Good afternoon, everyone, and welcome to the AerSale Inc. Fourth Quarter 2024 Earnings Conference Call. Please be aware that today's event is being recorded. I would now like to hand it over to Christine Padron, Vice President of Compliance.

Good afternoon. I'd like to welcome everyone to AerSale's Fourth Quarter and Full Year 2024 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, 2024, filed with the Securities and Exchange Commission, SEC, to be filed on March 10, 2025, 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 at ir.aersale.com. With that, I'll turn the call over to Nick Finazzo.

Thank you, Christine. Good afternoon, and thank you for joining our call today. I'll begin with a brief overview of the quarter, then provide operational updates before turning the call over to Martin to review the numbers in greater detail. We concluded the year positively with fourth quarter revenue amounting to $94.7 million, which was slightly higher than the previous year, even with a $16.4 million reduction in whole asset sales compared to 2023. When excluding whole asset sales, which can be volatile on a quarterly basis, our fourth quarter sales increased by 35.5%. This growth was evident across USM, leasing and sales of our engineered solutions product, AerSafe. Increased revenue boosted profitability with adjusted EBITDA up 118% to $13.1 million. Operational performance improved in 2024 due to strategic initiatives such as deploying capital to cost-effective feedstock, expanding our lease pool to stabilize revenue, monetizing our remaining 757 assets and growing our MRO capabilities amid strong demand. This strategy is gaining momentum and is reflected in our results. For the full year of 2024, we reported revenue of $345.1 million, representing an increase of 3.2% compared to 2023. Excluding whole asset sales, revenue for the full year increased by 18.7%, reflecting stronger USM volume, robust demand for MRO services and an expanded lease pool. Full year adjusted EBITDA rose to $33.4 million from $12.3 million last year. This increase was due to higher volume, a favorable sales mix and better cost controls, although it was partially offset by lower whole asset sales. In Asset Management, sales fell by about 1% year-over-year to $64 million due to fewer whole asset sales. Excluding whole assets, revenue rose by 91.7%, driven by strong USM engine part sales and a larger lease pool. For the full year, sales remained flat at $215 million. Excluding whole assets, segment revenue increased by 34% to $105.7 million, thanks to better feedstock availability in the USM business and an expanded lease pool. We remind investors quarterly that due to whole asset sales, our revenue can be volatile. We believe our business should be evaluated based on long-term performance, focusing on feedstock acquisitions and the value our team is able to extract from these investments. We acquired $18.4 million of feedstock in Q4 and $61.7 million for the full year. Despite a competitive market, our multidimensional fully integrated value extraction approach led to a 17.2% win rate in Q4, surpassing our long-term average of 10%. We remain disciplined in acquisitions and IRR targets. Additionally, our strong finish in feedstock acquisitions in 2023 has provided ample inventory for 2025, offering us extra flexibility. We anticipate future opportunities similar to this quarter that will help us meet our financial goals. Deal pacing may be uneven due to tight feedstock conditions likely persisting until OEM production and deliveries enable retirement of older aircraft by airlines. In our 757 passenger to freighter conversion program, end market demand increased in the fourth quarter with an uptick in bidding activity leading to the leasing of aircraft. This is the first transaction for the 757 program since late 2023, reflecting a steady improvement in the end market over the past few quarters. The quarter concluded with 6, 757s remaining from the conversion program and discussions continue with multiple potential customers. Turning to TechOps, revenue rose 3.1% to $30.7 million in Q4, driven by strong commercial demand for MRO and increased AerSafe unit sales ahead of the 2026 FAA compliance deadlines for fuel tank protection systems. This was partially offset by lower parts sales in our MRO units. For the full year, our TechOps segment saw a revenue increase of 8.6%, reaching $129.6 million. This growth was primarily driven by heightened demand for MRO services across our system, along with a robust increase in sales of AerSafe. At our Goodyear facility, we completed a contract with a major commercial airline, which has opened up additional capacity at the site. Demand for MRO services in the end market remains robust, and we're focusing on securing long-term predictable contracts that align our staffing levels with anticipated volume. These contracts typically take longer to initiate and finalize, especially considering the maintenance planning timelines involved with larger airlines. Consequently, we expect to see reduced volume at Goodyear in the first half of 2025 as we work to bring in new long-term agreements. This strategy will also impact the ramp-up at our Millington facility as both locations provide complementary services. By maintaining lower staffing levels in Millington, we can effectively manage resources while building volume at Goodyear and securing customers who prefer Millington as a maintenance location. We made progress on our facility expansion projects in the fourth quarter and into early 2025. However, continued construction delays at our pneumatics and Miami Aerostructures facilities have pushed the opening dates to the second quarter of 2025. As these facilities become operational, we anticipate incremental revenue growth each quarter with a potential to achieve $50 million in additional annualized revenue at full capacity. In our Engineered Solutions business, we increased the backlog in the fourth quarter for AerSafe as we approach the 2026 deadline to comply with an FAA airworthiness directive concerning aircraft fuel quantity indication systems. At the end of the quarter, our backlog totaled $14 million. We anticipate that quarterly revenue from this program will grow as we near the deadline and aircraft come in for routine maintenance. Regarding our revolutionary enhanced flight vision system, AerAware, we have continued to market the product and hosted 2 new customer demonstration flights since our last earnings call. Customer interest is ongoing, although no customer orders have been secured at this time. As commercial safety has gained more attention in recent months, it highlights the potential use case of the system. The FAA faces challenges in maintaining a high level of safety due to increasing congestion in the skies and airports, limited availability of experienced candidates for air traffic control positions and outdated systems restricting capacity. These factors underscore the urgency of enhanced flight safety and AerAware aims to address and simplify many of these issues. Additionally, while working with potential customers, we have improved the system by adding new features and indicators requested by airlines. This direct feedback loop has significantly enhanced the product, which is anticipated to support its long-term success. Next, I would like to provide an update on our cash position and the status of our insurance claim. We ended the quarter with $4.7 million in cash and total debt of $41 million. During the year, we generated $11.2 million in free cash flow, which included a payment of $30.9 million in insurance proceeds related to the Roswell fire previously disclosed. As noted in our 8-K on January 8, this was a payment made toward the claim while the insurers continue their review process. Based on this, we have recorded the amounts received as a liability until the claim is fully adjusted. We will update investors on the conclusion of this matter at the earliest opportunity. Before I hand the call over to Martin for a detailed analysis of the numbers, I would like to provide an overview of our goals for 2025 and discuss some key drivers for the coming year. Our primary focus will be on expanding growth opportunities and converting our inventory into cash. The main contributors to our top line in 2025 will include expanding our lease pool, which saw significant progress in 2024, ending the year with 17 engines and 1, 757 freighter aircraft on lease. This revenue stream is expected to recur and grow as we add more assets to the lease pool. Second, monetizing our remaining 757 freighter aircraft. We have successfully leased 1 in the fourth quarter and have 6 additional aircraft available. These assets are highly attractive due to their recent conversion and servicing, low flight hours and are amongst the youngest of the 757-fleet converted to freighters. Third, generating additional MRO revenue from our facility expansions and the growth of our customer base at our Goodyear facility as the year progresses. And fourth, anticipating strong performance for AerSafe in 2025 and 2026 as we assist customers in achieving AD compliance ahead of the November 2026 deadline. We're improving our margin profile with an enhanced efficiency program at AerSale, aiming to optimize operations. We streamlined workflow and facility scheduling, opening spare capacity to increase profitability. We examined costs against current revenue expectations, leading to a reduction in headcount. Our efficiency program is expected to save $10.4 million annually, accumulating throughout the year based on demand. This is in addition to the $10 million saved in 2024 through increased efficiency. In summary, we're starting the year with a stronger foundation, multiple revenue streams and an optimized cost structure. Taken together, we expect 2025 to be a growth year for AerSale on both the top and bottom line. Performance should improve incrementally, excluding any impact from whole asset sales as new capacity comes online and efficiency programs flow through to the bottom line. On balance, we're entering 2025 on a much stronger foundation with multiple growing revenue streams and an optimized cost structure. I want to thank our dedicated employees for their hard work and our investors for their ongoing support. We look forward to providing you with updates on our progress. Now I'll turn the call over to Martin for a closer look at the numbers.

Thanks, Nick. Our fourth quarter revenue was $94.7 million, which included $31 million in flight equipment sales, consisting of 6 engines. Revenue in the fourth quarter of 2023 was $94.4 million and included $47.4 million of flight equipment sales, consisting of 5 engines and 1 P2F converted Boeing 757 aircraft. As we point out during all of our earnings calls, flight equipment sales will 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 our progress. Fourth quarter gross margin was 31.4% compared to 25.9% in the fourth quarter of 2023, primarily driven by sales mix that included higher-margin engine leasing and flight equipment sales. Selling, general and administrative expenses were $24.8 million in the fourth quarter of 2024, which included $1.2 million of noncash equity-based compensation expenses. Selling, general and administrative expenses were $25.5 million in the fourth quarter of '23 and included $3.1 million of noncash equity-based compensation expenses. The decrease in selling, general and administrative expenses were primarily driven by the lower payroll-related expenses during the quarter. Fourth quarter income from operations was $4.9 million compared to a loss from operations of $1.1 million in the fourth quarter of 2023. Net income was $2.7 million in the fourth quarter compared to a net loss of $2.7 million in the fourth quarter of 2023. Adjusted for noncash equity-based compensation, mark-to-market adjustment to the private warrant liability, facility relocation costs, inventory reserves, restructuring costs and gain on the insurance proceeds, adjusted net income was $4.8 million in the fourth quarter of 2024. Adjusted for the same items, the fourth quarter of 2023 had an adjusted net loss of $0.1 million. Fourth quarter diluted earnings per share was $0.05 compared to diluted loss per share of $0.08 in the fourth quarter of '23. Excluding the adjustments mentioned above, fourth quarter adjusted diluted earnings per share was $0.09 compared to adjusted diluted loss per share of $0.02 for the fourth quarter of 2023. Adjusted EBITDA was $13 million in the fourth quarter of 2024 compared to $6 million in the prior year period. The growth in adjusted EBITDA was a result of higher sales volume during the period and lower expenses. Next, in terms of our cash flow metrics, year-to-date cash provided in operating activities was $11.2 million, resulting from the benefit of insurance proceeds received related to the Roswell fire, which occurred in April 2024. These amounts partially offset cash utilized for growth investments of over $78 million in newly acquired feedstock and make-ready costs to prepare inventory for sale. These investments should drive our revenue and earnings going forward. This is an improvement for the quarter of $43.6 million in cash generated from operations as we begin to monetize previously purchased feedstock. We ended the quarter with a substantial balance sheet with $142.8 million of liquidity, consisting of $4.7 million in cash and an available capacity of $138.1 million on our $180 million revolving credit facility, which can be expanded to $200 million. Looking forward to 2025, we are well-positioned to capitalize on the favorable market conditions we're seeing. As Nick mentioned, we expect to start from a lower base in the first quarter of 2025 relative to the fourth quarter and step-up incrementally as new revenue streams come online and cost reduction programs gain traction. In total for the year, we expect to grow both the top and bottom lines relative to 2024. We are supported by a strong commercial environment, robust activity in our asset management segment, and multiple expansion projects, which will increase our capacity and capabilities. In addition, efficiency changes instituted at the end of the fourth quarter and through the first quarter will also start to improve our profitability in 2025. With that, operator, we are ready to take questions.

Our first question comes from Michael Ciarmoli from Truist.

Nick, I think just on AerAware, you mentioned some enhancements. You obviously mentioned 2 more customers. Can you maybe just talk to us how the enhancements kind of sync up with your already existing inventory? Presumably, I wouldn't imagine there's any rework. And then maybe just what's kind of happening with your other partners on that program, Elbit? It seems like it's just in a holding pattern, I guess, but is everybody presumably ready to ramp if orders do come?

Mike, answering the question. The enhancements that we have been working on mostly are being done by Elbit's subsidiary, Universal in Tucson. So most of them are software. Some of them are hardware. As an example, our head wearable display today is not foldable. All the new head wearable displays that we've ordered and we are receiving are actually replacing the initial order of head wearable displays, which were not foldable. So that just allows us to stow the head wearable displays differently. The customers have requested that we add capability to the system. And I may have mentioned some of these before, and this comes from different customers. So it's not all the same one that's requesting these. But some have requested that we add runway length so that as the pilot is approaching the runway, whether he's taking off or landing, he knows what the remaining runway length is as he's making that approach or taking off and verifies whether he's got enough runway to stop or enough runway to take off. So that's one additional feature besides the folding of the skylines. Another is a tail strike indication, which allows the pilots to see if the airplane is likely to incur a tail strike, whether it be on landing or take off. Today, with a lot of young pilots transitioning from smaller regional aircraft up to these larger transport category aircraft, airlines are having issues with pilots suffering tail strikes and tail strikes can be extremely damaging to an aircraft, taking it out of service for a prolonged period of time, and are expensive to repair. Finally, I think that this is the most important feature that is in work. Now the certification of this has yet to happen, but it's in flight testing, not on our aircraft at this point, but on an Elbit Universal aircraft. I think they're flight-testing it on a King Air. And it's not really much different whether you're seeing it through the head wearable display on a King Air or you're seeing it through the head wearable display on a 737. But the feature that I'm about to describe is called ADS-B In. Now if you don't know what that is, I'll just describe it this way. Our aircraft currently and all aircraft flying in the United States have equipment installed that's called ADS-B Out. Actually, our AirTrack system is ADS-B Out. What that allows the aircraft to do is to transmit information through the global satellite system to be received by air traffic control at the other end, again, through satellite, not through traditional radar. At the other end of the system, the FAA air traffic control system receives that data using what's called ADS-B In. The transponders we have in our aircraft are capable of both doing ADS-B Out, which we have and receiving ADS-B In signals. So what Elbit and Universal have been working on is taking the ADS-B In data and putting it on the sky lens so that the pilots can see traffic on their sky lens rather than not seeing it or having to rely on the FAA to tell it what traffic is in its vicinity. Now in light of recent events, safety is a big issue and knowing where other aircraft are is super important. It's a major safety issue. And we believe that the addition of ADS-B In to the system will eventually add a feature and functionality that is as good as what the system can do from a weather point of view because if pilots can see through their head wearable display where other aircraft are based on how they transmit data to the air traffic control system, that's a huge benefit from a safety perspective.

Sure. Makes sense. That's pretty interesting. And then I guess on AerSafe, I mean, it sounds like the incoming order flow is exceeding expectations. I mean any color on maybe the revenue cadence, '26 isn't that far off. I mean, do you expect sort of a wave of further orders as we get closer to that mandate?

Previously, I anticipated that we would reach a $20 million backlog. We're at $14 million now. I think last year, we were at $11 million, and we have delivered kits. So we are seeing a backlog growing. No one wants to spend money today if they can push the expenditure of funds off into a later year. But because of the volume of aircraft that need to be made compliant, airlines don't really have much of a choice because they really want to install these kits when an aircraft is down for maintenance. So if you've got 5 or 10 or 15 aircraft that need to be done, you can't wait until November because you'll put all these aircraft down at the same time. And obviously, that's not good for an airline. So what we're finding now is that, yes, airlines have been pushing this off as long as they can. But as we get closer to that compliance deadline, I would bet by the time we get to November, December, because of scheduling issues, we will probably see a peak backlog as we approach the end of the year.

And our next question comes from Ken Herbert from RBC Capital.

Martin, this is actually Steve Strackhouse on for Ken Herbert. So just to touch on MRO services, it looks like your revenue was about $108 million for the full year '24. Can you maybe discuss how that will maybe grow organically? And then maybe just some cadence on some of the new MRO capacity that you have coming online in the quarter as well or in the year, excuse me.

Yes. So as Nick noted, we expect our component MRO to continue to increase throughout the year, even from Q4's levels. One, as we've talked about some of the cost reductions that we've done and really kind of greater efficiency in running those units, so not only do we expect revenue growth, but we're expecting margins to also improve. Nick did note that we did have a program that did cease at our Goodyear facility that was a line maintenance program or heavy maintenance program. That is causing a temporary decline. And I think the biggest impact of that you're going to see is in the first quarter of this year compared to the fourth quarter of last year. Again, we've rightsized that unit, and we expect that profitability to start to increase in the second quarter and then really to grow in the second half of the overall year. So we're in a good position. We still see a real focus on improving our profitability in our heavy MROs. We've also rightsized our Millington facility, understanding that it's better economies to focus on the Goodyear facility, fill all the 8 days in that facility before we move over to filling Millington. But having said that, we're already getting customer interest in that facility due to its central geographic location, and then we'll have plans to start increasing that. But we're taking a much more cautious approach, being very cost conscious and making sure that we focus on profitability as we grow.

Great. And then maybe just separately on AerAware, I'm thinking more so in terms of like a testimonial where is there may be some way you can demonstrate to an airline customer or even to the FAA administrators a way in which AerAware might have prevented or reduced the likelihood of maybe one of the aircraft incidents, whether it was weather-related or just sight visibility? It just seems like you guys might have an opportunity there.

On the recent event, I want to emphasize that I can't comment much because the specifics are still unclear. Therefore, we can't determine if our system would have made a difference. However, I can state that our pilots have reported significantly improved visibility when using the head wearable display compared to relying solely on their eyesight, especially at night. As for whether our system could have influenced the circumstances of the recent tragedy, we simply do not have enough information to make a conclusion. We may share our thoughts on that in the future, but overall, we believe our technology enhances visibility and, consequently, safety. Whether a pilot is landing in poor weather or approaching a runway with unseen traffic, a head wearable display equipped with a camera can provide vital information. We think a system with an advanced light vision camera and head wearable display could potentially mitigate factors that lead to recent tragedies.

We have a follow-up question from Michael at Truist.

Just Nick, maybe any color on the availability of feedstock as we're almost through the first quarter here and anything loosening up? I think it was maybe in early January, one of your competitors reported and talked about some availability hitting the marketplace. But anything you're seeing out there? I know Boeing and Airbus are obviously still struggling to get planes out the door. So the in-service fleet remains high and retirements are down, but any color you could add?

We are still experiencing a very tight feedstock market due to production challenges with the OEMs, engine issues, and FAA concerns that are hindering the two main OEMs from delivering aircraft. This situation is preventing the replacement of older equipment, which is what we are looking for. Despite this, we continue to secure deals. We often win deals when flight equipment is removed and requires significant work. Our strong infrastructure and various methods of enhancing flight equipment allow us to create value, even when we are not the most aggressive bidder. Other bidders may offer more, but we successfully close deals. Presently, there is substantial investment chasing assets in this market. Some investors have placed funds with companies that struggle to realize value, leading those companies to be left with underperforming assets that exceed their carrying costs. As a result, we're seeing a decrease in new investment from potential competitors on the buying side. Sellers are beginning to understand this and are finding that some buyers are unable to close deals due to lack of funds. Our advantages include a solid balance sheet, accessible cash, and the capability to monetize flight equipment needing significant work, which is why we keep winning deals. We maintain a robust buy rate, and our win rate in the first quarter was quite good. While I don't expect to consistently win 17% of our deals, this performance reflects our ability to extract value effectively. The market will remain challenging, with constrained inventory and heightened competition among buyers. Even though some investors may have experienced poor outcomes and reduced their investments, others are still willing to engage in the market, which complicates our position as we remain disciplined in our buying strategy. We will not pursue deals unless we believe we can achieve a 25% unlevered internal rate of return or high margins.

And ladies and gentlemen, at this time, we will be ending today's question-and-answer session. I'd like to turn the floor back over to Nick Finazzo for any closing remarks.

I want to thank Mike from Truist and Steve from RBC for their insightful questions, which I believe will help investors understand our business model and the progress that we've made to date. I also very much appreciate your interest in listening to our call today, and I look forward to bringing you up to date during our next earnings call. I wish you all a good evening. Thank you.

And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.