Good afternoon, and welcome to the AerSale Corp. Third Quarter 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Christine Padron, Vice President of Compliance. Please go ahead.

Good afternoon. I'd like to welcome everyone to AerSale's Third Quarter 2025 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 all that statements made on this call that do not relate to matters of historical facts 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, on March 11, 2025, and its other filings with the SEC. These findings 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 reported revenue of $71.2 million for the third quarter compared to $82.7 million in the prior year period. The year-over-year decline was entirely driven by the absence of engine or aircraft sales in the quarter compared to 5 engine sales in the prior year period. Excluding whole asset sales, which tend to be lumpy quarter-to-quarter, the balance of our business grew 18.5% to $71.2 million, driven by a strong inventory position supporting our USM business and higher leasing revenue. In TechOps, sales were down modestly versus last year as strength in component sales and higher AerSafe volume partially offset lower services revenue, particularly at our Roswell facility as we've repurposed that site for teardown and decommissioning work that yields higher margins. As we note every quarter, due to the nature of our business and the impact of whole asset sales, our revenue levels tend to be volatile quarter-to-quarter, and we believe our business should be evaluated based on aggregate performance over a longer period of time with a focus on feedstock acquisitions and the value our team is able to extract from those investments. Turning to profitability. We delivered solid margin performance despite the absence of whole asset sales in the quarter. Adjusted EBITDA was $9.5 million or 13.3% of sales compared to $8.2 million or 10.0% of sales in the prior year period. This improvement reflects stronger leasing contributions, higher USM activity and the ongoing benefits from our cost reduction efforts over the past year that have trimmed SG&A expenses and increased MRO profit margins. By segment and starting with Asset Management, revenue was $39.2 million in the third quarter compared to $50.4 million in the prior year period. This year-over-year decline reflects the absence of engine or aircraft sales this quarter versus 5 engine sales in the same period last year. Excluding whole asset transactions, segment revenue increased nearly 40.9% year-over-year to $39.2 million, driven by strong USM volume and higher leasing activity. As we've discussed in past calls, we've made a strategic decision to balance whole asset transactions with assets deployed on lease, which is more in line with our historical operating model. Consequently, we expect more stability in quarterly operating results, which was evident in the quarter. We've continued this effort throughout the year. As of quarter end, we had 15 engines and 1,757 freighter aircraft on lease with a second 757 lease executed at the end of the quarter. During the quarter, we remained active on feedstock acquisitions to drive our future growth. We acquired a total of $13.7 million in the quarter, which brings the year-to-date total to $84.2 million. As we've reported for the past few quarters, we're continuing to see opportunities in the market, but overall supply of attractively priced feedstock has been limited as new OEM production has yet to catch up with demand. We remain extremely disciplined not to overpay for feedstock in this highly competitive market, which has been driving up pricing. For the balance of the year, we're in a strong inventory position with more than $371.1 million of feedstock inventory, which includes 9 engines that are available for sale or lease and another 10 engines currently undergoing repairs. Turning to our 757 passenger to freighter conversion program. We continued to make steady progress. As I noted, we had 1 aircraft on lease during the quarter, and we placed an additional 757 freighter on lease that will begin generating revenue in the fourth quarter. Customer interest is high, and we're in active discussions to place the remaining 5 757s we converted across multiple potential customers. While the timing of these transactions is still uncertain and will likely take some time, we're encouraged by the clear improvement in market interest since a low point in 2023. Turning to TechOps. Revenue was $32.0 million, down modestly from $32.3 million in the prior year period. During the period, we reported stronger sales of component parts and Engineered Solutions, which mostly offset a modest aggregate decline in MRO services revenue. At Goodyear, sales have stabilized following the conclusion of a contract encompassing multiple aircraft heavy checks that started to wind down in the second quarter of last year, supported by a strong pipeline of recommissioning work that is expected to keep the facility operating at or near full capacity through 2026. We're also in discussions to secure long-term contracts that would provide greater volume visibility going forward. At our Roswell facility, results were lower, but in line with our expectations as we continue transitioning the facility to focus exclusively on teardown and decommissioning activity, which is yielding higher margins. Looking forward, construction of our expansion projects at both our Aerostructures and pneumatics facilities are now complete, and we're in the process of transitioning to production in both facilities. We expect this to be a significant driver of revenue growth in 2026 and beyond. In Engineered Solutions, we saw a strong increase in AerSafe deliveries year-over-year, and we anticipate volume will remain at elevated levels for the balance of the year and through 2026 as we get closer to the deadline for compliance with an FAA airworthiness directive, which is satisfied by installation of AerSafe. At quarter end, our 2025 deliveries of AerSafe plus current backlog totaled more than $22 million, and we have sufficient orders secured to achieve our 2025 financial plan. Turning to AerAware. We continue to enhance the functionality of the system and engage with potential customers as we work toward a launch order. We believe the ongoing enhancements to the product, combined with the increased focus by both operators and the FAA on situational awareness will drive long-term adoption of this advanced technology across the industry. As we've seen throughout the year with several safety incidents, we're now seeing system-wide air traffic control delays as a result of the government shutdown. In each of these scenarios, AerAware could serve to help alleviate air traffic congestion and enhance safety, particularly as we gain ADS-B in functionality to the system. To that end, we're expanding our outreach and education efforts with government authorities, including the FAA and congressional leaders. This will raise awareness of how technologies like AerAware can contribute to addressing industry-wide challenges such as airport congestion, air traffic control staffing shortages and overall flight safety enhancement. Looking to the balance of the year and into 2026, we're positioned for continued progress. We have ample feedstock availability to support growth across our USM, leasing and asset trading activities, providing a solid foundation for our core operations. Our lease pool continues to expand, creating a more predictable and recurring revenue stream, which will strengthen further as additional 757s are placed. This has been a strategic priority for us in 2025 and demonstrated its effectiveness in the third quarter through EBITDA margin improvement even without the sale of an aircraft or engine. In TechOps, construction is now complete on our new MRO facilities, and we're in the process of transitioning into operations. These additions will be an important growth driver in 2026, enhancing both capacity and capability. Finally, AerSafe remains a steady contributor, and we expect it to continue supporting results through the regulatory compliance deadline in the fourth quarter of 2026. Taken together, these initiatives position AerSale for a stronger, more stable and more diversified earnings profile as we move into 2026. In closing, I want to thank our dedicated team for their continued focus and execution. We are invigorated by the underlying performance of our business. And despite the absence of whole asset sales this quarter, we delivered solid margins and made meaningful progress across key initiatives. We're entering the fourth quarter with strong momentum, a growing base of recurring revenue and a platform that is more diversified and resilient.

Thanks, Nick. Our third quarter revenue was $71.2 million compared to $82.7 million in the third quarter of 2024. As Nick mentioned, the prior year included $22.6 million of flight equipment sales consisting of 5 engines, while this quarter did not include any whole asset sales. As we've noted in past calls, flight equipment sales can vary significantly from quarter-to-quarter, and we believe our progress based on asset purchases and sales over the long term is a more appropriate measure of our progress. Third quarter gross margin was 30.2% compared to 28.6% in the third quarter of 2024. This year-over-year improvement reflects stronger execution across the business, including higher lease revenue, sales mix and cost control measures that we've implemented over the past year that have allowed us to improve MRO margins. Selling, general and administrative expenses totaled $18.6 million compared to $21.7 million in the third quarter of 2024. SG&A included approximately $1.3 million of noncash stock-based compensation, which is in line with recent quarters. The reduction in total SG&A stems from lower fixed and variable payroll-related expenses, which benefited from the cost reduction efforts taken over the last 12 months. Operating income for the quarter was $2.9 million compared to $2 million in the same period last year. Net loss for the quarter was $0.1 million compared to net income of $0.5 million for the prior year period. Adjusting for stock-based compensation, facility relocation costs, restructuring charges and other nonrecurring items, adjusted net income was $1.5 million compared to an adjusted net income of $1.8 million in the third quarter of 2024. Adjusted EBITDA was $9.5 million in the third quarter, up from $8.2 million in the prior year period. This improvement reflects higher leasing revenue, lower operating expenses across the business and increased monetization of our feedstock inventory, partially offset by the absence of whole asset transactions compared to the prior year. Adjusted diluted earnings per share was $0.04, which was flat compared to the third quarter of 2024. We ended the quarter with $58.9 million of liquidity, consisting of $5.3 million of cash and available capacity of $53.6 million on our $180 million revolving credit facility, expandable to $200 million, subject to conditions and the availability of lender commitment and borrowing base liabilities. Cash used by operating activities year-to-date was $34.3 million, primarily due to continued investment in feedstock acquisitions as we continue to grow USM and leasing. Looking to the fourth quarter and full year performance, excluding flight equipment sales, we continue to expect full year revenue in excess of 2024 levels with a greater increase in EBITDA year-over-year as a result of more robust lease pool, continued monetization of our USM inventory and the cost reduction initiatives we've taken over the past 12 months that have improved MRO margins and reduced SG&A expenses. We remain focused on executing with financial discipline and maintaining a strong balance sheet to support our growth initiatives. This progress we've made in leveraging our strong inventory position, improving operating efficiency and optimizing working capital is translating into a more resilient business model with greater earnings stability. With ample liquidity, a growing base of recurring revenue and solid demand trends across our end markets, we believe AerSale is well positioned to deliver continued improvement in profitability and shareholder value as we move into 2026. With that, operator, we're ready to take questions.

Our first question comes from Steven Strackhouse of RBC Capital.

First question is that you guys have had some nice capacity expansion in your MRO business. And I can appreciate that you don't want to necessarily give a formal guide, but how should we be thinking about a baseline EBITDA for your MRO business into '26? Is there maybe a revenue or margin range that we can kind of get a target from on the nice recurring piece of the business?

Yes. As we noted from the 3 expansion projects that we have, we gave a full year projection of $50 million at full overall capacity. Looking at 2026, we think those numbers will be approximately $25 million of revenue and generating pretty strong margins of $4 million to $5 million. So, we're excited that those facilities will be coming online.

So, the $50 million in '25, is that an incremental $25 million in '26?

The $50 million was total capacity, the $50 million, sorry, the $25 million would be our expectations for 2026.

Got it. Okay. And then are you maybe able to just speak on your passenger to freighter conversions? It sounds like you guys got another aircraft on lease in the quarter. Has the market at all changed there? Or has the demand kind of shifted at all kind of in your favor?

We believe that there is currently no aircraft available that can match the operational performance of the 757, which has garnered attention from the operating community regarding its lack of replacement options. While the 767 has a higher capacity, it is a longer-range aircraft that is not available for the same routes that the 757 operates. Additionally, A330s have yet to be converted into freighters, and the A321 and 737-800 converted freighter do not truly compete with the 757 since they are smaller in range and capacity. Consequently, there is no competitive alternative for the 757, and our inventory is limited. Although we did not disclose it in this announcement, we have another two aircraft under letter of intent, which we expect to deliver in the current and upcoming quarters. This will bring our total to four aircraft contracted for the year, leaving only three remaining to place. We are in discussions with sufficient operators to take those three and potentially more. We are optimistic about our ability to place these remaining aircraft soon, especially considering the changes in demand from a low point in 2023, driven by various factors and the quality of our aircraft.

That sounds great. And then maybe just last one for me. I was hoping you might be able to give us a quick update on your USM strategy. Are there any changes about how you're thinking of it kind of into '26? Are you seeing any better demand signals or maybe any relaxation of the supply at all?

I'm not sure I understood that question. Could you please repeat it? Neither Martin nor I really grasped what you asked.

Sorry about that. Just trying to understand your availability of USM, how you anticipate USM to maybe kind of grow as we kind of get into 2026?

Okay. Good. I understood that. Availability of USM, as we mentioned, we've got a substantial amount of USM that we've had in work and is becoming available for sale, and we're selling it. Even though the market is very tight for USM, we still buy USM. We're disciplined. We could buy a lot more if we weren't as disciplined, but we're not going to do that. So, we remain disciplined in making sure we hit our target margin and IRR profiles when we acquire inventory. We're still acquiring it. We've got ample inventory to carry us, I think, all the way through '26 without buying much more, but we expect to continue to buy more. So, we think that it's because of the way we can extract value out of feedstock that allows us to win deals. And so that even though it's tough to buy things in an overheated market where pricing has gone up, if you can extract greater value out of it than somebody else because you can do more than just sell parts, you can sell parts, you can sell engines, you could lease engines, you could put a whole airplane together, you can use pieces to put other airplanes together that you have. It's really the multidimensional integrated business model we have that I think is allowing us to win deals. So, we're optimistic that even in a really tough buying market that we'll be able to continue to acquire feedstock to grow the business in the future.

Our next question comes from Sam Struhsaker of Truist Securities.

Just trying to, I guess, clarify for my sake as much as anything. On the Roswell and Goodyear facilities, do you have any, I guess, line of sight to when those facilities would kind of be fully transitioned to the new scope of work and operating at the level that you guys would ideally like either in time line? Or just any thoughts there in terms of visibility?

In our Roswell facility, we have largely moved away from heavy maintenance work and shifted our focus to storage, parting out, and dismantling aircraft. We are making significant progress in that direction. However, there remains potential for considerable growth even with this new focus. If our facilities in Goodyear and Millington reach capacity, we may have to reintroduce some heavy maintenance work at Roswell. Currently, we are considering several programs that could lead to this decision. For now, we prefer not to increase overhead for heavy maintenance in Roswell until we fully utilize our Goodyear and Millington locations. The progress at Goodyear is remarkable; although we haven't finalized many long-term contracts, we are approaching full capacity. We are currently operating seven out of eight days each week with transition work for around 70 A320neos and ceos that are moving to new lessors. These aircraft require various services like seat checks and paint jobs, as well as engine work, especially since many of them lack engines. We have a lot of activity surrounding the engine issue with the A320neo, and that situation is being addressed, allowing us to return those aircraft to service, which presents great opportunities for us. In addition to this work, we are generating consistent business from customers we've worked with in the past. We are servicing 757s, leasing company aircraft, and 767s. Our position now is significantly better than it was six to eight months ago when we just finished a heavy check line for a major airline and needed to backfill that work. As we approach 2026, we see a substantial amount of work, which will likely make it difficult for us to secure much long-term revenue since we will be focused on short-term projects. Therefore, it's essential that we ensure we have enough slots available to attract long-term customers while also accommodating a mix of short-term business, balancing steady and higher-margin revenue opportunities. Regarding Millington, we have deliberately held off on committing resources there until we could fully utilize Goodyear. However, we now recognize that we need to act. A regional carrier has approached us, and we have an LOI signed with them. They plan to initially send us several aircraft, and depending on our performance, they may entrust us with their entire fleet. This could be a program lasting from six months to three years, covering over 100 regional aircraft. We are feeling quite optimistic about Millington right now. Overall, we believe our on-airport facilities are in an excellent position to start generating significant revenue that we haven’t experienced to date, projecting a promising outlook for 2026 across those locations.

That's really great information. I appreciate it, and it sounds promising. You mentioned having nine engines available and ten under repair. I'm curious about your outlook on demand for those engines and the timeline for converting the ten that are undergoing repairs to be fully operational.

I’m not exactly sure how long each of the 10 engines will take, but I think we have some engines that will be available in the next month or within a few months after that. I would estimate that all 10 engines will be ready by the end of the first quarter of 2026. There will be additional engines coming in as we continue to acquire engines for repair. Currently, the engine shops are taking an excessively long time to process anything, and we are just managing through that. However, when we need an engine for work, we will send it to the shop. If we can obtain greater value from it as a complete engine, we will put it through the shop. What was the other part of that?

Anticipation of the growth.

I think just general like kind of, I guess, demand trends you guys might be seeing within...

Demand is currently very high. Whether it's a narrow-body engine for a 737NG or an A320, there is more demand than available engines at this time. The same goes for wide-body engines like the Pratt & Whitney PW 4000s used on 767s and 747s, and some Airbus models, as well as the GE CF680s. The challenge we face is that as we complete these engines in the shop and plan to lease them, customers are approaching us with cash offers to buy them instead. This forces us to decide whether to sell for cash or opt for a long-term lease, with a strong preference for leasing. Thus, the issue is not the lack of demand, but rather how to proceed with those engines. It's difficult to answer how we view our engine situation moving forward regarding trading and leasing opportunities, but we do see potential in both areas. The key will be determining the best placement for the asset and where we can achieve the highest margin with an appropriate level of risk.

This concludes the question-and-answer session. I would like to turn the conference back over to Nick Finazzo for any closing remarks.

All right. Thank you. As we've explained, even without any whole asset trades, AerAware sales or incremental revenue from our facilities expansion projects, our operating margins have continued to grow. I believe this validates our unique multidimensional and fully integrated business model. And as our businesses continue to develop, will put us in an excellent position to achieve substantial growth in the years ahead. As always, I want to thank Steven and Sam for their questions, which I believe provide additional insight into our business model and progress to date. I very much appreciate your interest in listening to our call today and look forward to bringing you up to date during our next earnings call. I wish you all a good evening. Thank you.

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