Fortress Transportation and Infrastructure Investors LLC Common Shares

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Fortress Transportation and Infrastructure Investors LLC third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's 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 keypad. At this time, I would like to turn the conference over to your host, Mr. Alan Andrini. Sir, please begin.

Thank you, Howard. I would like to welcome you all to the Fortress Transportation Infrastructure third quarter 2022 earnings call. Joining me here today are Joe Adams, the CEO of FTI, and Angela Knob, the CFO of FTI. 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 supplement. 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.

Thanks, Alan. And I'm pleased to announce our 30th dividend as a public company and our 45th consecutive dividend since inception. The dividend of 30 cents per share will be paid on November 28th, based on a shareholder record date of November 14th. Also, please note FTI successfully completed the spinoff of its infrastructure business on the 1st of August of this year. Historical financial condition and the results of operations related to the infrastructure business prior to this spinoff date have been disclosed under discontinued operations within the consolidated financial statements. Now let's turn to the numbers. The key metric for us is adjusted EBITDA. Adjusted EBITDA was $108.9 million, down 24% compared to $143.7 million in Q2 2022, and up 25% compared to $87.2 million in Q3 2021. The above numbers are for consolidated FTI, which includes both leasing and aerospace products. Starting this quarter, we will be presenting leasing and aerospace products as separate segments going forward. Let's start with leasing. Leasing had a good quarter, posting approximately 96 million of EBITDA. The pure leasing component of the 96 million of EBITDA came in at 75 million for Q3, down from 87 million in Q2 as expected. The principal reason for the decline was due to the sale of approximately 145 million of book value of assets in Q2 and Q3 attributed to our cargo campaign sales, in which we sold five aircraft and 30 engines. With very strong demand for assets, and the addition of some new acquisitions, which we'll talk about later, we expect Q4 will rebound. And next year, 2023, we're very confident in leasing EBITDA of 350 to 400 million for the year, excluding gains on asset sales. Part of the 96 million in EBITDA for leasing came from gains on asset sales, which also performed as expected. We sold 64.9 million book value of assets for a gain of 20.6 million. We have more asset sales coming in Q4 to recycle capital invested in some of 2021's larger acquisitions. In addition, we'll continue to make freighter sales to capitalize on the continuing robust freighter market. We're very comfortable assuming gains on asset sales continuing at approximately 25 million per quarter or 100 million for all of 2023. Aerospace products had another solid quarter with 19 million of EBITDA. We started these activities only a little over a year ago, and in the last four quarters have booked approximately 70 million in EBITDA without any contribution from PMA. We see tremendous potential and feel good about generating 20 to 30 million in quarterly EBITDA and think 100 million plus in 2023 EBITDA to be very doable. We feel confident about this number because we're seeing a rapidly expanding backlog of aerospace products business with other leasing companies, MROs or maintenance repair organizations and airlines. With respect to Q4, we have begun closing the sale of 200 million in assets and have signed letters of intent to purchase $300 million in new assets also in Q4. The net pickup and leasing EBITDA from the new investments minus the give up from the sales, we estimate to be $40 million per annum or $10 million per quarter. Importantly, two of these asset sales involve FTIE retaining the engine services contract on behalf of the buyer. which should generate $1 million per annum per aircraft or 10 million total per annum of aerospace EBITDA over the remaining lease term of approximately eight years. After three years of macro trade headwinds, we now have macro factors that are greatly helping us. First, OEMs have instituted mostly double-digit percentage price increases for parts effective this quarter, and parts price increases creates more opportunity for our cost-saving products to increase market share for us. And since service shop visits costs are predominantly parts, the replacement value of our engines goes up correspondingly. Second, many airlines are trying to reduce expensive full engine restorations and instead increase module swaps and light shop visits that do not require disassembly, which plays right to our strength and into our products. Thirdly, delays in new aircraft deliveries are creating scarcity of 737 NGs and A320 COs, which will drive strong demand for 737 NGs, A320 COs, and importantly, CFM 56 engines for many years to come. And fourth, industry demand for travel has returned to almost pre-COVID levels. Regarding PMA or parts manufacturing authorization, there is no change in our planning, which includes a full complement of airfoil parts becoming available throughout next year. In summary, it feels like we're finally operating in an environment with strong tailwinds. We managed through the COVID disruptions, followed by Russia, Ukraine, and we'll have our portfolio optimized by this year end. And with demand for air travel surging globally, combined with proprietary cost savings aerospace products, 2023 is shaping up to be an outstanding year. With that, let me turn the call back to Ellen.