AerSale Corporation

Greetings and welcome to the AirSail Incorporated third quarter 2022 earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. If you have a question, please press the 1 followed by the 4 on your telephone at any time during the presentation. Should you require operator assistance at any time, please press star zero. As a reminder, this conference is being recorded today, Tuesday, November 8th, 2022. I'd now like to turn the call over to Kristen Gallagher, Human Resources Director. Please go ahead.

Good afternoon. I'd like to welcome everyone to AirSail's third quarter 2022 earnings call. Conducting the call today are Nick Finazzo, Chief Executive Officer, and Martin Garmendia, Chief Financial Officer. Before we discuss this quarter's results, we want to remind you that all statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of the federal securities laws, including statements regarding our current expectations for the business and our financial performance. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors that may cause our actual results performance, or achievements to be materially different from any future results. Important factors that could cause actual results to differ materially from forward-looking statements are discussed in the risk factor section of the company's annual report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 15, 2022, 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 investor section of the AirSail website at ir.airsail.com. With that, I'll turn the call over to Nick Finazzo.

Thank you, Kristen. Good afternoon, and thank you for joining our call today. I'll begin with a brief overview of the quarter, including operational updates, and I'll then turn the call over to Martin to review the numbers in greater detail. As we do every quarter, We believe it's important to remind investors that our financial results are typically uneven quarter to quarter, and we recommend our performance be analyzed on a full year basis. This results from the nature of our flight equipment sales programs, which tend to occur at irregular intervals throughout the year. The pacing of our revenue in 2022 is no exception to this phenomenon. as the timing of flight equipment sales created record first and second quarters, followed by a lower third quarter, with an anticipated strong finish to the year. The underlying growth and volume of our business has remained robust throughout this period, and I'm pleased to report that all but two of our flight equipment sales that were contemplated when we issued our initial 2022 guidance earlier in the year have now closed. I'll comment on the remaining two plans flight equipment sales in a few moments. Turning to the details, in the third quarter, we reported consolidated sales of 51 million, which compares to 73.3 million in the prior year period. Our adjusted EBITDA during the period was a loss of $500,000 compared to a gain of 13.9 million in the third quarter of 2021. As I noted, The lower sales during the period were entirely the result of the timing of flight equipment sales being pulled forward into the second quarter or delayed into the fourth quarter. Year-to-date, sales have grown 40.1% to $313.4 million, and adjusted EBITDA has increased 16.2% to $70.5 million. Excluding the effect on adjusted EBITDA from CARES Act support in the prior year, our adjusted EBITDA increased 53.6% year-over-year. We're proud of these results, and we're in position to finish the year as we anticipated. Turning to segment performance, beginning with asset management solutions, third-quarter sales were $20.6 million. compared to 48.9 million in the prior year period. During the quarter, our flight equipment sales were just 2.7 million, which included two engines, compared to 27.4 million in the prior year period, which included three aircraft and one engine. Looking forward, we have contracted for 12 additional Boeing 757 P2F conversions from multiple providers which will extend the P2F program through the end of 2023. Included in this 12 are the two aircraft I mentioned earlier that were part of flight equipment sales in our original 2022 guidance. We pulled these two aircraft from sale as passenger aircraft in 2022 to higher margin opportunities for their sale or lease as P2F converted aircraft in 2023. In our USM parts business, Airframe and engine part sales were lower than the prior year period, mostly as a result of extended turnaround times for overhauled parts. As we look out beyond the next couple of quarters, we anticipate USM sales to improve as we're able to execute on the broadening asset availability in the market. In our leasing business, revenue was flat compared to the prior year, as more engines on lease nearly offset lower aircraft lease revenue. In our tech ops segment, sales increased sharply by 24.5%, driven by improving results from our landing gear and component MROs, coupled with strong MRO performance at our Goodyear facility during the period. Regarding airware, we're making steady and consistent progress toward certification. We've now requested the FAA to schedule our final certification flights, which we expect will commence in the coming weeks. While we're excited to begin our final flight testing, we caution investors that performance of the flight test requires specific weather conditions to demonstrate the system. Potential weather delays and FAA availability notwithstanding, we anticipate we'll receive our Supplemental Type Certificate, or STC, shortly after completion of testing. Certification of airwear will make AirSail the first to certify a head wearable display as a primary flight display on a commercial transport aircraft. As we're nearing the commercialization phase of AeroWare, we've continued to step up our marketing efforts with airline operators. We're currently working with several potential launch customers to model the cost savings and efficiency benefits of the system. The capabilities of AeroWare are clear and compelling. An aircraft equipped with airware enhances safety and reliability, is expected to have lower greenhouse emissions, and can produce tangible cost savings to operators by limiting weather-related congestion and delays. Importantly, airware product availability couldn't be timelier for airline operators and other commercial air travel stakeholders, as the global airline industry struggles to meet higher passenger volume amid airport congestion and increasing weather-related delays. AirAware directly addresses and helps alleviate these important problems. In summary, with just a couple of months left in the year, we're on pace to reach our full-year financial guidance and are primed to deliver a strong fourth quarter. We'll soon bring AirAware to market with multiple potential launch customers, Our backlog of Boeing 757 P2F conversions remains robust, and we're very well positioned to continue our momentum into 2023. Now, I'll turn the call over to Martin for a closer look at the numbers.