to the segments, asset management solutions revenue was $37.1 million down $51.3% compared to $76.3 million last year, which included $33.4 million of flight equipment sales.

Martin Garmendia: The decline was driven primarily by the absence of flight equipment sales in the current period. Turning to the segments, Asset Management Solutions revenue was $37.1 million, down 51.3%, compared to $76.3 million last year, which included $33.4 million of flight equipment sales. Excluding flight equipment sales, Asset Management revenue was $37 million, down 13.6%, as lower USM sales offset the higher leasing revenue from our expanded engine and freighter lease portfolio. TechOps revenue was $33.8 million, up 8.7%, driven by the ramp-up of our CRJ multi-line program at Millington and higher component MRO volume. Overall gross margin was 22.9%, compared with 32.9% last year. The decline reflects the absence of flight equipment sales, which normally carry higher margins and lower USM gross profit.

Speaker #2: Excluding flight equipment sales, asset management revenue was $37.0 million down $13.6% as lower USM sales offset the higher leasing revenue from our expanded engine and freighter lease portfolio.

Speaker #2: Tech Ops revenue was $33.8 million, up 8.7%, driven by the ramp-up of our CRJ multi-line program at Millington and higher component MRO volume. Overall gross margin was 22.9%, compared with 32.9% last year.

Speaker #2: The decline reflects the absence of flight equipment sales, which normally carry higher margins, and lower USM gross profit. It also reflects the stand-up investment supporting new capacity and programs, which Nick described—requiring us to carry incremental staff ahead of volume at Goodyear, as well as incremental ramp-up costs related to the Millington CRJ line.

Martin Garmendia: It also reflects the stand-up investment supporting new capacity and programs, which Nick described, required us to carry incremental staff ahead of volume at Goodyear, as well as incremental ramp-up costs related to the Millington CRJ line. We expect margins to improve as utilization increases, driving both higher revenue and margin. Selling, general, and administrative expenses were $21 million, down from $22.8 million a year ago, primarily due to lower rent and variable expenses. SG&A included $1.3 million of share-based compensation, compared with $700,000 in the prior year period. Net loss for the quarter was $5.6 million, compared with net income of $8.6 million a year ago. Excluding share-based compensation, adjusted net loss was $4.3 million, compared with adjusted net income of $9.4 million last year. The decline, again, is primarily attributable to the timing of flight equipment sales.

Speaker #2: We expect margins to improve as utilization increases, driving both higher revenue and margin. Selling general and administrative expenses were $21.0 million down from $22.8 million a year ago.

Speaker #2: Primarily due to lower rent and variable expenses. SG&A included $1.3 million of share-based compensation compared with $700,000 in the prior year period. Net loss for the quarter was $5.6 million compared with net income of $8.6 million a year ago.

Speaker #2: Excluding share-based compensation, adjusted net loss was $4.3 million compared with adjusted net income of $9.4 million last year. The decline again is primarily attributable to the timing of flight equipment sales.

Speaker #2: On a per-share basis, diluted loss per share was $0.12, and adjusted diluted loss per share was $0.09. Turning to cash flow and liquidity, cash used in operating activities was $33.5 million year to date, primarily reflecting continued investment in inventory through both feedstock and make-ready costs to make flight equipment available for lease or sale.

Martin Garmendia: On a per share basis, diluted loss per share was $0.12, and adjusted diluted loss per share was $0.09. Turning to cash flow and liquidity, cash used in operating activities was $33.5 million year to date, primarily reflecting continued investment in inventory through both feedstock and make-ready costs to make flight equipment available for lease or sale. The majority of this outflow reflects deliberate capital deployment on flight equipment we expect to monetize at attractive margins in H2 of the year, which will improve both profitability and liquidity. We ended the quarter with $376 million of inventory and $133 million of aircraft and engines held for lease.

Speaker #2: The majority of this outflow reflects deliberate capital deployment on flight equipment we expect to monetize at attractive margins in the second half of the year, which will improve both profitability and liquidity.

Speaker #2: We ended the quarter with $376 million of inventory and $133 million of aircraft and engines held for lease. Available liquidity was $34 million consisting of $2.2 million of cash and cash equivalents and $31.8 million of availability on our 180 million revolving credit facility which can be expanded to 200 million subject to conditions and borrowing base availability.

Martin Garmendia: Available liquidity was $34 million, consisting of $2.2 million of cash and cash equivalents and $31.8 million of availability on our $180 million revolving credit facility, which can be expanded to $200 million subject to conditions and borrowing base availability. Our balance sheet remains well-positioned to support our growth strategy, giving us the flexibility to continue to grow both our USM and leasing revenue streams, as well as to continue to take advantage of market opportunities when they arise. In summary, our Q2 results reflect the timing of our asset monetization rather than a change in the underlying business. As we convert our asset base to H2 and grow our recurring revenue, we expect meaningfully stronger cash flow and liquidity, and increasingly predictable financial profile over time.

Speaker #2: Our balance sheet remains well positioned to support our growth strategy giving us the flexibility to continue to grow both our USM and leasing revenue streams as well as to continue to take advantage of market opportunities when they arise.

Speaker #2: In summary, our second quarter results reflect the timing of our asset monetization rather than a change in the underlying business. As we convert our asset base through the second

Speaker #1: Second half and grow our recurring revenue . We expect meaningfully stronger cash flow and liquidity and increasingly predictable financial profile over time . We entered the second half with a substantially stronger pipeline of asset sales and expanding lease portfolio , and improving unit economics across our MRO facilities .

Operator: We enter H2 with a substantially stronger pipeline of asset sales, an expanding lease portfolio, and improving unit economics across our MRO facilities. We are confident this combination, supported by a healthy balance sheet, positions us for meaningfully improved performance in H2 of the year. With that, operator, we are ready to take questions. Thank you. We will now begin the question and answer session. To ask the question, you will need to press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Your first question comes from the line of Jeff Van Sinderen with B. Riley Securities. Your line is open.

Martin Garmendia: We enter H2 with a substantially stronger pipeline of asset sales, an expanding lease portfolio, and improving unit economics across our MRO facilities. We are confident this combination, supported by a healthy balance sheet, positions us for meaningfully improved performance in H2 of the year. With that, operator, we are ready to take questions.

Speaker #1: We are confident this combination , supported by a healthy balance sheet , positions us for meaningfully improved performance in the second half of the year .

Speaker #1: With that operator , we are ready to take questions

Speaker #2: Thank you . We will now begin the question and answer session . To ask the question , you will need to press star .

Operator: Thank you. We will now begin the question and answer session. To ask the question, you will need to press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Your first question comes from the line of Jeff Van Sinderen with B. Riley Securities. Your line is open.

Speaker #2: Press the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Your first question comes from the line of Jen Van Sinderen with B. Riley Securities.

Speaker #2: Your line is open

Speaker #3: Oh , hi everyone I guess one of the questions I have just on the the MRO facilities , I know you're you're still in the process of kind of ramping those up , but at this point , what is the utilization rate running on those facilities

Jeff Van Sinderen: Hi, everyone. I guess one of the questions I have just on the MRO facilities, I know you're still in the process of kind of ramping those up. At this point, what is the utilization rate running on those facilities?

Speaker #4: Utilization on the MRO facilities as we're ramping up .

Martin Garmendia: Utilization on the MRO facilities as we're ramping up. As we're ramping up overall our Millington facility, we have two lines that are in work. We still have capacity to add an additional two lines of work at that overall facility. As we've noted in the overall comments, the biggest issue we're having there is just ramping up, getting the incremental, the labor, and to go through the learning curve in doing those overall aircraft. What I can say is we have been seeing favorable improvements on that during H2 of Q2. We are very optimistic that we are going to be able to get back to our expected profitability in H2 of the year. At our facility in Goodyear, Arizona, we do, and as we've noted in the comments, have been operating at probably less than 20% of our available capacity.

Speaker #1: So, as we're ramping up overall at the Millington facility, we have two lines that are in work. We still have capacity to add an additional two lines of work at that.

Speaker #1: Overall facility . As we've noted in the overall comments , the biggest issue we're having there is just ramping up , getting the incremental labor to go through the learning curve in those overall projects and doing those overall aircraft .

Speaker #1: What I can say is we have been seeing favorable improvements in that during the second half During the second half of the second quarter .

Speaker #1: So we are very optimistic that we are going to be able to get back to our expected profitability in the second half of the year .

Speaker #1: At our facility in Goodyear, Arizona, we do. And as we've noted in the comments, we have been operating at probably less than 20% of our available capacity.

Speaker #1: However , our storage field is starting to fill up with a lot of yellow aircraft , and we do expect , as those operators and lessors start finding opportunities for those aircraft to start getting a meaningful pick up in hangar work .

Martin Garmendia: However, our storage field is starting to fill up with a lot of yellow aircraft, and we do expect as those operators and lessors start finding opportunities for those aircraft to start getting a meaningful pickup in hangar work at those facilities. At our Landing Gear shop, we have been working with two key accounts that have starting to bring volume into those facilities that started coming in at the latter month of Q2. That facility has been operating at probably about 80% overall capacity during one shift. With this incremental volume, we expect to increase that and add an additional shift. We are seeing improvements in these facilities, but we do still have available capacity to be able to continue to grow those numbers significantly.

Speaker #1: At those facilities . At our landing gear shop , we have been working with two key accounts that are starting to bring volume into those facilities that started coming in in the second , and at the latter month of the second quarter .

Speaker #1: That that facility has been operating at probably about 80% overall capacity during one shift . With this incremental volume , we expect to increase that and add an additional shift .

Speaker #1: So we are seeing improvements in these facilities . But we do still have available capacity to be able to continue to grow those numbers significantly

Speaker #3: Okay . Great to hear And then maybe you could just touch on any thoughts you have on the reasons for no flight equipment sales in the quarter

Jeff Van Sinderen: Okay, great to hear. Maybe you could just touch on any thoughts you have on the reasons for no flight equipment sales in the quarter.

Speaker #1: Sorry , can you repeat the question ?

Nicolas Finazzo: Sorry, can you repeat the question? Well, he wanted to know where we're at on flight equipment sales for the quarter. As I mentioned in my discussion, we have under contract several engines that we could have closed or might have closed this quarter, but for different reasons, didn't. We were awarded a $35 million sale of a 737 to the US Marshals Service that we're trying to get closed yet this quarter. It may move into the early Q4. Besides that, we have 17 engines in work, and it's been like that now the better part of the year, and it feels like they're all going to start coming up one right after the other here in the next several months. Those engines will go into our lease.

Martin Garmendia: Sorry, can you repeat the question?

Speaker #4: Well , he wanted to know where we're at on flight equipment sales for the quarter . So as I mentioned in my discussion , we we we have under contract several engines that that we could have closed or might have closed this quarter , but for different reasons , didn't .

Nick Finazzo: Well, he wanted to know where we're at on flight equipment sales for the quarter. As I mentioned in my discussion, we have under contract several engines that we could have closed or might have closed this quarter, but for different reasons, didn't. We were awarded a $35 million sale of a 737 to the US Marshals Service that we're trying to get closed yet this quarter. It may move into the early Q4. Besides that, we have 17 engines in work, and it's been like that now the better part of the year, and it feels like they're all going to start coming up one right after the other here in the next several months. Those engines will go into our lease.

Speaker #4: And we were awarded a $35 million sale of a 737 to the U.S. Marshal Service that we're trying to get closed . Yet this quarter , it may it may move into the into the fourth , early fourth quarter .

Speaker #4: Besides that , we have 17 engines , 17 engines in work and it's been like that . Now , the better part of the year .

Speaker #4: And it feels like they're all going to start coming out one right after the other here in the next several months . And those engines will go into our will , ace .

Nicolas Finazzo: Well, some of them will go onto aircraft that we've got that we're placing, whether it be a 757 or the 737. They'll go into our engine leasing portfolio. Lots of demand for those engines. That's the frustrating part, is if we could have got those engines out of the shop, we would've already had them on lease. Most of these engines are coming out in the near term, so we expect to see revenue from those, whether it be through trading

Nick Finazzo: Well, some of them will go onto aircraft that we've got that we're placing, whether it be a 757 or the 737. They'll go into our engine leasing portfolio. Lots of demand for those engines. That's the frustrating part, is if we could have got those engines out of the shop, we would've already had them on lease. Most of these engines are coming out in the near term, so we expect to see revenue from those, whether it be through trading or lease. Preferably, we'll lease them. However, if a financial buyer comes along or an airline comes along and they'll pay us more for that engine, and we feel we can realistically get out of it by leasing it and then adjusting for time and risk, then we'll sell it.

Speaker #4: Some of them will go on to aircraft that we've got , that we're that we're placing , whether it be a seven or , or the 737 , the they'll go into our engine leasing portfolio .

Speaker #4: Lots of demand for those engines . That's that's the that's the frustrating part is if we could get got those engines out of the out of the shop , we would have already had them on lease So we have an .

Speaker #4: All these engines are . Most of these engines are coming out in the near term . So we expect to see revenue from those .

Speaker #4: Whether it be through trading or lease , preferably we'll lease them . However if if if a financial buyer comes along or an airline comes along and they'll pay us more to , to for that engine , then we feel we can realistically get at it , get out of it by leasing it , and then adjusting for time and risk .

Martin Garmendia: Or lease. Preferably, we'll lease them. However, if a financial buyer comes along or an airline comes along and they'll pay us more for that engine, and we feel we can realistically get out of it by leasing it and then adjusting for time and risk, then we'll sell it. It's not our preference, because then we're back to, we've taken a piece of flight equipment that could've produced more recurring, consistent revenue, and we've moved it into trading. However, I'm going to add one more comment here, because we get this all the time, which is, I think that the investors don't appreciate what it takes to produce these assets, how much we pull from available inventory to keep the cost down in putting these assets together.

Speaker #4: Then we'll sell it . It's not our preference because then we're back to , you know , we've taken a piece of equipment that could have produced more recurring , consistent revenue .

Nick Finazzo: It's not our preference, because then we're back to, we've taken a piece of flight equipment that could've produced more recurring, consistent revenue, and we've moved it into trading. However, I'm going to add one more comment here, because we get this all the time, which is, I think that the investors don't appreciate what it takes to produce these assets, how much we pull from available inventory to keep the cost down in putting these assets together.

Speaker #4: And we've moved it into trading However , I'm going to add one more comment here because we get we get this all the time , which is I think that the investors don't appreciate what it takes to produce these assets .

Speaker #4: And how much we pull from available inventory to keep the cost down . In putting these assets together . And then ultimately , when we trade them , we get an outsized margin because we get more revenue from , from an engine that we put together then than we would if we if we didn't take that engine , put it together , broke it down , and just sold it at the piece , part level So the trading that we do is really just a higher way of , you know , a , a greater way to achieve better net revenue than if we just broke the engine down at the piece , part level .

Nicolas Finazzo: Ultimately, when we trade them, we get an outsized margin because we get more revenue from an engine that we put together than we would if we didn't take that engine, put it together, broke it down, and just sold it at the piece part level. The trading that we do is really just a greater way to achieve better net revenue than if we just broke the engine down at the piece part level. That's the analysis we make on every engine that we have in our portfolio, which is, at a given time, do we lease it where demand is high, or do we sell it where demand is high? That's where we're at. We've got a substantial number of engines coming here in the next several months, and that's a big change from where we've been over the past year.

Nick Finazzo: Ultimately, when we trade them, we get an outsized margin because we get more revenue from an engine that we put together than we would if we didn't take that engine, put it together, broke it down, and just sold it at the piece part level. The trading that we do is really just a greater way to achieve better net revenue than if we just broke the engine down at the piece part level. That's the analysis we make on every engine that we have in our portfolio, which is, at a given time, do we lease it where demand is high, or do we sell it where demand is high? That's where we're at. We've got a substantial number of engines coming here in the next several months, and that's a big change from where we've been over the past year.

Speaker #4: And that's the analysis we make on every engine that we have in our portfolio , which is at a given time . Do we lease it where demand is high or do we sell it or we're demand is high .

Speaker #4: And and that's where we're at . So we've got we've got a substantial number of engines coming here in the next several months .

Speaker #4: And that's a that's a big change from where we've been over the past year .

Speaker #3: Okay . That's , that's great to hear . And then if I could squeeze one more in just curious , I know you mentioned some yellow aircraft that are being stored .

Jeff Van Sinderen: Okay. That's great to hear. If I could squeeze one more in, just curious, I know you mentioned some yellow aircraft that are being stored, and I'm wondering what you think the fate of those aircraft is. Do you have a sense of the status? Are they ready to fly? Do they need MRO? What do you think happens there?

Speaker #3: And I'm wondering what you think the fate of those aircraft is , are they do you have a sense of the status ? Are they ready to fly ?

Speaker #3: Do they need MRO What do you think happens there

Speaker #4: So all refer to yellow airplanes . And I don't mind saying it . These are ex spirit Airlines aircraft . We have how many stored there now ?

Nicolas Finazzo: We refer to yellow airplanes, and I don't mind saying. These are ex-Spirit Airlines aircraft. We have how many stored there now?

Nick Finazzo: We refer to yellow airplanes, and I don't mind saying. These are ex-Spirit Airlines aircraft. We have how many stored there now?

[Company Representative] (AerSale): 84.

Martin Garmendia: 84.

Speaker #4: 33 . We have 84 stored there . I think we were over 90 at one point . All of those aircraft will need some level of of maintenance as they come out Many of them the NEOs require engines .

Nicolas Finazzo: We have 84 stored there. I think we were over 90 at one point. All of those aircraft will need some level of maintenance as they come out. Many of them, the neo, require engines, they'll be stuck there until the engines come out. The expectation is that engines for those airplanes will all come out over the next year. All of them that we have now are owned by banks or leasing companies, we're discussing with all of those companies, what are they going to do with their flight equipment? Some have actually been broken down and sold as airframes, and the engines seem to have more value leasing a serviceable engine than you can get for leasing the whole airplane. We've seen some of these leasing companies keep the engines that come out of the shop. Excuse me.

Nick Finazzo: We have 84 stored there. I think we were over 90 at one point. All of those aircraft will need some level of maintenance as they come out. Many of them, the neo, require engines, they'll be stuck there until the engines come out. The expectation is that engines for those airplanes will all come out over the next year. All of them that we have now are owned by banks or leasing companies, we're discussing with all of those companies, what are they going to do with their flight equipment? Some have actually been broken down and sold as airframes, and the engines seem to have more value leasing a serviceable engine than you can get for leasing the whole airplane. We've seen some of these leasing companies keep the engines that come out of the shop. Excuse me.

Speaker #4: So they'll be stuck there until the engines come out. The expectation is that engines for those airplanes will all come out over the next year.

Speaker #4: All of them that we have now are owned by banks or leasing companies . So we're discussing with all of those companies , you know , what , what are they going to do with their flight equipment Some have actually been been broken down and sold as airframes and engines seem to have more value .

Speaker #4: Leasing a serviceable engine than you can get for leasing the whole airplane. So we've seen some of these leasing companies keep the engines that come out of the shop.

Speaker #4: Excuse me . And then sell the aircraft for the airframe for part out . So some of those won't come back into service .

Nicolas Finazzo: Sell the aircraft for the airframe for part out. Some of those won't come back into service, and we're parting them out, candidly. It's a shame. These are relatively new airplanes, less than five years old in many cases, and airplanes are being parted out. We've just not seen that before. Again, that's because of the value of the engines being so high today because they're so rare that you get a decent engine out of the shop.

Nick Finazzo: Sell the aircraft for the airframe for part out. Some of those won't come back into service, and we're parting them out, candidly. It's a shame. These are relatively new airplanes, less than five years old in many cases, and airplanes are being parted out. We've just not seen that before. Again, that's because of the value of the engines being so high today because they're so rare that you get a decent engine out of the shop.

Speaker #4: And we and we're we're parting them out candidly . It's a shame . These are relatively new airplanes , less than five years old .

Speaker #4: In many cases . And airplanes are being part of that . We we've just we've just not seen that before . And again , that's that's that's because of the , the value of the , of the engines being so , so high today because they're so rare that you can get a decent engine out of the shop

Speaker #3: So yeah .

Jeff Van Sinderen: Yeah.

Speaker #4: All of that flight equipment , you know , the , the lessors are waiting if they can get their engines back , they're all , they're all hustling to get lease customers for them .

Nicolas Finazzo: All of that flight equipment, the lessors are waiting. If they can get their engines back, they're all hustling to get lease customers for them. If they've decided they're going to lease them, they have engines, they've got a customer, we're starting to get heavy checks because the airplanes have been sitting for quite a while. That'll keep us with a lot of heavy maintenance at the facility until all of those airplanes go through the process of. I would expect that most of them will be returned to service rather than parted out. That's going to keep us busy. The frustrating part to that is the unavailability of engines is still holding airplanes on the ground, and candidly, there's so many airplanes there that if every lessor asked us today to return those airplanes to service, we're not capable of doing it.

Nick Finazzo: All of that flight equipment, the lessors are waiting. If they can get their engines back, they're all hustling to get lease customers for them. If they've decided they're going to lease them, they have engines, they've got a customer, we're starting to get heavy checks because the airplanes have been sitting for quite a while. That'll keep us with a lot of heavy maintenance at the facility until all of those airplanes go through the process of. I would expect that most of them will be returned to service rather than parted out. That's going to keep us busy. The frustrating part to that is the unavailability of engines is still holding airplanes on the ground, and candidly, there's so many airplanes there that if every lessor asked us today to return those airplanes to service, we're not capable of doing it.

Speaker #4: So if they've decided they're going to lease them, they have engines, they've got a customer, then we're starting to get heavy checks because those airplanes have been sitting for quite a while.

Speaker #4: So that'll keep us . That'll keep us with a lot of heavy maintenance at the facility until all of those airplanes , you know , go through the process of either being .

Speaker #4: And I would expect that most of them will be returned to service rather than part it out . So that's going to keep us busy .

Speaker #4: The frustrating part to that is , is engines , the unavailability of engines is still holding airplanes on the ground and candidly , there's so many airplanes there that if every lessor asked us today to return those airplanes to service , we're not capable of doing , we have eight bays and we can't return eight airplanes with heavy checks in a short amount of time .

Nicolas Finazzo: We have eight bays, and we can't return eight airplanes with heavy checks in a short amount of time. Our expectation is as the lessors find their lessees, that we'll fill up probably for the next year. By the way, those Spirit airplanes and those aircraft lessors aren't our only customers there. We have other customers that we've been dealing with long-term. That's why we feel optimistic about filling up our capacity at Goodyear, despite the fact that this issue with Spirit has really created a big blob of airplanes that are going to need maintenance. But as we did during COVID, storing over almost 100 airplanes there, these are ready airplanes. Most of them are going to fly again. They're not going to get parted out. That provides a decent amount of revenue for us as well.

Nick Finazzo: We have eight bays, and we can't return eight airplanes with heavy checks in a short amount of time. Our expectation is as the lessors find their lessees, that we'll fill up probably for the next year. By the way, those Spirit airplanes and those aircraft lessors aren't our only customers there. We have other customers that we've been dealing with long-term. That's why we feel optimistic about filling up our capacity at Goodyear, despite the fact that this issue with Spirit has really created a big blob of airplanes that are going to need maintenance. But as we did during COVID, storing over almost 100 airplanes there, these are ready airplanes. Most of them are going to fly again. They're not going to get parted out. That provides a decent amount of revenue for us as well.

Speaker #4: So we will , you know , our expectation is as the lessors find their lessees , that will will fill up probably for the next year .

Speaker #4: And by the way , those airplanes and those , those aircraft lessors aren't our only customers . They're we have other customers that we've been dealing with long term .

Speaker #4: So that's why we feel optimistic about filling up our capacity at Goodyear , despite the fact that that this , this issue with with spirit is really created , you know , a , a a big glob of airplanes that are doing maintenance .

Speaker #4: But as we did during Covid , you know , storing over almost 100 airplanes there , these are these are ready airplanes , these are airplanes that are most of them are going to fly again , they're not going to get parted out .

Speaker #4: So that provides a decent amount of revenue for us as well .

Speaker #3: Okay, thanks for all that color. Thanks for taking my questions.

Jeff Van Sinderen: Okay. Thanks for all that color. Thanks for taking my questions.

Speaker #4: Okay . Well , thanks for asking

Nicolas Finazzo: Okay. Well, thanks for asking.

Nick Finazzo: Okay. Well, thanks for asking.

Speaker #2: Your next question comes from the line of Stephen Stackhouse with RBC. Your line is open.

Operator: Your next question comes from the line of Stephen Strackhouse with RBC. Your line is open.

Speaker #3: Hey , Ricky Martin , thanks for taking my questions . Nick , I was hoping you might be able to just follow up on the part that you said that investors don't maybe appreciate in terms of what it takes to really put the assets together Maybe kind of speaking to that trade off of kind of forgoing the near-term USM piece , parts sales in favour of building the longer term leasing assets , kind of as a recurring strategic choice Can you assign any , any value or numbers to that , maybe in terms of the margins that you can kind of , or maybe even the incremental margins between the two to kind of level set us there .

Stephen Strackhouse: Hey, okay, Martin. Thanks for taking my questions. Nick, I was hoping you might be able to just follow up on the part that you said that investors don't maybe appreciate in terms of what it takes to really put the assets together. Maybe kind of speaking to that trade-off of kind of foregoing the near-term USM piece part sales in favor of building the longer-term leasing assets kind of as a recurring strategic choice. Can you assign any value or numbers to that, maybe in terms of the margins that you can kind of, or maybe even the incremental margins between the two, to kind of level set us there?

Speaker #4: We have that information we can share .

Nicolas Finazzo: We have that information we can share.

Nick Finazzo: We have that information we can share.

Speaker #1: Yeah . I would say when we when we look at overall USN margins and we noted on our IRR margins are typically in the 25% overall range when we've done flight equipment sales and when we've looked at the opportunity we've achieved margins that have exceeded those amounts .

Martin Garmendia: Yeah, I would say when we look at overall USM margins, we noted on our IRR, margins are typically in the 25% overall range. When we've done flight equipment sales, and when we look at the opportunity, we've achieved margins that have exceeded those amounts, sometimes by a large overall amount. That's when we look at the opportunities that have been in front of us, whether it's the opportunity with the US Marshals Service or various other opportunities to put overall engines, the economics are truly attractive to have made the investments, because we have made, as Nick has noted, it's not just grabbing the engine. We have to have made significant investments to get these engines into serviceable condition and then sell those assets out. That itself is providing not only the higher margin, but it's increasing our overall monetization cycle.

Speaker #1: Sometimes by a large overall amount . And that's when when we look at at the opportunities that have been in front of us , whether it's the opportunity with the US Marshal Service or various other opportunities to put overall engines , the economics are truly attractive to have made the investments because we have made , as Nick has noted , it's not just grabbing the engine .

Speaker #1: We have to have made significant investments to get these engines into serviceable condition and then sell those assets out, and that itself is providing not only the higher margin, but it's increasing our overall monetization cycle.

Speaker #1: So we're getting back our capital quicker, which again is important because it will also improve our liquidity position.

Martin Garmendia: We're getting back our capital quicker, which again, is important because it'll also improve our liquidity position.

Speaker #4: Let me add a little something else to that , which is , you know , as we view flight equipment purchases , the highest value we can get out of buying flight equipment is to keep the aircraft as a flyable asset .

Nicolas Finazzo: Let me add something else to that, which is, as we view flight equipment purchases, the highest value we can get out of buying flight equipment is to keep the aircraft as a flyable asset. The next highest value is to keep the engines as flyable engines. When the airframe is not valued as a flyable airplane, it costs too much to keep it in service. You take the engines off. Now we have, obviously, plenty of opportunity to lease or sell the engines. When the engines have greater value at the piece part level because of the cost of returning them to service, then they go into the USM parts. Along all that, there's sub-components. There's Landing Gear. There's APUs. There's other components that come off the aircraft as sub-assemblies that have higher value as sub-assemblies than they do at the piece part level.

Nick Finazzo: Let me add something else to that, which is, as we view flight equipment purchases, the highest value we can get out of buying flight equipment is to keep the aircraft as a flyable asset. The next highest value is to keep the engines as flyable engines. When the airframe is not valued as a flyable airplane, it costs too much to keep it in service. You take the engines off. Now we have, obviously, plenty of opportunity to lease or sell the engines. When the engines have greater value at the piece part level because of the cost of returning them to service, then they go into the USM parts. Along all that, there's sub-components. There's Landing Gear. There's APUs. There's other components that come off the aircraft as sub-assemblies that have higher value as sub-assemblies than they do at the piece part level.

Speaker #4: The next highest value is to keep the engines as as flyable engines . When the airframe is not , you know , it's not valued as a flyable airplane .

Speaker #4: It costs too much to keep it in service . You take the engines off . Now we have obviously plenty of opportunity to to lease or sell the engines when the engines have have a greater value at the piece part level because of the cost of returning them to service .

Speaker #4: Then they go into the USM parts . Along all that , there's subcomponents , there's landing gear , there's a there's other components that come off the aircraft as subassemblies that have higher value as subassemblies than they do at the piece .

Speaker #4: Part level . At the end of the day , USM , when you think about it , it's just purely piece parts . It's not components , it's not landing gear .

Nicolas Finazzo: At the end of the day, USM, when you think about it's just purely piece parts. It's not components, it's not Landing Gear. It's just components. It's just piece parts. That's the lowest value you can get out of that. It can move relatively quickly, and if there's certain very high demand USM parts that can quickly be sold after you've torn it down, got it to the piece part level, sent it to the shop, got it back, and assuming you predict all your scrap rates and yield and the sales value correctly, you'll get your value out of it. We strive for at least a 25% margin on USM parts, and sometimes, most of the time, we get it.

Nick Finazzo: At the end of the day, USM, when you think about it's just purely piece parts. It's not components, it's not Landing Gear. It's just components. It's just piece parts. That's the lowest value you can get out of that. It can move relatively quickly, and if there's certain very high demand USM parts that can quickly be sold after you've torn it down, got it to the piece part level, sent it to the shop, got it back, and assuming you predict all your scrap rates and yield and the sales value correctly, you'll get your value out of it. We strive for at least a 25% margin on USM parts, and sometimes, most of the time, we get it.

Speaker #4: It's just components. It's just piece parts. That's the lowest value you can get out of that, because now it can move relatively quickly.

Speaker #4: And if there are certain very , you know , high demand USM parts that can quickly be sold after you've torn it down and got it to the piece part level , send it to the shop , got it back .

Speaker #4: And as soon as you predict all your scrap rates and you know , yield and , and the sales value correctly , you know , you'll get your value out of it .

Speaker #4: We strive for , at least a 25% margin on USM parts . And sometimes , you know , most of the time we get it .

Speaker #4: But when we take those parts and we sell and we put it together as part of part of a whole airplane or a whole engine , and then are able to monetize the whole engine , we're not just getting value at a 25% margin off of or more off of the parts that are easy to sell .

Nicolas Finazzo: When we take those parts and we sell and we put it together as part of a whole airplane or a whole engine, and then are able to monetize the whole engine, we're not just getting value at a 25% margin off of, or more, off of the parts that are easy to sell. We also get value out of all the other things on the airframe or engine that we probably won't sell. That's why the total margin becomes much greater because some of that we wouldn't have otherwise been able to sell. When you look at the incremental dollars we're talking about, these are big transactions. These are transactions where we'll make $4, $5, $10 million or more on the sale of an asset. Do you know how many USM piece parts you have to sell to make that kind of margin?

Nick Finazzo: When we take those parts and we sell and we put it together as part of a whole airplane or a whole engine, and then are able to monetize the whole engine, we're not just getting value at a 25% margin off of, or more, off of the parts that are easy to sell. We also get value out of all the other things on the airframe or engine that we probably won't sell. That's why the total margin becomes much greater because some of that we wouldn't have otherwise been able to sell. When you look at the incremental dollars we're talking about, these are big transactions. These are transactions where we'll make $4, $5, $10 million or more on the sale of an asset. Do you know how many USM piece parts you have to sell to make that kind of margin?

Speaker #4: We also get value out of all the other things on the airframe or engine that we probably won't sell . And so , so that's why the total margin becomes much greater because some of that we wouldn't have , we wouldn't have otherwise been able to sell .

Speaker #4: And then when you look at the incremental dollars we're talking about , this is these are big transactions . These are transactions where we'll make four , five , 10 million or more on the sale of an asset .

Speaker #4: And do you know how many USM PS parts you have to sell to make that kind of margin ? So when we can use our infrastructure to put together an asset and get a , you know , an higher margin than selling it at the piece , part level and a large incremental dollar amount with , with not so much additional effort because we're using our existing infrastructure to do it , but by just piecing it , by piecing it back together rather than piecing it , you know , taking it apart at the piece of art level , that's why that's why we apoal USM and use it in , in the repair of our own material , you know , our own flight equipment .

Nicolas Finazzo: When we can use our infrastructure to put together an asset and get a higher margin than selling it at the piece part level and a large incremental dollar amount with not so much additional effort, because we're using our existing infrastructure to do it, but by just piecing it back together rather than taking it apart at the piece part level. That's why we pull USM and use it in the repair of our own material, our own flight equipment.

Nick Finazzo: When we can use our infrastructure to put together an asset and get a higher margin than selling it at the piece part level and a large incremental dollar amount with not so much additional effort, because we're using our existing infrastructure to do it, but by just piecing it back together rather than taking it apart at the piece part level. That's why we pull USM and use it in the repair of our own material, our own flight equipment.

Stephen Strackhouse: That is really.

Speaker #3: And we'll continue .

Speaker #4: And we'll continue to do that as long as we feel that the that we're going to get a greater value out of it .

Martin Garmendia: We'll continue to do that as long as we feel that we're going to get a greater value out of it.

Speaker #3: That is really , really helpful . Color and a couple questions here are really just around . I can appreciate the investment that you guys are making to really kind of get the revenue model into a recurring stream and to really take advantage of the margin potential .

Stephen Strackhouse: That is really helpful color, and a couple of questions here are really just around. I can appreciate the investment that you guys are making to really kind of get the revenue model into a recurring stream and to really take advantage of the margin potential. Maybe my second question is also in a similar line of thought, where I know you talked about the CRJ ramp and the Goodyear labor investments that you're making. Maybe not even kind of when they turn accretive to like the back half, but what can kind of some of the incremental margins or the margin capability look like on that MRO work in like 2027 or 2028?

Speaker #3: So maybe my , my second question is also in a similar line of thought where I know you talked about the ramp Goodyear Labor investments that you're making , maybe not even kind of when they turn accretive to like the back half , but what kind of some of the incremental margins or margin capability look like on that MRO work in like 2027 or 2028 ?

Speaker #1: So in our , in our on airport MRO margins have usually when we're running at full operations have been in the 20 to 30% overall range .

Martin Garmendia: In our on-airport MRO margins have, usually when we're running at full operations, have been in the 20% to 30% overall range. Now, margins improve, and as you would understand, the more volume you have, the better absorption you have of your fixed costs. One of the things that we're suffering from now is that as we're ramping up, volume is low. We have to ramp up and get the staffing that's needed to support that value, whether it's the Millington ramp-up or in Goodyear, in preparation for the large amount of work that we're seeing ahead of us. That's where we're seeing kind of a lower margin profile.

Speaker #1: Now margins improve , as you would understand , the more volume you have , the better absorption you have of your of your fixed costs .

Speaker #1: So , you know , one of the things that we're suffering from now is that as we're ramping up , volume is low , we have to ramp up and get the staffing that's needed to support that , that value , whether its the Millington ramp up or in Goodyear in preparation for the large amount of work that we're seeing ahead of us .

Speaker #1: And that's where we're seeing kind of a lower margin profile as we start increasing that volume and an example , as Nick noted on Goodyear , as there's this need to run aircrafts and run them quickly through our pipeline will add additional shifts .

Martin Garmendia: As we start increasing that volume, and give an example, as Nick noted on Goodyear, as there's this need to run aircraft and run them quickly through our pipeline. We'll add additional shifts, and that will start improving our margin profile going forward. Again, as Nick has noted, specifically for Goodyear, there's a large amount of aircraft that when those assets start becoming available, there's going to definitely be a need from our customers for us to ramp up to go through that increased volume.

Speaker #1: And that will start improving our margin profile going forward . And again , as Nick has noted specifically for Goodyear , there's a large amount of aircrafts that when those assets start becoming available , there's going to definitely be a need from our customers for us to ramp up , to go through that increased volume .

Speaker #3: That's helpful . And then very last question from me , I can appreciate that there's a bit of a drop off after Airsafe in , in the peak of like 3 to 26 , but can you talk about the investment cycle that you that you could be making a new product offerings ?

Stephen Strackhouse: That's helpful. Then very last question from me. I can appreciate that there's a bit of a drop-off after AerSafe in the peak of Q3 2026. Can you talk about the investment cycle that you could be making in new product offerings? We've heard a lot from a lot of other peer companies this quarter on their earnings calls talk about new product development. I was wondering if you could share any investments that you're making into other new products that could eventually replace AerSafe and drive some longer-term growth.

Speaker #3: We've heard a lot from a lot of other peer companies this quarter on their earnings calls . Talk about new product development . I was wondering if you could share any investments that you're making into other new products that could eventually replace Airsafe and drive some some longer term growth .

Speaker #5: So

Nicolas Finazzo: Apart from AerAware, which we've been discussing for many quarters now, we are looking at other PMA opportunities or even DER repairs where we're basically providing a solution to an airline that they can't get from the existing OEM of a part, or they can't get the parts altogether, and we could manufacture parts for them, because they can't get it. What we're seeing is, especially with the current CRJ line that we're doing, there's a lot of need for additional services that will use our PMA capability. What we really need to understand is, okay, guys, what do you need? What can we do for you? Although, in all candor, we don't have any additional PMA developments at this time, there's a number that we're working on that we will look to potentially develop and monetize on a go-forward basis.

Speaker #4: Apart from Airware , which we've we've been discussing for , for many quarters now , we are looking at other PMA opportunities or , or even DUR repairs where we're basically providing a solution to an airline that they can't get from the existing OEM of a part , or they can't get the parts all together .

Nick Finazzo: Apart from AerAware, which we've been discussing for many quarters now, we are looking at other PMA opportunities or even DER repairs where we're basically providing a solution to an airline that they can't get from the existing OEM of a part, or they can't get the parts altogether, and we could manufacture parts for them, because they can't get it. What we're seeing is, especially with the current CRJ line that we're doing, there's a lot of need for additional services that will use our PMA capability. What we really need to understand is, okay, guys, what do you need? What can we do for you? Although, in all candor, we don't have any additional PMA developments at this time, there's a number that we're working on that we will look to potentially develop and monetize on a go-forward basis.

Speaker #4: And we could manufacture parts for them Because they can't get it . And what we're seeing is , especially with the current CR line that we're doing , is there's a lot of need for additional services that that will use our PMA capability and what we really need to understand is , okay , guys , what do you need ?

Speaker #4: What can we do for you ? So although in all candor , we don't have any additional , any additional PMA developments at this time , there's a number that we're working on that that we will we will look to potentially develop and monetize on a go forward basis .

Speaker #4: I don't expect any of that to happen . Don't expect any of that to make a substantial contribution . That's gonna it takes it takes a better part of a year to , identify a product that you're going to develop and then go through the whole process , you know , go through the whole process of developing it and then assuming you have a customer that wants it , because we're not going to develop anything on a , just on a , a list .

Nicolas Finazzo: I don't expect any of that to make a substantial contribution. It takes the better part of a year to identify a product that you're going to develop and then go through the whole process of developing it. Then, assuming you have a customer that wants it, because we're not going to develop anything. We did that with AerAware. We had a very interested customer, which has dragged and dragged and dragged. The next time we do something, when we develop it's going to be for a customer who says, "Give me this, and I'll give you an order for hundreds of them." Don't have one yet, and I can't tell you that we have visibility on what we're going to see coming in the next year.

Nick Finazzo: I don't expect any of that to make a substantial contribution. It takes the better part of a year to identify a product that you're going to develop and then go through the whole process of developing it. Then, assuming you have a customer that wants it, because we're not going to develop anything. We did that with AerAware. We had a very interested customer, which has dragged and dragged and dragged. The next time we do something, when we develop it's going to be for a customer who says, "Give me this, and I'll give you an order for hundreds of them." Don't have one yet, and I can't tell you that we have visibility on what we're going to see coming in the next year.

Speaker #4: We did that with air where we , we didn't have a , we had a very interested customer , which is dragged and dragged and dragged .

Speaker #4: The next time we do something , when we develop it , it's going to be for a customer who says , give me this and I'll give you an order for hundreds of them , but don't have one yet .

Speaker #4: And and I can't , I can't tell you that that we have visibility on what we're going to see coming in the next year .

Speaker #3: To appreciate the color , thank you

Stephen Strackhouse: Really appreciate the color. I'll hop back in the queue.

Speaker #2: There is no further . There are no more further questions at this time . I will now turn the call back over to Nick CEO for closing remarks .

Operator: There are no more further questions at this time. I will now turn the call back over to Nicolas Finazzo, CEO, for closing remarks.

Speaker #4: Okay . Thank you . I really want to thank you , gentlemen , for for your good questions . And it gave me an opportunity , Martin , and I , an explain a little more detail , some of the things maybe we missed during the call .

Nicolas Finazzo: Okay. Thank you. I really want to thank you, gentlemen, for your good questions. It gave me an opportunity, Martin and I, an opportunity to explain in a little more detail some of the things maybe we missed during the call. I want to thank everyone else who's expressed an interest by listening to AerSale today for your interest. Thank you very much. The numbers don't reflect the story, and we're going to show you. The H2 of this year is not going to look like the H1 of this year. You'll see that if you listen to us next quarter and the last quarter of the year. We remain optimistic and confident and we're eager to make things happen here. Again, everyone, thanks for listening, and we hope you listen in next time we have our earnings call.

Nick Finazzo: Okay. Thank you. I really want to thank you, gentlemen, for your good questions. It gave me an opportunity, Martin and I, an opportunity to explain in a little more detail some of the things maybe we missed during the call. I want to thank everyone else who's expressed an interest by listening to AerSale today for your interest. Thank you very much. The numbers don't reflect the story, and we're going to show you. The H2 of this year is not going to look like the H1 of this year. You'll see that if you listen to us next quarter and the last quarter of the year. We remain optimistic and confident and we're eager to make things happen here. Again, everyone, thanks for listening, and we hope you listen in next time we have our earnings call.

Speaker #4: I want to thank everyone else who's expressed an interest by listening to AerSale today for your interest . Thank you very much . The numbers don't reflect the story , and we'll have to .

Speaker #4: We're going to show you this second half . This year is not going to look like the first half of this year . And you'll see that if you if you listen to us next quarter and in the last quarter of the year .

Speaker #4: So we remain optimistic and confident and and we're we're eager to make things happen here . So again , everyone , thanks for thanks for listening .

Speaker #4: And we hope you'll we'll hope you'll listen in next time . We have our , our earnings call . I hope everyone has a really good night .

Nicolas Finazzo: I hope everyone has a really good night. Thank you.

Nick Finazzo: I hope everyone has a really good night. Thank you.

Speaker #4: Thank you .

Operator: Concludes today's call. Thank you all for joining, and you may now disconnect.

Q2 2026 AerSale Corp Earnings Call

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