AerSale Corp Q3 FY2023 Earnings Call

Good day, and welcome to the AerSale, Inc. Third Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Jackie Carlon, Vice President of Marketing and Communications. Please go ahead.

Good afternoon. I'd like to welcome everyone to AerSale's third quarter 2023 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 Factors section of the company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 7, 2023, and its other filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward-looking statements on this call. We'll also refer to non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of those non-GAAP metrics to the nearest GAAP metric can be found in the earnings presentation materials made available on the Investors section of the AerSale website. With that, I'll turn the call over to Nick Finazzo.

Thank you, Jackie. Good afternoon and thank you for joining our call today. I'll begin with a brief overview of the quarter and provide operational updates before turning the call over to Martin to review the numbers in greater detail. Our consolidated third quarter results improved notably over the second quarter and the prior year. In total, we reported sales of $92.5 million, an increase of 81% against third quarter 2022 sales of $51 million. This increase was largely the result of flight equipment sales in the period, which included $38.9 million of engine sales. Sequentially, sales increased as we were able to monetize the strong levels of feedstock acquired over the past 12 months, which included both engine and aircraft flight equipment sales during the period. While we are pleased to see the increased volume, third quarter results trailed our internal forecast expectations as several additional flight equipment sales slated for the third quarter are now expected to close in the fourth quarter. As we do each quarter, I would like to remind investors that our quarterly results tend to be lumpy because of the timing of flight equipment sales. Therefore, assessing full year time periods and feedstock acquisition rates are both better analytical tools to our performance than year-over-year or sequential revenue patterns. Turning to profitability. Adjusted EBITDA in the third quarter was $1.9 million, compared to a loss of $0.5 million in the year-ago period. The improvement in EBITDA performance was the result of higher flight equipment sales during the period and better USM volume. At the segment level and beginning with Asset Management, third quarter sales were $65.1 million compared to just $20.6 million in the prior year's quarter. Higher sales compared to 2022 reflected the monetization of feedstock acquisitions with the growth stemming from increased flight equipment and USM part sales, partially offset by lower revenues from our leasing portfolio. In the current year, we sold 7 engines and 1 P2F converted 757 aircraft during the period compared with 2 engines and no aircraft in the prior year. In addition to the flight equipment sales delivered in the third quarter, there are two aircraft, a highly modified 737-800 and a P2F converted 757 aircraft we expected to deliver in the third quarter that are now expected to be delivered in the fourth quarter. Looking forward, with the aircraft and engines planned for delivery in the fourth quarter, we anticipate a solid finish to the year for flight equipment sales with an additional 18 in the pipeline expected to close before year-end. Turning to an update on the cargo market. Conditions continue to be unfavorable as higher interest rates and lower air cargo demand create a dramatically different backdrop than what we experienced during and immediately following the pandemic when consumer demand for physical goods peaked. To date, we've sold 8 aircraft under our 757 P2F conversion program and currently have an additional 10 aircraft in inventory waiting for delivery or conversion. Consistent with our communication last quarter, given the current end market conditions, we anticipate these will take longer to place than originally forecasted at the start of the year, and expect a higher mix of aircraft will be leased instead of sold. In our USM parts business, airframe and engine parts sales nearly doubled compared to the prior year, which is the direct result of the success of our feedstock acquisition program converting to sales. Year-to-date, we've closed on approximately 130 million of feedstock with a total of 200 million acquired or under contract. This compares to the first 9 months of 2022, which included just 34 million of feedstock. Elevated feedstock levels drove higher sales in the third quarter, which is expected to continue in the fourth quarter and into 2024. Finally, in our leasing portfolio, we had no aircraft and 7 engines on lease during the period compared to 1 aircraft and 17 engines in the year-ago period. Because we're continuously monitoring the best and highest use of our flight equipment, we opportunistically sold some of these assets, which provided a higher return profile than continuing to lease. In our TechOps segment, we reported sales of $27.4 million compared to $30.4 million in the third quarter of 2022. Lower sales resulted from fewer aircraft in storage and the completion of several large customer programs at our aerostructures and landing gear facilities. This work at our landing gear shop has since been replaced by a larger long-term program with a major U.S. airline that began in the fourth quarter. At our aerostructure shop, we're onboarding new customers to fill the additional capacity made available after moving into our new building, which is almost triple the size of our current facility. Turning to Engineered Solutions, we're near the conclusion of the FAA approval process of our enhanced flight vision system, AerAware. At this time, all tests have been completed and we're working through documentation review and completion of final checklist items in anticipation of the issuance of the STC by the FAA. In addition, in late October, we announced that we received FAA approval for a 50% visual advantage over the naked eye, which will make AerAware the first and only product available with this level of visual advantage. We're proud of this award, as it validates the primary benefit of AerAware, offering a compelling value proposition to our customers, as the system enhances safety, lowers operating costs by minimizing weather-related delays and fuel consumption, and provides associated environmental benefits by lowering carbon emissions. Turning to capital allocation, we have a healthy, almost unlevered balance sheet enabling continued funding of our acquisition programs to sustain business growth. To date, we have acquired roughly 130 million of feedstock and ended the quarter with approximately 175 million of liquidity consisting of cash on our balance sheet and remaining revolver capacity. Further, as we continue to monetize the feedstock already acquired, we anticipate an increase in free cash flow generation net of any additional feedstock purchases. In conclusion, our third quarter results have shown significant improvement over the previous quarter and the same period last year. Our growing feedstock availability is driving better quarterly performance and flight equipment sales. Given the success of our feedstock acquisition program in 2023, resulting in the significant volume of inventory we currently have available to convert to sales, we anticipate this trend to continue into the foreseeable future. We anticipate a strong fourth quarter as we finish the year with flight equipment sales expected to continue their positive momentum. I would like to thank our employees for their dedication to AerSale and their efforts in delivering on our commitments to all stakeholders. Now I'll turn the call over to Martin for a closer look at the numbers.

Thanks, Nick. I will start with an overview of our third quarter financial performance and end with our updated guidance for 2023. Our third quarter revenue was $92.5 million, which included $44.8 million in flight equipment sales, consisting of 7 engines and a P2F converted Boeing 757 aircraft. Revenue in the third quarter of 2022 was $51 million and included $2.7 million of flight equipment sales consisting of only 2 engines and no aircraft. As we have pointed out during multiple earnings calls, flight equipment sales may significantly vary from quarter to quarter. And we believe monitoring our progress based on asset purchases and sales over the long term is a more appropriate measure of progress. Third quarter Asset Management revenue rose to $65.1 million because of the increase in flight equipment sales I just mentioned. USM part sales were up from the year-ago quarter because of higher demand and availability of feedstock, which was partially offset by lower revenue from leasing. TechOps revenue was down 9.8% to $27.4 million in the third quarter from $30.4 million in the third quarter of 2022. Our TechOps business was adversely impacted by fewer customer aircraft in storage as compared to prior periods and weaker contributions from our aerostructures and landing gear facilities. This was partially offset by greater revenue associated with increased on-airport MRO capacity dedicated to customer aircraft, which was enabled by outsourcing the P2F conversions of our 757 aircraft. Third quarter gross margin was 25.4% compared to 30.4% in the third quarter of 2022, primarily driven by the mix of flight equipment sales. Selling, general, and administrative expenses were $25.4 million in the third quarter of 2023, which included $3.2 million of non-cash equity-based compensation expenses. Selling, general, and administrative expenses were $24 million in the third quarter of 2022 and included $4.4 million of non-cash equity-based compensation expenses. The increase in selling, general, and administrative expenses was primarily driven by higher costs related to AerAware development and facility expansions. Third quarter loss from operations was $1.9 million compared to a loss of $8.5 million in the third quarter of 2022. Net loss was $0.1 million in the third quarter, compared to $9 million in the third quarter of 2022. Adjusted for non-cash equity-based compensation mark-to-market adjustment to the private warrant liability, facility relocation costs, inventory reserves, and secondary issuance costs, adjusted net income was $0.9 million in the third quarter of 2023. Adjusted for the same items, the third quarter of '22 had an adjusted net loss of $1.9 million. Third quarter diluted earnings per share was 0 compared to diluted loss per share of $0.17 in the third quarter of 2022. Excluding the adjustments mentioned above, third quarter adjusted diluted earnings per share was $0.02 compared to adjusted diluted loss per share of $0.03 for the third quarter of 2022. Adjusted EBITDA was $1.9 million in the third quarter of 2023 compared to a loss of $0.5 million in the prior year period. The growth in adjusted EBITDA was a result of higher USM sales and a greater number of flight equipment sales. Next, in terms of our cash flow metrics, cash used in operating activities was $168.1 million, resulting from a gross investment of over $200 million in newly acquired feedstock and make-ready costs to prepare inventory for sale, which should drive our revenue and earnings going forward. We ended the quarter with a substantial balance sheet with $174.6 million of liquidity, consisting of $3.2 million in cash and available capacity of $171.4 million on our $180 million revolving credit facility, which can be expanded to $200 million. Finally, moving to our updated guidance for 2023. We now expect to generate revenue of $400 million to $420 million and adjusted EBITDA of $40 million to $45 million in 2023. Our revenue and adjusted EBITDA guidance reflects current expectations for our core business and flight equipment sales slated for delivery before year-end. The exact timing of these flight equipment sales can vary by days or weeks based on a variety of factors. Therefore, because of the amount of asset sales that are planned to close by the end of the year, with limited time remaining to do so, some of those could roll into the first quarter of 2024. We are pleased with the recovery in our sales in the third quarter, which was driven by the broad success of our feedstock acquisition program. And we remain confident that our purpose-built model and excellent execution capabilities will enable us to drive and generate long-term value for all of our stakeholders. With that operator, we are ready to take questions.

The first question comes from Bert Subin from Stifel. Please go ahead.

Hey, good afternoon and thank you for the question.

Good afternoon, Bert.

Martin, you mentioned the possibility of some rollover into the first quarter. I understand that visibility has been somewhat difficult this year, which has led to timing delays. Can you provide some insights on your visibility for the fourth quarter? Have you made any sales in the quarter so far? Looking ahead to 2024, your guidance update indicates around $65 million in sales slippage, primarily on the whole asset side. How do you see this impacting your outlook for '24?

Yes. Currently, we have an anticipated delivery schedule that enhances our visibility into the potential flight equipment sales planned for the rest of the year. As we mentioned, various factors, including customers' capabilities to accept or take possession of these assets, could result in some sales being pushed to the fourth quarter. However, all relevant contracts are set to conclude this year, and we are actively working to finalize them. On a positive note, these contracts are secured by agreements, and if we are unable to complete them this year, we expect to finalize them in the first quarter of 2024.

Okay. And then just on the, I guess, on the '24 side of that, or I guess, just to clarify, can you say I guess, how many of the 757 you have under contract? And then, in terms of sort of teeing up expectations for '24, just where things stand. Just because there's been so much movement in the timing of asset sales.

Yes. As of right now, we have 1 757, it's under contract to be sold in the current year. And then we have the remaining 757s that are still being marketed for potential lease or sale.

Okay. And then just as a follow-up, it seems like positive commentary on the AerAware front. I know people seem like they're probably biting their nails, trying to figure out when that's going to happen. It seems like when you got through the final tests, and to August, it was going to be expected to be a pretty quick process. Can you just walk us through what's happened over the last 6 or so weeks? And I guess what your best visibility is into what happens between now and hopefully an STC being granted.

So what typically happens is, as you're going through the whole process of obtaining an STC in anticipation of doing flight testing, you submit reports to the FAA, all the testing that you've done, how the flight testing is going to demonstrate that the product that you're trying to certify complies with whatever the rules are. So you've got a number of reports. And if I recall, I think we submitted over 50 reports to the FAA for their review and ultimate approval. Typically, that is all finished by the time you start your flight testing, but that did not occur in our case. It took the FAA because of the complexity of this certification. It took the FAA many, many days to return documents to us, in some cases, as much as 6 months to get documents back to us because there wasn't certainty as to what type of test we would do that would satisfy the FAA. So there's a lot of back and forth with the FAA on the type of testing that dragged on slightly past completion of flight testing, but not much, because shortly after completion of flight testing, the balance of testing that we had to do was completed satisfactorily. And now we're just in the documentation phase now. And the documentation phase, it's every document is reviewed, every word is looked at. If the FAA doesn't like the way you described something, they ask us to review it, we will go back, we'll fix it, send it back to them, they have to review it again and it's just taken incredibly long. There's a lot of people involved at the FAA. And again, because of the complexity of this, and the stage that we're at now, and what we've been working at, is just finishing documentation and addressing comments from the FAA on our revisions. And then we will submit a summary report that encapsulates everything we’ve done. We’re not at that stage yet, because we don’t have all the comments back from the FAA and all the documents that we've submitted. But we're substantially there. There are very few documents compared to the overall amount of documents that are outstanding. And I see every day including today, I see more and more reports coming back as signed off.

Thanks, Nick, and thanks, Martin. Appreciate the time.

You’re welcome.

And the next question comes from Ken Herbert from RBC Capital Markets. Please go ahead.

Yes. Hi, good afternoon, Nick and Martin.

Hi, Ken.

Hey, Nick, maybe just wanted to follow-up on the asset sales. If I understood correctly, you've committed to $200 million. I think you've done $130 million of that year-to-date in terms of deploying capital. Do you expect much upside to that $200 million as we get into the end of the year, and maybe you could just comment on sort of where you're seeing the opportunities and how's the pricing environment out there for the feedstock?

We expect to reach that $200 million target by the end of the year, and not much has changed in our outlook. The feedstock we are acquiring requires significant work, which is advantageous for us as we can extract value from older flight equipment needing repair, unlike other financial buyers who lack that capability. They may purchase leased aircraft, but acquiring off-lease planes with engines in need of repairs and heavy checks poses a challenge for them since they must outsource that work, increasing their costs. The opportunity to continue sourcing this type of feedstock remains strong. Although the OEMs are facing issues with geared turbofans and delays in delivering new aircraft, keeping older models in service has limited our access to newer flight equipment technology, we believe that will change once the OEMs catch up. In the meantime, we are still acquiring items that align with our business model, and I don’t foresee any changes in that trend. As we look ahead, following our recent Board meeting, I don't expect alterations to what we've experienced in 2023. I anticipate continued growth in this area, particularly as the OEMs address their issues and begin delivering more reliable new aircraft.

Yes, I wanted to follow-up on the geared turbofan issue, because it sounds like on the one hand that would restrict availability of feedstock to your comments. But on the other hand, it's probably really strengthening demand for material to support legacy engines, the CFM56 and the V25, in particular. How does the net factor of the geared turbofan issues affect you? And are there opportunities that arise from that, that you can maybe call out?

We purchased quite a few CFM56-5Bs that power the A320. And we bought most of those at parts value thinking that eventually, the amount of engines that went into the shop would increase and the demand for USM parts for the older technology A320 would come back very strong. And that's a fact, we're seeing that. The issue we're having is a lot of the engines that we thought were going to end up as parts turned out to be engines that have good service life left. And we have customers that are interested in taking those engines, whether it be for purchase or for lease that are going to deprive us of having the USM to sell at the piece part level. We don't care as long as the net value we receive out of that is the same or greater than we would get going the long haul for parting up. As I said, I do see that the market is continuing to be strong. The question is can you get engines today? Where are they going to come from? Finding good serviceable engines today is very difficult to do. When you're taking low time remaining parts engines and you're selling them as whole engines or leasing these whole engines to people because they don't want to spend money on putting engines through the shop, that indicates that there's going to be less USM available to support all the engine shop visits that are coming or that are already here as a result of these older technology aircraft staying in service. Yes, there is an upside for the supply of USM parts for the supply of whole engine trading and leasing, but there's a limited demand for that equipment. I don’t know that we've quantified the offset to that.

No, no, that's helpful. I appreciate that. There's a lot of moving pieces there. And if I could just one final question and maybe for Martin. As we think about sort of the implied adjusted EBITDA in the fourth quarter, is value much of the sequential increase expected to come from whole asset sales? Are you expecting maybe more contribution in the fourth quarter from TechOps, from USM under the parts of the business?

Yes, I think it's twofold. We definitely expect to see a continuation of improvement in the USM side of the overall business, but definitely the visibility that we have from flight equipment sales will be the bulk of the overall increase that we have factored into the guidance number overall.

Yes, I want to emphasize that when we purchase engines for their parts value and subsequently lease or sell them as complete assets, it can distort the perception of our USM business performance. Ideally, we would only report the sales of complete assets that were originally intended for USM, but the truth is that they remain whole engines. Don't let the volume of whole asset sales mislead you; most of these assets were acquired as parts. Selling them as complete assets or flight equipment does not diminish our potential to expand the USM business; it's simply reflected in a different segment.

Good evening, everyone. I appreciate everyone joining and asking questions. To continue on my previous point, Nick, can you share your thoughts on what would be more advantageous for you—a complete asset sale or selling individual parts? Where do you see the potential for better returns? Clearly, a complete asset sale allows for quicker movement of inventory, but in this tight market, how do you evaluate the pricing and value of individual parts? Ultimately, what do you consider more valuable and what generates better returns for you?

Well, we don't necessarily look at IRR because a short-term sale of an engine versus a longer-term parting process may produce a greater IRR, but the quantum of the net revenue would be much smaller. So if you put IRR aside for the moment, we look at what's the dollar value of what we would get if we went long and parted out the engine? We have to weigh that against what can we get today, net of no additional time or acquisition costs. If we feel that we can get the same or more money today selling it as a whole asset versus going to the longer route of selling it as parts, we will almost always choose to sell the asset today. That just skews everybody's view. But I think the right answer is to get the same or better money on a short-term basis. That's where we go with the asset.

Okay. Got it. That’s helpful. And then just looking at the feedstock purchases, looking at the inventory of kind of aircraft frames parts, you're up to, I think $326 million on the balance sheet. How should we think about that? I mean, it sounds like that could grow potentially into the fourth quarter. And then just trying to get a sense of how that inventory winds down and maybe drives cash flow next year and also helps the top line. Can you give us any color there?

Yes, I would say from the USM side, we're already starting to see a pickup in overall sales volume, probably kind of approaching closer to about $8 million in overall monthly sales, a run rate of about $100 million. Based on the volume that we have, again, if we keep the assets that we have identified as piece parts, we can increase that overall volume to $120 million to $140 million of annual sales on the USM side, based on the level of inventory and historic disposition rates. We're also seeing opportunities to increase our leasing portfolio, again, taking demand on strength in certain platforms, such as the CFM56. With that feedstock, you're going to see increases in USM, you're going to see increases in the leasing portfolio. You'll start seeing those benefits flowing through '24 and beyond.

Okay, got it. And then Martin, you kind of hit on it. I think you said the $100 million run rate for USM. What was the actual USM dollar amount in the quarter? Or even if you can give us kind of the year-over-year. I think you did close to $20 million in USM last quarter.

Yes, I think overall for the quarter, USM sales were around $20 million overall.

Last question, Nick. Regarding AerAware, I know you had pre-built some inventory. How are you considering your hardware supplier, Elbit, in light of their current situation with many reservists being called up? Can you outline any potential supply chain issues or challenges in getting products?

We have been in contact with Elbit. They have their own contingency plans for situations like this, but the unfortunate part is that they haven't faced anything like this in recent history. Nevertheless, they are currently manufacturing products for us, which we expect to be delivered imminently. They have products ready for us, and we want them. They continue to manufacture and deliver. At this time, we are not experiencing any issues with our ability to get products.

Okay.

Who knows? Depends on what happens.

Yes. No, of course. Got it. All right. Good stuff, guys. I'll jump back in the queue.

Okay.

The next question comes from Jack Ayers from TD Cowen. Please go ahead.

Hey, guys. This is Jack on for Gautam. Thanks for the question here. Hey, yes, just kind of honing in here on the Q4 guide and I know you mentioned you're kind of just baking in that one sort of asset sale in Q4. I just wanted to see kind of how customer sort of campaigns are going. I know you've talked in the past that you are having active discussions. So maybe, like, at first glance, it seems like there's more downside or sort of more risk to a push out. But could there be incremental upside, if demand sort of strengthens here? Like do you have the ability to basically monetize those 10 in inventory you've got or the magnitude you can do in Q4.

We have identified 18 pieces of flight equipment scheduled to close by the end of the year, each with specific dates and delivery conditions. We are focused on getting this equipment into the hands of buyers who need to complete their due diligence and inspection processes. Considering the time left, we are confident that if everyone acts accordingly, we will deliver these assets this year. However, some may inevitably be delayed. For instance, we experienced a situation where a customer’s bank closure caused a delay in receiving funds, leading to a closing in the following quarter. We do not expect issues like that this quarter. The 18 items mentioned do not include additional assets that may arise as sale opportunities in the near future. We might close on all 18, exceed that number, or close on fewer. We are committed to the 18 scheduled for this year, but some may shift out, and we expect to replace them with others.

Okay. Yes, I was kind of asking just specifically the 757.

I'm sorry, the 757 has been under contract. We had a delivery issue with one of the engines, which we thought would be delivered already. We've resolved the delivery issue by providing a substitute engine, and they are now in the final phase of accepting the aircraft.

Okay, got it. So is that incremental to the one you've already got under contract? I guess like …

No, that is the one, yes. Guidance only has 1 757 P2F sale.

Okay. So, okay, no that's helpful. And are there any other campaigns because I think you've got those, I guess now 10 remaining 757s? Like is there any chance those discussions are progressing well, or with any color, there would be helpful.

So we're negotiating with one to two aircraft today. One is available and the next one is not, but it's close to delivery, to be leased. And we have the prospect with the customer that's taking the aircraft this quarter, that they want a second aircraft, but they're not going to talk about that until they get their first aircraft in operation. Beyond that, we don't have anything that's pending. We have discussions with multiple customers, but we have nothing pending where I can point to and say, okay, we've got that account for potentially leading 7 of the aircraft uncommitted.

Yes, to provide some insight into the fourth quarter, there will be deliveries of the 757, but they are not currently available. They will be delivered this quarter along with deliveries from cargo conversion.

Yes. That will become available.

Okay, got it. Yes, from your third-party supplier, okay. That makes sense. And then just one last one on AerAware. Just conviction there with the FAA and whether a government shutdown and any case here in the next couple of weeks could have any impact on potential timing there. Any color would be helpful. Thanks.

So we've already been told by the certification branch that they will be shut down if the government shuts down. I can only speculate that based on the last time there was a government shutdown. The government can only hold out a couple of weeks. So if that happens, and that lasts all the way through the end of November, it still leaves December for them to finish up the paperwork and issue the STC. But that would clearly delay it until December and potentially longer, as once you get into December, you've got FAA guys taking vacation, you've got two holidays between then, certainly Christmas and New Year. I'm just hoping we're not caught up in that as we're just so close at this point.

Yes, I hear you. Okay. That's it for me. Thanks, guys.

All right. You're welcome.

We have a follow-up question from Bert Subin from Stifel.

Hey, thanks for the follow-up. Just on the AerAware front, I guess just two real quick questions. Nick, is there any sort of possibility in your mind right now the way things stand that you think there's an STC approval or granting in 2023? And then aside from the STC question, can you give any color about how conversations are going with the future customers of those kicked off? Are you waiting for the STC?

Okay. That's the first question. Possibility of STC approval in '23. Possible, I've identified what we're going through at this point. It's out of our control how long the FAA takes to respond to the revisions that we sent back to them. You'd think that they could, when they're asking us to make a minor change, they could look at it in a couple of days and get back to us. In some cases, they have and some cases, the guy is on vacation, the guy is sick, he's not in, he's too busy. We're dealing with that and I'm not complaining about the FAA, because they've been great to work with in this complex program. So I can't tell you that I have any reason to believe that we will get this certified in '23? Neither do I have any reason to believe that I won't get it certified in '23. It's just out of our control. We've done everything the FAA has asked us to do and continues to ask us to do. But it's in their hands as to the pace and then add potential government shutdown, and then the end of the year holidays to it. It is a possibility we will not get certified in '23.

Okay. And then, aside from that, can you give any color about how conversations are going with future customers as those conversations kicked off? Are you waiting for STC?

So we have been continuing to fly with a number of customers, both customers that have expressed interest and have been flying with us all along and some new customers that are interested. We continue to get very positive feedback. All of the customers, we press them and push and some get set up a little bit and say, guys, come back to us when you have your STC. So we are getting a little bit of that pushback. It's like, okay, we've been talking about this for a long time. Customers want to see it. Once we get approval, we can begin implementation. We’ve been dealing with a higher level of activity from our customers since we finished flight testing.

Very helpful. Thank you, Nick.

You're welcome.

This concludes our question-and-answer session. I would like to turn the conference back over to Nick Finazzo, Chief Executive Officer for closing remarks.

Okay, guys, and everyone listening, thanks for all the good questions. Look, thank you for everyone on the line for joining our call today and for your interest in AerSale. With the third quarter, we're beginning to see positive results from the investments we've made in feedstock over the past year. We've judiciously used our balance sheet to overcome supply chain delays and organically build out our infrastructure of people and facilities. These investments have positioned us well to accelerate growth in this fourth quarter and into the future. We have confidence in our purpose-built, multi-dimensional and fully integrated business model and we're not discouraged by short-term earnings volatility. We're leaning into our future and are perfectly situated to thrive in a growing aftermarket. We are continuing to look at M&A opportunities to cost-effectively expand customers, capacity, and capability. Certification of AerAware will come, and we expect its commercialization will drive a steady base of recurring revenue well into the future. We're excited about all the opportunities ahead of us and we're convinced the future is bright for AerSale. We look forward to keeping you updated on our progress. So everyone have a good evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.