FTAI Aviation Ltd.

Good day, and thank you for standing by. Welcome to the first quarter of 2026 FTIE Aviation Earnings Conference Call. At this time, all participants are in listen-only mode. After this previous presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference will be recorded. I would like to hand the conference over to your first speaker today, Alan Andrini, Investment Relations. Please go ahead.

Thank you, Marvin. I would like to welcome you all to the FTIA Aviation First Quarter 2026 Earnings Call. Joining me here today are Joe Adams, our Chief Executive Officer, David Marino, our President, Nicholas McLeese, our Chief Financial Officer, and Stacey Kuperis, our Chief Operating Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including EBITDA. The reconciliation of those measures to the most directly comparable GAAP measures can be found in the earnings supplements. Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements, and to review the risk factors contained in our quarterly report filed with the SEC. Now I would like to turn the call over to Joe.

Thank you, Alan. The first quarter was a solid start to the year for us, and we'd like to begin this morning by highlighting the key objectives for each of our businesses in 2026 and the progress we made during this first quarter. Across aerospace products, strategic capital, and power, we are scaling platforms with strong structural demand in a disciplined manner and deploying capital to support growth where we see the most attractive long-term returns. I'll start with aerospace products. First, a top priority for us in 2026 is to focus on accelerating our market share growth. As our production capabilities, parts procurement strategies, and overall MRE customer adoption reach an inflection point, now is the time for us to take full advantage of our competitive moat and focus on market share growth. As a reminder, we're only five years into building our aerospace products business, and as the business continues to mature and grow, we have the opportunity to leverage our enhanced execution capabilities to take more market share more quickly from traditional engine maintenance shops. Second, as the market for the CFM56 and V2500 engines continues to mature, we've seen a notable increase in demand for leased engine solutions from top-tier airlines. even those with in-house engine MRO capabilities. We offer flexibility, customized pricing and scale that no one else can fulfill, and these large programs are very sticky. It's a key priority for us in 2026 to win more of this business. Third is production. We've always talked about expanding production capacity well ahead of growth, as well as adding maintenance facilities in parts of the world where we see strong traction with our customer base. It's notable today that when you look at the map, we have no major maintenance facilities east of Rome, Italy. I'd expect this to look different when we are on next year's first quarter call. Turning to results, aerospace products results support the objective I just outlined with top line revenue growth accelerating both year over year and quarter over quarter up 104% year-over-year and 32% quarter-over-quarter, respectively. First quarter adjusted EBITDA of $223 million is an increase of 70% year-over-year and up 14% from $195 million in Q4 of 2025. EBITDA margins for the quarter of 30% are indicative of an increased mix of deals with large airline customers and a larger mix of full performance restoration shop visits. We expect this to be the trend line going forward as our capabilities have been built out and we're able to bring volumes to the market that others simply cannot. Shifting now to strategic capital where our top priority is completing the deployment of the 2025 SPV or special purpose vehicle. Our deployment pace for the first vehicle has been strong and our engine maintenance focused approach to adding value to aircraft ownership has been well received by the market. As we approach the end of the second quarter, the 2025 SPV will be fully invested and we will shift from the deployment period to the harvest period where quarterly distribution will now begin. David will share more with you about the goals for adding value to the portfolio during this phase. As an active asset manager, We're always pursuing ways to enhance the returns above what is the contractual lease stream. Our second area of focus for strategic capital is the launch of the 2026 SPV. We continue to plan to have a first close at the end of the second quarter and we'll start acquiring aircraft in the third quarter of this year. The investment strategy, 12 to 15 month deployment period and size of the vehicle will be consistent with the 2025 SPV. Last, to support the build of the strategic capital business, we've added to the team and now have over 40 dedicated individuals focused on sourcing, underwriting, and servicing the portfolio across offices in Dublin, Dubai, Cardiff, and New York. The growth ambitions and differentiated strategy around engine maintenance has resonated in the market. and we've been able to attract great talent to supplement our existing team and scale the platform. Finally, the F-Type Power business continues to make strong progress towards its commercial launch in the fourth quarter of this year. This week, we signed an important joint venture agreement with the Jera Group for packaging and customer conversions that are in advanced stages, both of which David will share more details about. shortly. Before I pass it over to David, I want to address the conflict in the Middle East that began at the end of February and the broader geopolitical environment our industry is navigating today. We are hopeful for a peaceful resolution and a return to more normal energy trading and prices, but we're also realistic about some of the challenges of today's environment. Beginning with aerospace products, our exposure to the Middle East is limited. less than 3% of our global current-gen narrow-body fleet is based in the region, and we have very little customer exposure. More generally, we've not seen any meaningful change in shop-as-a-demand to date. That said, elevated oil prices and fuel prices do negatively impact our customers' financial situation, and while this can create some volatility, it's the exact environment where our F-type value proposition becomes even more critical to the customer. When an airline is facing a multimillion-dollar engine shop visit in comparison to a faster, lower-cost engine exchange with FTI, the decision is even easier to make when liquidity is top of mind. It's also worth remembering that airlines cannot meaningfully change their fleets in response to short-term volatility. New aircraft orders are locked in for the next four to five years, and the current generation aircraft will continue to be a vital part of the global fleet for many, many years. In short, market share gains in aerospace products are much more consequential to us compared to overall market growth. For strategic capital, periods of volatility create opportunities, investment opportunities. When liquidity is tight, sale-leaseback transactions help raise funds and avoid future shop visits. As the only lessor in the world that covers all engine maintenance for its aircraft portfolio, We are uniquely positioned to help airlines in this matter. And lastly, for power, our business is largely insulated from the geopolitical dynamic today. The Mod 1, our product, runs predominantly on natural gas, and to the extent we see additional aviation retirements, it will just provide additional feedstock to grow our conversion efforts. So I will now hand it over to David Moreno.

Thanks, Joe. I will start by providing an update on aerospace products production. We refurbished 270 CFM 56 module this quarter across our four facilities, an increase of 96% compared to Q1 2025. This is a good start to our 2026 production goal of 1,050 modules and continues to reflect the hard work of our fast growing team. As Joe mentioned, we have built a strong aerospace products foundation over the last five years and we are ready to further accelerate our market share growth. From a commercial perspective, we are seeing customer engagements expand to larger, more programmatic partnership as airline adoption accelerates. This is driven by both the overall market tightness as well as FTI's capabilities continuing to broaden to now include engine and module exchanges, engine leasing, and aircraft leasing. We can't emphasize enough the stickiness that's created as our relationships with airlines and asset owners expand. We become a solution provider that is integrated into the operational plans for the airline's future growth. Our close relationships with airline customers is something we are very proud of, and we believe this will continue to accelerate our market share in the years to come. Next, I'll share a further update on our strategic capital. To support the full deployment of the 2025 SPV, we upsized the vehicle's warehouse debt facility at the end of March, adding $1 billion of committed capacity. This facility is now $3.5 billion in size across 10 lenders, creating a strong roster of partners for our significant debt capital needs in the business going forward. As we mentioned last quarter, capital deployment for the 2025 is largely complete. We have closed 165 aircraft as of the end of Q1, and after we sign a few LOIs that are in process, all new future aircraft will go into the 2026 SPV. With the 2025 SPV transitioning from investment mode to harvest mode, we are very focused on maximizing the value of potential cash flows for our investors. We do this through active management of maintenance events, both airframe and engines, as well as through lease extensions. We continue to see strong desire from our airlines to fly current-gen aircraft as long as possible, especially when they do not have to worry about engine shop visits. Our all-in-one solution of combining leasing and engine maintenance has resulted in many lease extensions, and we believe this will continue to be an important trend in the portfolio. Finally, on FTI Power, I want to share updates on the timing of our commercial launch, our packaging integration, and progress with customers. First, we remain firmly on track to commercially launch the Mod 1 in the fourth quarter, and our prototype testing is actually running ahead of schedule. We have completed all the major mechanical testing milestones, including testing our redesigned Mod 1 fan stage at synchronous speed, and we expect to wrap up final testing in the third quarter. The results to date have exceeded our expectations. We have been also hosting customers onsite to observe the Mod 1 prototype directly, and that has become an important part of how we sell this product. Second, as Joe mentioned, we signed a joint venture agreement with Jera group one of the leading packagers for mobile gas turbines. This is a foundational step for the program, as Jera will be our primary partner responsible for taking our turbine and combining it with the mobile package that includes the key components like the generator and gearbox. Through the joint venture, we will draw on Jera's manufacturing footprint across the United States, the UAE, Canada, and China, which gives a scale, geographic reach, and a clear path to global product rollout. The joint venture de-risks our supply chain, accelerates our speed to market, and aligns the incentives of both parties across the long-term success of the platform. Third, we are building a customer base committed to the long-term deployment of the Mod 1. The customer momentum we discussed last quarter has accelerated meaningfully. We are in deep and active negotiations with leaders across the energy and digital infrastructure landscape And every one of these deals is anchored by long-term service agreement, or LTSA, on the turbine. One exciting element is that customers are coming to us with a range of commercial structures in mind, from outright purchase to lease, which speaks to the flexibility of our model and the strength of the underlying demand. The interest in lease structure in particular fits naturally with our strategic capital initiative. and gives us the ability to offer customers a sought-after leasing solution while preserving capital efficiency. Several of these conversations are framed around multi-year, multi-block deployment plans, which gives us visibility well beyond 2027. Last, what has resonated most with customers is the maintenance model. The ability to swap a turbine in place in just two days rather than take the unit offline for an extended overhaul is a capability the power industry has not had access to before, and it translates directly into a lower levelized cost of energy or LCOE for the customer. Based on these conversations stand today, we expect to be mostly sold out of our 2027 target production in the near term, with a meaningful portion of 2028 spoken for. Before I hand it over to Nicholas, I want to take a moment to congratulate him on his promotion to CFO, as well as Mike Hazan on his promotion to CAO. Both Nicholas and Mike have been key contributors to our operational success, and their new leadership roles they are positioned to have a large impact on our future success. With that, I'll now hand it over to Nicholas to talk through the first quarter numbers in more detail.

Thanks, David. The key metric for us is adjusted EBITDA. We started 2026 with adjusted EBITDA of 325.6 million in Q1 of 2026, which represents a 17% increase compared to 277.2 million in the fourth quarter of 2025. The 325.6 million EBITDA number was comprised of 222.6 million from our aerospace product segment, 153 million from our aviation leasing segment, negative 50 million from corporate and other, including interest segment eliminations and startup expenses associated with our power initiative. Aerospace products delivered another good quarter with $222.6 million of EBITDA and an overall EBITDA margin of 30%. This is up 14% sequentially from $195 million in Q4 of 2025 and up 70% year-over-year compared to $131 million in Q1 of 2025, reflecting continued momentum from production growth and operating leverage. Turning to aviation leasing, the segment continued to perform well, generating approximately 153 million of EBITDA in the first quarter. This included 45 million of insurance recoveries, 12 million in gains on sale, 25 million from 2025 SBV management fees and co-investment returns, and 71 million from leasing assets held on our balance sheet. For insurance recoveries, in addition to the 45 million recognized in the first quarter, we continue to expect approximately 5 million to be settled later this year, consistent with our previously communicated 50 million for 2026. When combined with the 65 million recovered during 2024 and 2025, this brings total recovery since the outbreak of the war in 2022 to approximately 115 million, against the 88 million we wrote off in 2022. For gain on sales, we began the year with 127.5 million in asset sale proceeds, generating a 9% gain, or 12.1 million, as we closed the first 9 of 14 aircraft expected to be sold to the 2025 SPV this year and divested several non-core assets during the quarter, including airframes and an Orbi 211 engine. Overall, as we continue to launch new strategic capital vehicles on a programmatic basis, we expect the mix of leasing EBITDA to increasingly shift towards strategic capital-driven earnings as we further pivot away from balance sheet aircraft leasing and toward a more capitalized fee-driven asset management model. This shift in our business model is also driving continued improvement in our financial profile. We began the year at approximately 2.3 times leverage on an annualized basis, now below our targeted range of 2.5 to 3 times agreed with our rating agencies. and meaningfully lower than the average than the leverage levels approximately five times in 2022 and four times in both 2023 and 2024 before we pivoted to an asset-light strategy. In April, we also upsized our revolving credit facility from 400 million to 2.025 billion and extended the maturity of the facility through 2031 on improved pricing terms, providing FDI with a long-term source of liquidity. The facility was significantly oversubscribed and is supported by a diverse syndicate of 15 lenders, including several institutions that also finance the debt facility of our 2025 SPV. As we continue to scale our asset management platform, this alignment across financing relationships enhances flexibility, lowers our cost of capital, and delivers tangible financial benefits to the public company. Finally, in the first quarter, we generated $158 million of adjusted free cash flow. reflecting several strategic investments made early in the year to position the business for further growth in 2026. These included approximately $75 million in prepayments under our multi-year CFM56 parts agreement with the OEM, approximately $81 million in induction prepayments for V2500 engines, where demand for full performance restoration remains strong, and $19 million of incremental inventory for F-type power, to build working capital in support of a targeted 100-unit production run in 2027. Excluding these growth investments, adjusted free cash flow for the quarter totaled approximately $333 million, reflecting the strong underlying cash generation capability of the business. With that, I'll hand it back over to Joe for final remarks.

Thanks, Nicholas. I'd like to reiterate how encouraged we are by the start of 2026. Despite a dynamic geopolitical backdrop, demand across our customer base remains robust, execution across our three platforms is extremely strong, and the strategic investments we're making today position FTI well for continued growth in 2027 and beyond. While developments in the Middle East remain fluid and could present both challenges and opportunities, we continue to see strong underlying fundamentals across our business. and a durable competitive advantage in all of our platforms. Consistent with that view, we reaffirm our 2026 total business segment EBITDA outlook of $1.625 billion, comprised of $1.05 billion from aerospace products and $575 million from aviation leasing, supported by growing and accelerating demand across our proprietary aerospace offerings. Based on this outlook, we also remain confident in our expectation to generate approximately $915 million of adjusted free cash flow in 2026, which reflects continued execution against our annual production plan of 1,050 CFM56 modules to meet customer demand, while prioritizing excess cash flow for reinvestment in high return growth initiatives, including M&A, minority investments in the 2026 SPV, and the continuing development of FTI power. As a result of this confidence for the third consecutive quarter in a row, we're announcing an increase to our dividend from 40 cents per quarter to 45 cents per share per quarter. The dividend will be paid on May 26th to shareholders of record as of May 13th. This marks our 44th dividend as a public company and 59th consecutive dividend since we started. As we look ahead to the rest of 2026, our focus remains on building a durable, scalable, and differentiated platform that delivers value over the long term. The investments we are making across aerospace products, strategic capital, and power are designed to strengthen our competitive position, expand our addressable markets, and support sustainable growth for many years to come. And I want to recognize the teams, the fabulous teams across our organization for their continued focus on execution and delivery in a demanding operating environment. And I also want to thank our customers and partners for the trust they place in FTIE as we help them navigate capacity constraints and rising demand and our shareholders for their ongoing support as we continue to scale our business. We are focused on executing against the opportunities in front of us and remain confident in FTIE's ability to deliver. With that, I will pass it back to Alan.

Thank you. Thank you, Joe. Marvin, you may now open the call to Q&A.

Thank you. At this time, we'll conduct a question and answer session. As a reminder to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Sheila Carriago of Jefferies. Your line is now open.

Good morning, guys, and thank you. Nice quarter. I have two questions, if that's okay. First one is on aerospace products. You know, market share continues to climb higher, up from 10% to 12%. While the margin rate is healthy but has taken a step back, can you maybe talk about some of the puts and takes, how much came from higher work scope versus the market share in new customers?

Yes. I mean, we really don't have a specific breakout of the components. It's really a mix of things that go into it. And as we mentioned previously, as the customers get bigger, the potential orders get bigger, the work scopes get bigger. We're consciously going for a higher market share and to drive faster growth in EBITDA and an absolute dollar amount. And we think that moves the needle much more than anything else. And really the opportunity to take advantage of this scale that we have today and really capture as much of the market as possible is something that we've been working hard to get ourselves in position to be able to do for years. And we feel like we're there at this point.

Yeah. And this is David to add to that, right? I think, as Joe mentioned, the scale is intentional. It's obviously intentional on the aerospace products, but it's also intentional across the value it creates on the entire business, our strategic capital and our power business. So when we look about and think about the value creation, there's no better lever than increasing market share for us as a top priority.

Great. And then maybe, David, you mentioned much of the 27, 28 modules should be committed to in the near term. Can you give us some flavor of what your customer set looks like and the underlying assumptions in terms of volumes and packaging capability as you get into the 2028 timeframe?

Yep. Yeah. So we've made meaningful progress with customers. As I mentioned, we've had customers on site as well to, you know, look at the prototype, understand that. I think that's a very important piece of the sales process. So to give you a little more color, the customers really consist of four types of customers. Number one, hyperscalers. Number two, data center operators. number three, gas distributors, and number four, financial sponsors. There's a lot of activity from financial sponsors who are providing a lot of capital in this space. We feel very good about being where we're at, and we expect to be, as I mentioned, in a short matter of time, sold out of 2027 volumes. The conversations we're having are beyond 2027. They're multi-year, multi-block conversations. So we're talking about you know, conversations or orders, you know, to 2028 and beyond. And I think that's a very important piece is when we built this, we wanted to create a diverse group of customers really with the intention of having them operate this base load for a long term. And I think we've seen that and, you know, we're very happy with the progress. And, you know, as I mentioned, I think we're kind of in the final steps here and we hope to, you know, update you guys shortly.

Got it. Sharing aerospace and power. Makes sense. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Ken Herber of RBC. Your line is now open.

Yeah. Hi. Good morning, Joe and David and Alan and Nicholas. Hey, maybe Joe or David, can you just talk a little bit more about the relationship with your JV partner, Jera Group, and maybe how that came about, why you picked them, and the value uniquely they sort of bring to this F-Type power opportunity?

Yeah, this is David, Ken, so I can take that. Yeah, we're very excited about our partnership with Jera Group. They're one of the largest oil and gas equipment manufacturers across the world. And what they're going to be doing with us is they're going to basically handle everything except the turbine, right? What that means is the actual trailer, all the key components on the trailer, including the generator, the gearbox, and all the controls. And that will allow us to focus on the Mod 1, which is obviously our specialty around the turbine. You know, Jera, we selected Jera because of their scale in manufacturing. They have manufacturing facilities across the U.S., Canada, the UAE, and in China. So that scale is obviously an important theme, and it's something that you know, we're going to continue to talk about, as well as they have a lot of experience with aero derivative packaging. They've packaged turbines for, let's say, folks like GE Vernova, Baker Hughes, Siemens, and that, you know, they can create a lot of value in everything but the turbine. So I think it's a really good marriage between both companies, and we have shared incentives to continue to, you know, work and scale this business together.

Does the work with Jera at all impact sort of your access to the post-sale economics when we think around maintenance and spare parts and other ways to sort of monetize, obviously, the F-type power?

Yeah, I would say there's no real change to how we've talked about economics, right? So the overall unit economics will remain roughly the same or in line. Right. But obviously, a part of this will come through a joint venture. So the way that it will look on the face of the financials may be a little different, meaning revenue may be slightly lower. And then we'll have, you know, earnings, a piece of this earnings through earnings in a joint venture. But overall, the unit economics remain the same. Obviously, as part of, you know, the group handling the packaging, that means for us, we'd have to invest less in working capital around the packaging piece of the equation, which is obviously a good part. But overall, they're best in class. They can package at scale, and they're vertically integrated, so they add a lot of value there. So it does not have any impact on our overall margins. And the LTSA? Yeah, and I think we talked about this on the call, but we're obviously very focused on the long-term service agreement when we talk about economics to FTI on the turbine. What that is is effectively customers will pay for us to service the turbine, and I would think of that as very similar type as our aerospace business, where effectively customers will pay us based on usage. And depending on usage, every three to six years, turbines will have to get replaced. And we're going to be handling that through our exchange business, which we're very excited. And what that means is effectively we can replace these turbines in two days or less. And we're excited because typically the lead times of doing maintenance on turbines is actually... a bit longer than the aerospace business. So we think that's going to be a huge competitive advantage, as well as a revenue stream, which we're very excited about. Thanks, David.

One moment for our next question. Our next question comes from the line of Christine Leeway of Morgan Stanley. Your line is now open.

Hi, good morning, everyone. Maybe David, since you're talking about power, I just want to touch a bit more on some of the things you said. So one, I just want to clarify, when you said that you're mostly sold out for 2027, does this mean that these things are accounted for and you're just waiting for ink to dry on the orders? That's the first question. And also the second question, can you provide more color in terms of how your interactions are with these hyperscalers? What's important to them? When you talk about being able to service these engines, Are these turbines at a shorter period, is that a key differentiator? Are they valuing this? And ultimately, how competitive is your offering to what they're considering right now? Thanks.

Yes. Yeah, so we're in advanced negotiations. I'd say we're in kind of the final steps, and we expect, let's say, to be sold out imminently. So that's the first question. As far as the second question, what differentiates our product and what's important for our customer, really, it's three things, right? Number one is speed to power, right? So customers want units now, right? There's really a shortage of equipment out there. And our unit is mobile, and it can be installed in less than two weeks. So that's a big value add. Very different than, let's say, an EPC or construction that takes, let's say, you know, can take up to 18 months. Number two is scale. Customers want scale. I think now, you know, between our ability on the turbines as well as Dara's ability on the packaging, we have really scale that no one has today. And then number three is really reliability of the product, which includes, obviously, the reliability of the turbine. So it's the CFM56. It's the most durable engine ever produced. And then as well as the maintenance or the servicing of it, which is a huge advantage, right? Ultimately, if you can service a unit in two days versus six months, that ultimately means you need less units and it's lower operating costs for a customer. So all that's very important. And I think they're very excited about the Mod 1. And again, we've really been thoughtful about building the customer base, not just thinking about 2027, but thinking about the longevity of this platform.

Super helpful, David. And then, you know, you guys have historically talked about the power margins would be better or equal than aerospace products. You know, with your investment now in higher market share for aerospace products within the margin pressure that that's yielding, can you talk about where you think power margins could be in the long run? I mean, compared to when you guys have talked about the power initiative, this ability to turn around the maintenance in one to two days seems like a very significant opportunity. So does that materialize in better pricing, better margins? Anything to level set us on power margins and what to expect for 27 and 28 would be helpful. Thanks.

I would say our margins, right, when we talked about it, are going to be in line to our historical aerospace margins, right? So I would say there's no changes, you know, based on, you know, our growth in market share on aerospace that has no impact on power. You know, we're obviously going to be providing more color as we progress through the specifics of these contracts, but you're right. The long-term service agreement is a key differentiator. It's really value-add for the customer, and for us, it's recurring revenue, right? Really sets up a long-term base. Typically, the type of contracts we're going to enter are going to be long-term in nature, right? So let's say 10 years plus, and I think that's a very important piece because it's not only the day one sale, but it's also the ability to provide services on that equipment, which is a huge differentiator for our customers and something they prioritize when talking to us.

Great. Thank you very much.

Thank you. One moment for our next questions. Our next question comes from the line of Juliano Bologna of ComputePoint. Your line is now open.

Good morning, and congratulations on the continued impressive results and the scaling of the business. One thing I'd like to focus on is the real acceleration in the module count in producing 270 this quarter. Can you tell us more about what's driving that acceleration in the module production? Because it seems like a pretty impressive acceleration in your production volumes. And be curious about the durability and where things go from there, because it does hit very well versus your standard targets for the year.

Yes. No, no. We're proud of the execution from the team, right? And as we said all along, right, we've been really focused on execution, and that includes adding the capacity, which we've done. Number two is the people, right? We've been focusing on adding the right people, and we talked about the training academy, so that continues to be humming. And then obviously number three is execution. So we're very excited. I think that's playing out in the numbers. As you mentioned, we went from 138 Modules in Q1 in 2025 to 270. So, you know, pretty dramatic increase year over year. And I would point out that Rome and Lisbon are still, you know, ramping up. So I think we see a lot of momentum from those facilities and a lot of, you know, growth coming. So we're very excited. I think Joe also mentioned this earlier. We continue to look for additional capacity east of Rome. I think that's a key priority for the business. We want to get ahead, well ahead of capacity, you know, as we continue to go for market share.

And I think also having a parts supply deal from the OEM helps us scale as well. And that, you know, that's a huge provider of parts. You need parts people and facilities to build an engine. And so we've really concentrated the last year on all three of those. And, you know, the result is we're able to double production year over year.

That's very impressive. I appreciate the time. I'll jump back in the queue. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Josh Sullivan of Jones Trading. Your line is now open.

Hey, good morning.

I just wanted to touch base on the conflict in the Middle East. I know your exposure is pretty limited. But if this is a projected broader event, you know, given the cost saving tools that FDI offers, are you seeing any early conversations with new customers who might feel they're exposed to preparing?

Well, I think, I mean, when you get in these environments, liquidity becomes, you know, number one, two, and three for airlines to focus on. And so anytime that happens, you start having inquiries on salee spec, opportunities, asset sales, avoiding engine shop visits. So yes, it's a direct result of when you get into these environments, the priorities change for the airline's customers and we're there to partner with them. We're always offering help. We've done this in other past crises. If you think about COVID or back when airlines had been the Russian situation. So we've We're always flexible, and we have a lot of access to capital, and we can save. So we really go in and try to sort of sit down and work with the client, figure out what they need and what we can do and how to help them as opposed to sort of an adversarial relationship. It's really a partnering approach, which has worked very well.

And then I guess kind of relatedly, are you seeing any acceleration in engine assets for sale in the Middle East or Europe becoming available as a result of the conflict? And I guess it's really a question on, you know, the retirement dynamic and how that's playing out in your view.

Yeah, no, it's early, so we're not seeing that yet. As Joe mentioned, obviously for us, you know, we want Airlines to do well the whole entire aviation industry is better when airlines are doing well, but we're well prepared You know with with the tools that we have right? I mean Joe covered it But the ability for us to you know, do a sale lease back with engine management really has two benefits It's day one you create liquidity and day two you avoid the expensive shop visit So we're really one of one that can execute at that scale and So it's still early, but we're prepared to help when the time is right.

I mean, the only things you see in the beginning are if people are flying, you know, A340s or 747s or sometimes some regional jets that are either, you know, really high cost or low revenue, those can be taken out of operation. And that's sort of what you see in the early periods. But, you know, core fleets that people need to operate their schedule and They plan over multiple years, and you can't get replacement capacity. It's been such a tight market. You know, we don't expect to see much, if anything, on that changing in the next few months, even if this goes on. Great.

Thank you for your time. Thank you. One more for our next question. Our next question comes from the line of Brandon Oklinski of Barclays. Your line is now open.

Hey, good morning. Thanks for taking the question. Joe, can you speak maybe a little bit more on the customer profile of these larger airlines that you had in the quarter and, you know, looking forward as you seek to get more market share here? I think this might actually be very much a validation of the model that you have here, but I don't know, maybe you want to elaborate?

Yeah, and it's a great question because I mentioned last time that if I was talking to some of the big airlines 12 or 18 months ago, they would have been somewhat, you know, we don't need this product and we're a little bit more dismissive, but now We talk to airlines. Virtually everyone in the world is a potential customer, if not an actual customer today. And the reason is you can go to an airline and say, you tell me what you think you're going to spend to rebuild an engine, and I'll match that price or beat that price for you, and I'll get rid of all the expenses you have to incur to manage that event, like spare engines, engineering department's and the risk that the cost, you know, becomes, you have a negative surprise and a cost overrun, all that goes away. It's like, who wouldn't want to do that? You know, so it is a great pitch. So when airlines, you know, hear that and they think about it and say, you know, why shouldn't I, particularly if I'm, you know, moving into the new technology, the Leap, and even if I have my own, you know, maintenance capabilities, why shouldn't I begin to use this product at least, you know, for a portion and then And then ultimately a conversation becomes, well, if you like it for, you know, 10% of your fleet, why not 100% of your fleet? And we have conversations now where we go into an airline and we might have acquired some aircraft on lease to an airline through SCI. And the airline says, we go and say, great news. You never have to do another engine shop visit on that fleet ever again. So you don't have to fight with your lessor and don't have to you know manage the engine shop visit and end up spending a lot more money and they like that's fantastic why don't you go try to buy all of my other leased aircraft from other lessors and convert those and so they're actually helping us you know to to expand the relationship and ultimately the goal is to manage for an airline their entire fleet and once you get to the level of comfort is like why wouldn't they want to do that so So I would say virtually every airline in the world, I can't think of maybe a handful that might not, but almost everybody in the world is an actual or potential customer.

Thank you for that, Joe. And Nicholas, I think you, and congrats on the new role, but you improved liquidity with a larger revolver, but I think also enhanced the warehousing facility on FCI. Is that correct?

Yep, thanks, Brandon. So I think it's probably important to clarify first they are two independent facilities from each other. So the revolver is related to the public company and is the primary source of liquidity. The warehouse upsize is all related to closing out the deployment of capital for SEI1 as we tracked about 6 billion number. But said that, we do have lenders in both facilities across them. And then so as we become a bigger and bigger player on the SEI, we're able to see financial benefits. And we're both very pleased with the outcome of this is that we're able to improve terms on the public company, given we're becoming a much larger player on the SEI.

Can you just put that in context of your expected capital commitments or capital calls at the corporate level looking out the next year or two?

Yeah, so for the first SEI, we have 19% of the $2 billion that we closed earlier in the year. The capital pool for that, there's approximately $95 million remaining from that as of 3-31. We do expect that to be closed by Q2, and that will fully close out. As a reminder, SEI-1 is a closed-end fund, so once we commit that capital, we'll then switch from being in investment mode to harvest mode. And at that point, we'll start doing distributions back to all of the institutional LPs, including FTI for its 19%. Related to SEI2, we are actively now in the equity fundraising mode. So from that, we will expect to deploy capital in the second half of the year. But the timing of that will ultimately relate to the cadence of when we first do our equity closing.

Thank you. Thank you. One moment for our next question.

Our next question comes from the line of Brian McKenna of Citizens. The line is now open.

Okay, great. Thanks. Good morning, everyone. So there's clearly not a lot of noise across private credit today, although most of that is within corporate direct lending. But what are your dialogues like today for SCI2? We've been hearing that institutional allocators continue to deploy capital in a big way across private credit, despite all the rhetoric out there specifically into ABF opportunities. So I'm curious what you're seeing on this front. And then from your seat, What's ultimately driving such strong demand for your product?

Well, I would say ultimately it's returns. And these are, you know, we're not seeing any impact from, you know, whatever the private credit side is experiencing in withdrawals or redemptions because our investors are all, you know, committed into private equity style vehicles and non-redeemable structures. So It has no impact on our ability. And really what people like is an uncorrelated asset-based, you know, return that has high contractual cash flows. And that's a sweet spot in the market. It always has been. And we hit that, you know, perfectly. And what we're able to show people is a higher return with lower risk, which is another, you know, thing that every investor I've ever met is always trying to find that. So we're able to show better returns than a traditional approach given our engine maintenance exchange program and lower risk because we have less residual value exposure. So there's really nothing. What we offer is a great product in today's world. And all of the investors in the first SPV or we're doing this with an idea that it would be a program and they would be able to do this over, you know, multiple funds over the next few years and they're seeing great returns and so they're very happy with what we've been able to do and are very committed to continuing to invest.

That's helpful. Thanks, Joe. And then you're clearly building a great network here of alternative asset managers and large institutional allocators for SCI. But I'm curious, a lot of these large investors also own or are invested in data centers and energy-related infrastructure. And I think you guys alluded to this a little bit, but is there an opportunity to leverage some of these relationships on the SCI side to further enhance the adoption and distribution of your power product over time?

Yes, this is David. And the answer is absolutely. So we're We've talked about the demand being a lot of demand for leasing, long-term leasing. And we're thinking about it very similar to the way that we think about our aviation business, where we can create these long-term contracted cash flows. And then our capital partners are very much wanting to invest in these type of assets. So we feel very good about being able to scale that. And I think that's a very capital-efficient way to do so. So absolutely. Absolutely.

It also further differentiates our product because most equipment, you know, sellers don't offer financing. And so we, when we go to the customer, we say, like we did in aviation on the power side, you can either buy it, you can lease it, or you can have a power purchase agreement. You tell us what you want. And that flexibility is hugely beneficial to today's world where there's, you know, a lot of demand for capital, as you can see, and people are trying to figure out how to make it go farther. So The flexibility that we can offer on the financing is extremely well-received, and it's a perfect structure for an SCI power vehicle.

All right. I'll leave it there. Thanks so much.

Thanks. Thank you. One moment for our next question. Our next question comes from the line of Shannon Doherty of Deutsche Bank. Your line is now open.

Hey, good morning. Thanks for taking my questions. First one for Nicholas, and congratulations on your new role. After the additional $5 million of expected insurance proceeds this year, will you be completely finished with the insurance claims?

Thanks, Shannon. Yes, that's correct. So we settled on $44.6 million in Q1, of which we received $27 million of that. The balance of that will be received in Q2 from cash proceeds. And then remaining that $5 million is consistent with their original guidance of $50 million. After that, that will be ultimately it and closed.

Great. Thanks for the clarification. And for my second question, any update on the progress of getting the remaining PMA parts approval with the FAA? We all know that parts inflation is an issue for everyone in the industry right now, so maybe you can provide us with some more color on levers that you can pull to manage costs. Thanks for taking my questions.

Great. Sure. So, I mean, just to recap, there are five parts in total that Cromwell had been working on. Three are approved. Those three represent about 80% of the total cost savings. So the last two parts are in process to getting approved. But the majority of the cost savings is already, you know, with parts that are already available and in the market. So, but they are in, you know... in the works in terms of getting approval for those last two.

Thank you. One moment for our next question.

Our next question comes from the line of Myles Walton of Wolf Research. Your line is now open.

Hi, good morning, everyone. This is Greg Dahlberg on for Miles. I just had a quick follow-up on Giuliano's question regarding module production. I wanted to focus more on Miami and Montreal specifically just because it looks like Montreal is down sequentially in 1Q and Miami was well above the full-year run rate. So can you just talk about the dynamics specifically in 1Q and kind of how those play out through the year?

Yes, I can take that. So Montreal is our most mature shop, which that means they're going to handle the heaviest work scopes. So the product production mix is based purely on work scopes. So Montreal is doing, let's say, heavier shop visits, while Miami is doing a bit lighter, and then Rome today and Lisbon are doing the lightest work scopes.

Got it. Thank you. And then a quick one for Nicholas. Just given the corporate expense in 1Q was embedded with some of the power costs, can you talk about the full year expectation?

Yep. So we had approximately $10 million in incremental expenses related to power. That's R&D expense, but that's also incremental headcount from building out the teams of engineers, technicians, and support staff. So decomposing that, you can assume that we will be approximately slightly less on an annualized level related to that for 2026. But as in the future years, we plan on growing this into 100-unit production growth, we will be increasing headcount. So in outer years, you can expect that our expenses for power will continue to grow. But ultimately, there's some one-time expenses in Q1, Q2, Q3, as we do R&D that will immediately hit our P&L rather than being capitalized.

But probably in 2027, it'll be a segment, and we will not have it in corporate.

Yes, that's correct.

It'll be a sizable business, and we'll set it up as a separate reporting segment. And so all those expenses will be attributed, allocated to the power business at that point.

Got it. Thank you.

Thank you. We'll move on to our next question. Our next question comes from the line of Andre Madrid of BTIG. Your line is now open.

Yeah, thanks. Good morning. You know, this is the first quarter in a while that I can remember at least that we didn't see some kind of acquisition being announced. Obviously, it still remains a capital deployment priority. I guess just could you give more color as to what the M&A pipeline looks like? Maybe, obviously not too deep in the details, but colors around, color around scale and maybe geographic location and capability?

Yeah, I didn't realize we built an expectation that we have an M&A until every quarter. But it is hard to, you know, control that. But I would say, you know, an M&A, the activity is in two different categories. This one is adding capacity to the overhaul business. And, you know, we did allude to the fact that we expect by this time next year that we'll have another facility somewhere east of Rome, Italy. So we do have some candidates. We're working on that. It's often hard to control the timing on M&A, but we've been very disciplined and we've found great assets to add. And when we get the right structure and the right asset, we can move quickly. So we We're working on deals in that category. And then the second area where we've been active is in piece part repair and part manufacturing. And we have several deals that we're looking at in that space as well. So we'll continue to vertically integrate in our product offering any time we can undertake an activity to reduce the cost of overhauling and building an engine. We're going to be very aggressive about that. And, you know, we've added – last year we added Pacific Aerodynamic and Prime through the Bauer partnership. So we'll keep looking and hopefully add, you know, additional capability in the repair and piece part manufacturing business in the future.

Awesome, awesome. Appreciate the color. I'll leave it there. Thanks, Joe. Yep.

Thank you. I'm sorry, no further questions at this time. I'll now turn it back to Alan Andrini for closing remarks.

Thank you, Marvin, and thank you all for participating in today's conference call. We look forward to updating you after Q2.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.