AerSale Corporation

Welcome to the Airsail First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Christina Petrone. Thank you. You may begin.

Good morning. I'd like to welcome everyone to Airtel's first quarter 2021 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 meanings 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. Factors discussed in the risk factors section of the company's annual report on Form 10-K for the year ended December 31, 2020, followed with the Securities and Exchange Commission, SEC, on March 16, 2021, and its other filings with the SEC, including its quarterly report on Form 10-Q for the period ended March 31, 2021 to be filed with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward-looking statements on this call. We'll also refer to non-GAAP measures that we view as important in assessing the performance of our business A reconciliation of those non-GAAP metrics to the nearest GAAP metric can be found in the earnings presentation materials made available on the investor's section of the air sale website at ir.airsale.com. With that, I'll turn the call over to Nick Bonazzo.

Thanks, Christy. Good morning to everyone on the line, and thank you for joining our call today. I'll begin with brief comments about air sale and our strategy. followed by an overview of the quarter, operational updates, and progress on major programs and initiatives. I'll then turn the call over to Martin for a closer look at the numbers. For those of you unfamiliar with AirSail, we operate a purpose-built, fully integrated, multidimensional aftermarket aviation model that includes part procurement, flight equipment sales and leasing, MRO, FAA certifications, and aircraft storage and decommissioning. This allows us to keep a close pulse on the market, identify attractive flight asset purchase opportunities, and deliver a higher overall value to our customers as we touch every part of the aircraft maintenance cycle. Our battle-tested model has proven very effective, even under extreme stress in the industry, as we've demonstrated during the COVID-19 pandemic. As the effects of COVID resulted in the massive reduction of flight capacity by the airlines, our aircraft storage facilities quickly filled up, with decommissioning work and storage maintenance revenue helping to offset much of the decline in routine MRO work and used serviceable material, USM part sales. Further, insight gained from firsthand observation of passenger aircraft coming out of service has allowed us to quickly pivot our efforts to cargo aircraft that remained in high demand throughout the pandemic. This allowed us to identify feedstock opportunities to serve the freighter market specifically through our 24-aircraft Boeing 757 fleet acquisition announced last year and expansion of our passenger-to-freighter conversions being performed at our Goodyear, Arizona MRO. We're currently scheduled to convert five of the aircraft acquired using the industry-preferred Precision Aircrafts Cargo Conversion Kit, with our first completion expected later this month and under contract for sale to a Canadian cargo operator. Conversions two, three, and four are also under LOI and in the lease documentation phase with the US cargo operator. We're in discussions with multiple additional customers for our fifth conversion with scheduled cargo completion in the first quarter of 2022. As we acquire or repair more engines, we have an option with Precision to purchase up to five more cargo conversion kits to modify aircraft 19 through 23 potentially leaving only one of the original 24 aircraft fleet for part out. Our capacity to acquire a large fleet of aircraft, perform cargo conversions, secure coveted precision cargo conversion kits, and find the cargo customers for aircraft converted on spec differentiates us from our peers and provides yet another high margin revenue outlet for the company's flight equipment. As we review our business results, there are a few important things to keep in mind. First, we generally don't focus on quarterly year-over-year analysis to assess our financial performance, which you'll notice throughout our commentary. The rationale for this is simple. Our asset management, acquisition, and flight equipment sale businesses are one of the cornerstones of our success and account for large transactions at irregular times throughout the year. As we discuss our results, we'll make it a point to update our investors on these key transactions for both the current year and prior year periods. More importantly, we believe relevant indicators for our business performance are asset acquisitions and activities, the outlook for flight equipment sales throughout the year, progress on engineered solutions, STC development and contracts, and the underlying performance of our MRO business. With that in mind, we're performing well and as expected in 2021, with first quarter consolidated sales of $58.4 million. Sales in the prior year were 57.1 million. Sales levels in 2021 have been primarily supported by 13.8 million of flight equipment sales, continued demand for aircraft storage maintenance, and strong MRO demand, which was offset by lower leasing from aircraft whose leases expired, combined with lower USM part sales volume, which is still under pandemic-related pressure. Turning to profitability, our first quarter 2021 adjusted EBITDA was 16.5 million or 28.2% of sales compared to 9.4 million or 16.5% of sales in the prior year. Higher adjusted EBITDA margin during this period was attributable to strong cost controls and higher gross margin mix. The period also included 6.4 million of CARES Act proceeds, which did not occur in the prior quarter and are not excluded because we cannot reduce the associated labor cost for the year to remain in compliance with CARES Act grant restrictions. On the specific quarters that include CARES Act proceeds, it does create a lift to margin performance. To dig into the specifics by segment and beginning with asset management, during the quarter, we sold 13.8 million of flight equipment, representing the sale of one Boeing 737-800NG airframe and two Pratt & Whitney PW4000 engines to cargo operators and one Pratt & Whitney PW4000 engine for parts as we took advantage of market dynamics where there was strong interest in purchasing whole engines in support of USM needs. Our aircraft and leasing revenue was down compared to the prior year as a result of three Boeing 747 passenger aircraft leases that expired. We decided not to invest in returning these aircraft to service as we concluded They have a higher value as whole engines, USM airframe, and engine parts. Of the 12 General Electric and Pratt & Whitney engines removed from these three 747s, the serviceable ones have been added to our engine lease pool, and the engines needing extensive repairs and the airframes will become feedstock for our USM parts business as we take advantage of strong demand in this platform from cargo operators. This reduces our fleet aircraft lease fleet to just four aircraft, two passenger and two freighter, all of which have been performing well. This aircraft portfolio reduction is not a coincidence. Over the past several years, we have been anticipating a market downturn and have been strategically reducing our leased aircraft fleet. Unlike pure play aircraft leasing companies post-COVID, we've not had to forgive rent in order to keep the aircraft on lease. As such, all of our flight equipment is generating an acceptable amount of revenue, keeping our balance sheet clean with no debt and plenty of capacity to add more flight equipment assets to our portfolio as the industry recovers. We continue to market for asset purchases and believe that opportunities will become more attractive in the back half of 2021 once airlines are able to resume more normalized service levels and can better assess their fleet requirements. Regarding our 24 aircraft Boeing 757 fleet acquisition program, we made good progress on either the sale or lease of the first 18 aircraft. In the balance of our asset management business, we're seeing an uptick in USM part sales as carriers gear up for a stronger anticipated summer, but overall volume is still down from pre-pandemic levels. We're also challenged in this business by limited feedstock availability at attractive prices. However, we expect this dynamic will become more favorable over the next 18 months. Turning to our tech ops business, total sales in the quarter were quite strong and driven by continued demand at our aircraft storage locations, along with high demand for MRO as airlines begin to recommission aircraft. Aircraft storage maintenance has been a strong offset to lower pandemic-related volume in other parts of our business. We do expect our facilities to remain full, even as some aircraft are recommissioned, as storage demand has far exceeded capacity and an extended recovery will continue to fill any vacancies for some time. Reviewing the product development side with engineered solutions, we produce highly specialized products that comply with regulatory mandates and or enhance the safety of commercial aircraft. We're currently marketing three products, including AirSafe and AirTrac, for which we hold supplemental type certificates, STCs, issued by the FAA. Sale of our existing STCs have netted strong margins, and all of our STC products will serve a customer base of over 16,000 aircraft. Regarding AeroWare, which is expected to have the largest addressable market of any of our STCs, we made substantial progress towards gaining STC approval and completed additional flight tests with a potential launch customer during the period. We continue to work with the FAA, both in reviewing our proprietary engineering data and performing test flights using our Boeing 737-800NG prototype test aircraft. In summary, after our first full quarter as a public company, we're exactly where we anticipated we would be. Our MRO facilities are full, and our diversified portfolio continues to support our business performance in a dynamic operating environment. We remain very enthusiastic about the future and look forward to updating our investors in the coming quarters. Over a year into the pandemic, our employees have shown great flexibility and resiliency. Our strong financial performance is the result of their dedication and the multidimensional and fully integrated business model we spent the last decade building. The diversity of our revenue sources has created a counter-cyclical hedge, enabling AirSail to thrive in a challenging commercial aviation market. I'll be back to answer questions in a few moments, but for now, I'll hand it over to Martin for a look at the numbers.

Thanks, Nick. I will start with an overview of our financial performance before ending with an update on our guidance. Our first quarter revenue was $58.4 million compared to revenue in the first quarter of 2020 of $57.1 million. As Nick noted, our business may fluctuate from quarter to quarter and year to year based on flight equipment sales, and therefore it is important to monitor our progress based on asset purchases and sales over the long term. Looking ahead to the rest of 2021, we continue to work with our customers to finalize the sale of the 24 Boeing 757s whose purchase we announced in September. We are very pleased to note that we have commitments for 18 of these aircraft contracted or under letters of intent for sale or lease including four passenger to freighter converted aircraft being completed at our Goodyear facility. This ability to sell, lease, convert, and break down flight equipment into parts is key to our ability to generate higher margins than our competitors. First quarter asset management solutions, or AMS revenue, was $29.3 million, compared to $30.8 million in the first quarter of 2020. Aside from the shift in expected timing of flight equipment sales, AMS revenue was lower because revenue from used serviceable material, or USM, declined compared to the first quarter of 2020 when the COVID-19 pandemic was just beginning. On a positive note, margins from USM has increased, which has partially offset the impact of these declines to net income. Since the start of the COVID-19 pandemic, we saw fewer opportunities to buy feedstock, lower demand for existing inventory, and a drop in utilization rates on our flight equipment. As you are aware, demand for USM, overhaul activity, and short-term engine leasing declined, passenger air travel dropped, and airlines grounded a significant portion of the global passenger fleet. However, with the recovery strengthening and passenger air travel beginning to increase, especially as we approach the summer, we should benefit from the rise in demand for USM parts consumption for maintenance and overhaul activity as airlines begin to bring portions of their grounded fleet back online. Our tech ops segment offset some of the decline in our asset management solutions volume, with total segment revenue up 10.9% compared to the first quarter of 2020, increasing to $29.2 million. Our MRO facilities continue to benefit from the increased maintenance demand from the fleet groundings that resulted from the pandemic. Looking forward, we remain confident that we will benefit from deactivation work, heavy maintenance, and cargo conversion activity, as well as have a strategic advantage in identifying feedstock for our asset management segment as the commercial passenger market recovers given the large number of aircraft at our on-airport MRO facilities. Gross margin increased to 33.9% in the first quarter of 2021 compared to 26.8% in the corresponding period in the prior year. This is a result of higher flight equipment sales and increased maintenance storage demand during the quarter. Selling general and administrative expenses for the first quarter of 2021 were $13.3 million, which is about $100,000 lower than the same quarter last year. This amount was offset by CARES Act contributions of $6.4 million recognized in the first quarter of 2021. Cost savings and efficiency measures taken during 2020 have helped to offset higher public company costs being incurred in 2021. Income from operations was $12.9 million in the first quarter of 2021 compared to $1.9 million in the first quarter of 2020. Net income was $10.1 million or 17.3% of sales up from $1.1 million or 1.9% of sales. First quarter adjusted EBITDA was $16.5 million or 28.3% of sales up from adjusted EBITDA of $9.8 million or 17.2% of sales in the corresponding period in the prior year. Adjusted EBITDA was $7.1 million higher primarily due to the payroll support program contributions. However, adjusted EBITDA would have been higher even after excluding the payroll support benefit as contributions from flight equipment sales and storage activity offset lower leasing revenues. As Nick noted, we do not adjust the payroll support program proceeds out of our numbers as there are associated costs embedded in our operating expenses that are required for receipt of these proceeds. Cash flow used in operating activities was $14 million in the first quarter of 2021, compared to cash flow provided of $21.4 million in the corresponding prior year period. The main driver of cash utilization during the quarter was the acquisition of the flight equipment, primarily related to the Boeing 757 transaction. At quarter end, Airso had approximately $20 million of cash on its balance sheet and an undrawn revolver of $150 million. This provides us with ample financial flexibility to fund our asset acquisition priorities in 2021 and beyond. Finally, our guidance update and summary. We continue to expect revenue of $340 to $360 million and adjusted EBITDA of $60 to $70 million in 2021. This outlook reflects an increase in activity in our asset management segment, continued strong demand for our on-airport MRO services, accelerating demand in cargo and e-commerce markets, and increased requests for passenger-to-freighter conversion and other TechOps products and services. We expect the main growth driver of the asset management segment to be the monetization of the Boeing 757 package secured in 2020. Because of the strong demand for cargo conversion aircraft, we continue to project selling the majority of the available aircraft in 2021. For tech ops, in addition to the continued contributions from our storage maintenance and component MRO activities, we are on track to commence sales of our AeroWare product in late 2021. Our projected ranges for 2021 do factor in a possible delay in the start of sales for AeroWare due to uncertainties regarding the pace of initial scale-up production activities. We continue to diligently work on solutions that will allow us to meet anticipated demand for this product from our potential launch customer. Lastly, since we reported our fourth quarter 2020 and full year 2020 results on March 15, 2021, we were awarded grant proceeds of $5.5 million under the American Rescue Plan. These proceeds are in addition to the CARES Act grant proceeds of $9.2 million awarded to us in 2020. This award extends restrictions on the company related to retention of employees, which could result in higher associated operating costs required to be in compliance with the agreement. In summary, over a year into the pandemic, our employees have shown great flexibility and resiliency. Our strong financial performance is the result of the dedication and multidimensional and fully integrated business model we have spent the last decade building. Our continued investment in business units experiencing the greatest demand is beginning to pay off. The diversity of our revenue sources has created a counter-cyclical hedge, enabling air sales to thrive in a challenging commercial aviation market. We believe we are well positioned to outperform our competitors as the recovery gains theme in the months ahead. With that operator, we are ready to take some questions.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for questions. Our first question is from Gautam Khanna of Cowan. Please state your question.

Yes. Thanks. Good morning. I had a couple questions. First, I was curious, when you talked about the selling the majority of the available aircraft, 757s this year, how many will be available, if you will? How do we define that?

Well, hi. Good morning, Gotham. This is Nick. We have 24 total aircraft that we're purchasing in the transaction we announced last year. We don't believe we have in that package enough engines to basically market all 24 aircraft. So we think we have enough in the first 18, which basically consists of two airframes that we're selling or sold or are selling, and 16 aircraft. We have 32 engines that were either serviceable as part of that transaction or that we're making serviceable through repairs on those engines to supply the first 18 aircraft. Additional aircraft will require additional engines, which were in the market for acquiring. So available aircraft to us is what we have engines for that we don't have to spend, you know, major overhauls on. The cost of a major overhaul on an RV-211 is excessive, and the benefit of this package is that we were able to pick up a significant number of contingent-time serviceable engines.

That makes sense. And could you talk a little bit about the acquisition environment, equipment acquisition environment that you've seen? Do you have any bids out there and, you know, maybe characterize how it's changed over the past three or six months?

It doesn't really feel from our perspective that it's changed substantially. You know, we still feel the tide is coming in as far as equipment that's going to be available to us at attractive prices. It's not that we're not seeing an increase in volume, but it's not the level of volume that we would have expected at this time. We think that it's going to take the next six to 18 months before the tide fully comes in and more aircraft are available for purchase. The pricing of this equipment coming out of aircraft leasing companies continues to remain beyond the levels at which we feel comfortable of acquiring that equipment. Because aircraft are parked, we think that leasing companies have yet to determine whether they should hold those aircraft or continue to – or basically bite the bullet and sell the aircraft at their current value. Having said that, there are aircraft coming out of leasing companies that have one engine that might be unserviceable and an airframe and What we're finding is that the leasing companies are holding on to engines because they can keep their book costs higher on engines, and they're disposing of the unserviceable engines that require significant maintenance and or the airframes, which would require significant maintenance to return to service. So for us, we see the opportunity on both the airframe side and the unserviceable engine side because that's what we've been built to refurbish or part out and monetize. Now, with respect to the airlines, the airlines remain focused on, you know, recovering aircraft that have been put into storage, performing the maintenance they need to put them back into service, and trying to figure out what their future fleet plans are. The market continues to remain, you know, the passenger market continues to remain, you know, severely depressed. Even though it's improving, And the airlines don't have really the focus at this point to figure out what they should sell. They're more focused on putting aircraft back in the air to service their, you know, what I believe we all believe will be a summer surge in travel. So we're not also seeing yet the amount of aircraft that we would have expected to come out of the airlines because they can't focus on it. We feel that as the market starts to recover and the airlines will have time to focus on their fleet disposition or their excess fleet needs, more aircraft will become available from the airlines that will be at prices that make sense for air sale to acquire and then redistribute to the marketplace using our machinery.

That makes sense. And then one last one for me on AeroWare. Any update to the certification timing? Is it still expected in the second quarter and You mentioned some potential supply constraints. If you could elaborate on those.

Okay. So we had a very nice conversation with our counterpart at Universal. And as a result of their discussions with their parent company with respect to supply side, my concern on the supply side was alleviated. I've been assured. that LBIT slash Universal can make whatever equipment is necessary to supply the needs for our potential launch customer and anyone else. I have no control over that, and I take that at face value that supply constraint is not going to be an issue. From the air sales side, we're already gearing up to produce the kits required for our potential launch customer. We've basically put in place all the infrastructure to do that. we're discussing with our subcontractors the availability of material or any work that we choose to subcontract out. With respect to the development stage of errorware, I think it's unrealistic at this point to assume we could complete and get FAA certification at this time by the end of the second quarter. The reason I say that is, one, we didn't fully appreciate because we didn't fully understand how complicated it was for Elbit to do the software modifications to the system. For us, to prepare the conversion kits, to extract the data from the flight deck, to modify the aircraft to incorporate the components that Elbit supplied us, that didn't seem to be difficult in comparison to the – what we didn't appreciate is how difficult and time-consuming it is to modify the software to make sure that all the symbology that comes out of the flight deck displays correctly in the head wearable display. I think that we've learned it's in the ordinary course of business for them to take this long. We just didn't have a good appreciation for it. So we were off in our projections thinking that that would move as fast as we were able to move. But it's a different business. It takes different timing to complete the process. And they won't be able to Elbit Universal won't be able to complete their software testing until we finish with the FAA any modifications to the system. When we did our first set of flight testing with the FAA, we had about a dozen FAA people on the airplane, there were a few minor items that came up that we think are simple to fix. And they won't take long to fix, but until we fix those and retest the aircraft and give it to Elbit to do the software testing, which is going to add six to eight more weeks to this process, we're not going to be able to get certification completed until that's completed. So I think that in the best case, we're more looking at the end of the third quarter and potentially at the very beginning of the fourth quarter to receive FAA certification.

Okay. And does the customer, the launch customer order follow the certification or will they actually place an order a contingent order in advance.

I believe we'll get a contingent order subject to having this approved by the FA in advance.

Thank you very much, guys.

You're welcome.

Our next question is from Pete Skibitsky of Olympic Global Advisors. Please state your question.

Hey, good morning, guys. Hey, Nick, kind of a top-level question, similar to Gautam's second question. I just wanted to get your perspective. You know, presumably, you know, kind of going through the worst downturn in commercial history, I would presume your goal would be to buy more assets than probably you guys ever have just because of the depth of the downturn. So I guess, A, is that kind of your goal, you know, understanding you expect pricing to improve over the forward roughly 12 months? And do you guys feel like you have the financing in place to buy, you know, to acquire a large number of assets over that timeframe?

The answer is yes, and not necessarily that we have all of the financing available to acquire, you know, a large fleet of assets, you know, hundreds of millions of dollars. However, we are in discussions with multiple financial parties that do have the capital to acquire hundreds of millions, if not billions of dollars of assets, where we would work with those parties to use their financial resources to acquire the package. We would take a piece of it, we would manage it, and we would therefore receive the kind of returns that we would typically expect by us deploying our capital and still permitting our financial buyer to receive an outsized return that they couldn't do on their own in this space.

Okay.

Okay.

Just to add to that, we do have $150 million available in the revolver. We sat with $20 million of cash at the end of the quarter. We are actually going to be monetizing the 757s in the remaining of the period. So we're going to have cash coming in during that overall period. So it will give us additional capital to be able to redeploy in addition to the additional sources Nick discussed. Okay.

No, it's very helpful because I know sometimes – You guys might monetize these over 10 years, right, or longer. So I'm just trying to think over an entire cycle how, you know, how the assets could play out. So, but that's great color. I appreciate it.

And we also, I'll further add, we also expect as we have the requirement to hold more assets as we're replenishing our portfolio, our credit facility will be adjusted to reflect a higher carrying value of aircraft and engines on lease.

Okay, okay. Thanks, guys.

You're welcome.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For the participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for additional questions. Our next question is from Ken Herbert of Canaccord. Please state your question.

Hey, good morning, Nick and Martin. Nick, your comments sounded like you've clearly seen some positive or more recent positive strength in the cargo market with the conversions and everything else. Do you view coming out of sort of COVID at the high level that the cargo markets are structurally different than previously? And to what extent do you see potential risk to the cargo markets as belly capacity incrementally comes back online?

I don't see it being structurally different. Again, we've been discussing the – if you consider the e-commerce market booming being structurally different, then yes. that's something that's evolved over the past decade. What's exacerbating or actually what is fostering the freight market today, again, is the lack of belly capacity on passenger aircraft. So we do expect that the cargo market will return to more normalcy adjusted for the booming e-commerce market as the passenger airlines recover. But thinking about the wide-body market. The wide-body passenger market has been the one carrying the greatest amount of cargo, and that market continues to remain severely impacted by COVID-19 as wide-body traffic is way down. So until the international wide-body market recovers, which will follow the resolution of the pandemic and the majority of the world being vaccinated or free of COVID, It's going to continue, in our opinion, to be a boom for the cargo airlines, and we don't see that there's going to be any significant change in that for several years. Now, as that changes, and I've mentioned before, we will refocus our strategy on the passenger side of the business. But to us, it doesn't matter whether we're selling equipment to the passenger side or the freighter side. Previously, we didn't deal with many freighter customers as we are doing today. As you've heard from the transactions that we've announced, that shift is now very focused on the freighter side of the business. So our ability to kind of pivot and move from one business segment, which is the passenger side to the cargo side, it makes us really agnostic to what's happening in the industry, whether it's the cargo side that's booming or the passenger side that's booming.

Okay, very helpful. Can you talk about the sequential trends you saw from the fourth quarter to the calendar first quarter in either the USM or the MRO businesses? Are you seeing – I know USM, you've talked about the lack of feedstock, there's limited growth there, but maybe in terms of unmet demand and the requirements that we've seen from the fourth quarter to the first quarter?

So we are seeing, as I mentioned, we are seeing an uptick in demand for material. Availability has still been scarce at attractive prices, as I previously discussed. One of the things that is different at this time is typically our repair cycle is 45 days for sending used serviceable material out. It feels like it's doubled at this point. And therefore, We have demand for some used serviceable material on the engine side, but we can't get the parts out of the shop. So until those engine shops or those parts component shops recover and bring back their employees, we're going to continue to experience a lag between the availability of our used serviceable material and the ability to put that used serviceable material in the market post-repair. So we are seeing demand uptick, but it is being slowed by the long lead time for parts resurfacing.

And just finally, when you think about pricing within USM, as we get to a situation in the summer where we see utilization go up, do you get a sense that airlines from a pricing standpoint might be a little more or pricing could be a little easier just depending upon the urgency at the airlines or what are the trends you're seeing on USM pricing into the spring and summer?

We don't see a significant change in pricing. Pricing has been consistent. We haven't seen any significant reduction in the parts that people need to buy. So I can't tell you that we've seen or expect to see a significant pricing in the material that generally moves quickly. Now, as more, you know, oh-by-the-way material comes onto the market, pricing on that will soften and as more – as the supply of that material exceeds the demand. But for the stuff that we put value on, you know, we continue to see strong demand subject to availability. And as aircraft recover – I'm sorry, as the industry recovers and there's more aircraft flying that demand parts, the stuff that typically moves will continue to move, and we believe it'll continue to move at consistent pricing, if not increasing pricing, because with the effects of COVID and what it's done to the industry, we're not seeing anything go down in pricing. Cost of material repair is not going down. If anything's staying consistent, I would expect at some point there'll be some upward pressure on material pricing, you know, for repairs. Not seeing it yet, but would expect to see that over time. So if material cost of repair is going to go up, cost of material is going to go up, inflationary costs, which we're not seeing yet, eventually will kick in. So, you know, we do expect to see a – we don't expect to see a softening in pricing. To the contrary, we expect to see, you know, pricing hold, and eventually pricing will escalate.

Great.

Thank you very much for the time. You're welcome, Ken.

We have reached the end of the question and answer session, and we'll now turn the call back over to Nick Finazzo for closing remarks.

Again, ladies and gentlemen, thank you for listening to our call this morning and for the great questions from Gotham, Pete, and Ken. We look forward to speaking to you all next quarter. Thanks again.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.