Hello, and thank you for standing by. At this time, I would like to welcome everyone to the AirSail, Inc. 2nd Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask the question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Jackie Carlin, Senior Vice President of Marketing and Communication. You may begin.

Good afternoon. I'd like to welcome everyone to AirSales' second quarter 2026 earnings call. Conducting the call today are Nick Fanazo, 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 security 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, 2025, filed with the Securities and Exchange Commission, SEC, on March 10, 2026, 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 AirSale website at ir.airsale.com. After prepared remarks, we will open the call for questions. With that, I'll turn the call over to Nick Finazzo.

Thank you, Jackie, and good afternoon, everyone. Thank you for joining us today. I'll begin with a review of our second quarter financial and operational performance, including key developments during the quarter, and then discuss the actions we're taking to advance our strategic priorities. I'll then turn the call over to Martin to walk through the financials in more detail. This quarter, we continue to focus on executing our strategic priorities, monetizing our asset base, scaling our MRO operations, and growing recurring revenue streams to achieve more consistent earnings. We made progress against these priorities, giving me confidence in our momentum heading into the second half. Both revenue of $70.9 million and adjusted EBITDA of $2.2 million came in below the prior year period. These results reflect timing, not trajectory. There were no flight equipment sales, incremental improvements across most of our business units. Disregarding flight equipment sales, overall revenue decreased 4.2% year-over-year from lower USM sales. First-half margins were negatively impacted by a number of factors, including the cost of standing up new capacity and capabilities at Goodyear, Millington, and Landing Gear. as we prepare for the increased revenue opportunities that will follow as investments in future earnings power, not structural cost increases, and we're already seeing the operating leverage begin to improve. In anticipation of heavy maintenance work largely related to the spirit shutdown, we continue to carry additional labor at our Goodyear facility that weighed on margins. This work has been slower to develop than we first expected, but we're starting to see an increase in stored aircraft at the facility that will accelerate growth in the second half of the year. In Millington, our new CRJ 700-900 multi-line maintenance program drove higher MRO revenue this quarter. But as noted, startup costs from the ramp-up still weigh on margins, and we're already seeing significant improvement in labor efficiency and turn times. In fact, both facilities to contribute to stronger results in the second half as volume continues to build and these operations gain scale and efficiencies. Received gear for two key customer programs during the quarter, including 737 MAX and 787, and that progress gives us increased confidence in the long-term trajectory of this business as volume continues to build. That momentum extends across the business, and we expect a meaningfully stronger second half. On the leasing side, we placed our fourth 757 converted freighter on lease in July and executed a lease for a fifth, which is scheduled for delivery this month. This leaves just two freighters from our P2F conversion program to monetize, and we're working on multiple opportunities for this remaining flight equipment. These transactions will support the improvement in earnings and add available liquidity in the second half. While we remain focused on growing our recurring revenue base through leasing and MRO, we're also deliberately executing on select flight equipment sales that provide higher margin realization, improved returns, and a shortened monetization cycle. That has meant dedicating additional cash in the near term to get this material ready to sell, and we expect to recover those investments, plus the associated returns, in the second half of the year. This is evidenced by several wins secured during and subsequent to quarter in, which include a 737 aircraft sale to the U.S. Marshals Service for $35 million, in addition to several engines, which we expect to close in the late third or early fourth quarter. Let me now turn to segment performance in order to provide more insight into the results. In our asset management segment, leasing remained a key driver. Leasing revenue grew approximately 50% year-over-year to $12.4 million, reflecting an expanded engine and freighter lease portfolio. We ended the quarter with 18 engines and three 757 freighters on lease, compared with 16 engines and one freighter a year ago. Higher lease rates and improved utilization continued to lift asset yields and support our goal of building a larger, more consistent, recurring revenue base. This growth will also benefit from the addition of currently owned engines that are completing the repair cycle. as well as the revenue from the remaining 757 freighters. This growth was offset by lower USM revenue, which reflects in part lower feedstock acquired in the first half of the year compared to the prior year. Feedstock acquisitions for the second quarter were $5.6 million, down from $27.1 million a year ago, as we stayed disciplined in pricing in a hyper-competitive acquisition market. In addition, as we noted in the first quarter, we consumed USM material that could have been sold to build serviceable flight equipment for sale or lease, as this reallocation higher returns than by simply selling the material as USM piece parts. In our tech ops segment, revenue grew nearly 9% to $33.8 million. Growth was led by the continued ramp-up of our long-term CRJ 700 and 900 multi-line maintenance program at Millington, additional storage volume at Goodyear, and higher landing gear and aerostructures activity. Demand for our AirSafe product also remains strong and is expected to peak in the third quarter of this year, ahead of the FAA's November 2026 compliance deadline for the Fuel Tank Flammability Airworthiness Directive. Tech Ops margins this quarter decreased due to softer throughput at our accessory shop, as well as due to the ramp-up costs previously noted for Goodyear and Millington, are exaggerated at its reduced volume level. However, as the operations continue to scale, margins will improve as utilization increases. We also made changes to tech ops across our sales organization this quarter to sharpen our commercial focus and better align coverage with our highest opportunity accounts, and we expect these changes to support improved throughput and margin recovery in the second half. Turning to our enhanced flight vision product, Arroware, we remain engaged with U.S. regulators and industry participants to highlight AeroWare's unique capabilities to enhance situational awareness and support safer flight operations. We believe the growing regulatory and legislative focus on ADSB-N and pilot situational awareness supports the long-term opportunity for AeroWare as operators increasingly evaluate solutions designed to improve flight safety. A head-wearable display, such as airwear, offers meaningful advantages over existing technologies, which we believe will have decades of utility. Stepping back, our priorities for the remainder of 2026 are unchanged. First, increase the number of assets deployed in our lease pool, including placing our remaining 757 freighters, to strategically monetize our inventory. Third, build available capacity across our MRO network. And fourth, improve operational profitability as our recent expansion initiatives gain scale. Execution of these priorities will lead to higher profits and a more consistent revenue stream going forward. With an active leasing pipeline and expanded operational capabilities and a clear path to monetize the inventory we built, We believe AirSail is well-positioned to deliver improved and more consistent earnings going forward. With that, I'll turn the call over to Mark.

Thanks, Nick, and good afternoon, everyone. I'll walk through our second quarter results in more detail and then cover cash flow and liquidity. Total revenue for the second quarter was $70.9 million compared with $107.4 million in the prior year period. The decline was driven primarily by the absence of flight equipment sales this quarter, which totaled $33.4 million a year ago, related to eight engines sold. As we remind investors each quarter, flight equipment sales can vary meaningfully from period to period, and performance is best assessed over time with a focus on feedstock acquisition, the monetization of those investments, and profitability trends. Excluding flight equipment sales, revenue was down 4.2% as lower USM sales offset the continued growth in leasing and MRO. Adjusted EBITDA was $2.2 million, or 3.1% of revenue, compared with $18.3 million, or 17% of revenue, in the prior year period. The decline was driven primarily by the absence of flight equipment sales in the current period. Turning to the segments, asset management solutions revenue was $37.1 million, down 51.3%, compared to $76.3 million last year, which included $33.4 million of flight equipment sales. Excluding flight equipment sales, asset management revenue was $37 million, down 13.6%, as lower USM sales offset the higher leasing revenue from our expanded engine and freighter lease portfolio. TechOps revenue was $33.8 million, up 8.7%, driven by the ramp-up of our CRJ multi-line program at Millington and higher component MRO volume. Overall gross margin was 22.9% compared with 32.9% last year. The decline reflects the absence of flight equipment sales, which normally carry higher margins, and lower USM gross profit. It also reflects the stand-up investment supporting new capacity and programs, which Nick described, required us to carry incremental staff ahead of volume at Goodyear, as well as incremental ramp-up costs related to the Millington CRJ line. We expect margins to improve as utilization increases, driving both higher revenue and margin. Selling general and administrative expenses were $21 million, down from $22.8 million a year ago, primarily due to lower rent and variable expenses. SG&A included $1.3 million of share-based compensation, compared with $700,000 in the prior year period. Net loss for the quarter was $5.6 million, compared with net income of $8.6 million a year ago. Excluding share-based compensation, adjusted net loss was $4.3 million compared with adjusted net income of $9.4 million last year. That decline, again, is primarily attributable to the timing of flight equipment sales. On a pair-shared basis, diluted loss per share was $0.12 and adjusted diluted loss per share was $0.09. Turning to cash flow and liquidity, cash used in operating activities was $33.5 million year-to-date, primarily reflecting continued investment in inventory through both feedstock and make-ready costs to make flight equipment available for lease or sale. The majority of this outflow reflects deliberate capital deployment on flight equipment we expect to monetize at attractive margins in the second half of the year, which will improve both profitability and liquidity. We ended the quarter with $376 million of inventory and $133 million of aircraft and engines held for lease. Available liquidity was $34 million, consisting of $2.2 million of cash and cash equivalents and $31.8 million of availability on our $180 million revolving credit facility, which can be expanded to $200 million, subject to conditions and borrowing-based availability. Our balance sheet remains well-positioned to support our growth strategy, giving us the flexibility to continue to grow both our USM and leasing revenue streams as well as to continue to take advantage of market opportunities when they arise. In summary, our second quarter results reflect the timing of our asset monetization rather than a change in the underlying business. As we convert our asset base through the second half and grow our recurring revenue, we expect meaningfully stronger cash flow and liquidity. and increasingly predictable financial profile over time. We entered the second half with a substantially stronger pipeline of asset sales and expanding lease portfolio and improving unit economics across our MRO facilities. We are confident this combination, supported by a healthy balance sheet, positions us for meaningfully improved performance in the second half of the year. With that operator, we are ready to take questions.

Thank you. We will now begin the question and answer session. To ask the question, you will need to press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Your first question comes from the line of Jen Van Sinderen with B. Riley Securities. Your line is open.

Hi, everyone. I guess one of the questions I have just on the MRO facilities, I know you're still in the process of kind of ramping those up, but at this point, what is the utilization rate running on those facilities?

Utilization on the…

So, as we're ramping up overall, our Millington facility, we have two lines that are in work. We still have capacity to add an additional two lines of work at that overall facility. As we've noted in the overall comments, the biggest issue we're having there is just ramping up, getting the incremental, the labor and to go through the learning curve in those overall projects and doing those overall aircraft. What I can say is we have been seeing favorable improvements in that during the second half of the second quarter. So we are very optimistic that we are going to be able to get back to our expected profitability in the second half of the year. At our facility in Goodyear, Arizona, we do, and as we've noted in the comments, have been operating at probably less than 20% of our available capacity. However, our storage field is starting to fill up with a lot of yellow aircraft. And we do expect as those operators and lessors start finding opportunities for those aircrafts to start getting a meaningful pickup in hangar work at those facilities. At our landing gear shop, we have been working with two key accounts that have started to bring volume into those facilities that started coming in in the second and at the latter month of the second quarter. that that facility has been operating at probably about 80% overall capacity during one shift. With this incremental volume, we expect to increase that and add an additional shift. So we are seeing improvements in these facilities, but we do still have available capacity to be able to continue to grow those numbers significantly.

Okay, great to hear. And then maybe you can just touch on any thoughts you have on the reasons for no flight equipment sales in the quarter?

Sorry, can you repeat the question?

Well, he wanted to know where we're at on flight equipment sales for the quarter. So as I mentioned, in my contract, several engines could have closed or might have closed, and we were awarded a $35 million trying to get closed. A car comes along or an airline comes along, and they'll pay us more, more recurring, consistent revenue. We get this all, which is I think that the investors don't appreciate what it takes to present how much we pull and then ultimately get an outsized margin because we get more revenue from an engine that we put together than we would if we... The trading that we do is really just a higher way of... And that's the analysis we make at a given time. Do we lease it where demand is high or do we sell it where demand is high? And that's where we're at. So we've got a substantial number of engines coming here in the next several months. And that's a big change from where we've been over the past year. Okay, that's great to hear.

And then if I could squeeze one more in, just curious. I know you mentioned some yellow aircrafts that are being stored. And I'm wondering what you think the fate of those aircraft is. Do they give a sense of the status? Are they ready to fly? Do they need MRO? What do you think happens there?

So all, we've heard of yellow airplanes, and I don't mind saying it. These are ex-Spirit Airlines aircraft. We have how many stored there now? We have 84 stored there. I think we were over 90 at one point. All of those aircraft will need some level of maintenance as they come out. Many of them, the NEOs, require engines, so they'll be stuck there until the engines come out. The expectation is that engines for those airplanes will all come out over the next year. Some that we have now are owned by banks or leasing companies, so we're discussing with all of those companies, what are they going to do with their flight equipment? Some have actually been broken down and sold as airframes, and the engines seem to have more value leasing a serviceable engine than you can get for leasing the whole airplane. So we've seen some of these leasing companies keep the engines that come out of the shop and then sell the aircraft for the airframe for part out. So some of those won't come back into service, and we're parting them out candidly. It's a shame. These are relatively new airplanes, less than five years old in many cases, and airplanes are being parted out. We've just not seen that before. And again, that's an engine out of the shop. So all of that flight equipment, the lessors are waiting. If they can get their engines back, they're all hustling to get lease customers for them. So if they've decided they're going to lease them, they have engines, they've got a customer, then we're starting to get heavy checks because those airplanes have been sitting for quite a while. So that'll keep us with a lot of heavy maintenance until all through the process of either being, and I would expect that most of them will be returned to service. Those airplanes to service are optimistic about filling up our capacity. as we did during COVID, you know, these are ready airplanes.

Okay. Thanks for all that, caller. Thanks for taking my questions.

Okay. Well, thanks for asking.

Your next question comes from the line of Stephen Strackhouse with RBC. Your line is open.

Hey, I'm Ken Martin. Thanks for taking my questions. Nick, I was hoping you might be able to just follow up on the part that you said that investors don't maybe appreciate in terms of what it takes to really put the assets together, maybe kind of speaking to that trade-off of kind of foregoing the near-term USM P-Smart sales in favor of building the longer-term leasing assets as a recurring strategic choice, can you assign any value or numbers to that, maybe in terms of the margins that you can kind of, or maybe even the incremental margins between the two to kind of level set us there?

Maybe so we can share.

Yeah, I would say when we look at overall USM margins, we noted on our IR, Our margins are typically in the 25% overall range. When we've done flight equipment sales and when we look at the opportunity, we've achieved margins that have exceeded those amounts, sometimes by a large overall amount. And that's when we look at the opportunities that have been in front of us, whether it's the opportunity with the U.S. Marshall Service or various other opportunities to put overall engines. The economics are truly attractive to have made the investments, because we have made, as Nick has noted, it's not just grabbing the engine. We have to have made significant investments to get these engines into serviceable condition and then sell those assets out. And that itself is providing not only the higher margin, but it's increasing our overall monetization cycle. So we're getting back our capital quicker, which, again, is important because it will also improve our liquidity position.

As we view flight equipment, the value we can get out of buying flight equipment is to keep the aircraft as a flyable asset. The next highest value is to keep the engines as flyable engines. When the airframe is not valued as a flyable airplane, it costs too much to keep it in service. You take the engines off. Now we have, obviously, plenty of opportunity to lease or sell the engines. When the engines have greater value at the piece part level because of the cost of returning them to service, than they go into the USM parts. Along all that, there's subcomponents. There's landing gear. There's APUs than they do at the piece part level. At the end of the day, USM, when you think about it, it's just purely piece parts. It's not components. It's not landing gear. It's just components. It's just piece parts. That's the lowest value you can get out of that because, no, it can move relatively quickly, And if there are certain very high-demand USM parts can quickly be sold after you've torn it down, got it to the piece part level, sent it to the shop, got it back, and as soon as you predict all your scrap rates and yield and the sales value correctly, you'll get your value out of it. for at least a 25% margin on USM parts. And sometimes, you know, most of the time we get it. But when we take those parts and we sell and we put it together as part of a whole airplane or a whole engine, and then are able to monetize the whole engine, we're not just getting value at a 25% margin off of, or more, off of the parts that are easy to sell. We also get value out of all the other things on the airframe or engine that we probably won't sell. And so that's why the total margin becomes much greater because some of that we wouldn't have otherwise been able to sell. And then when you look at the incremental dollars we're talking about, these are big transactions. These are transactions where we'll make $4, $5, $10 million or more on the sale of an asset. Do you know how many USMPs you have to sell to make that kind of margin? So when we can use our infrastructure to put together an asset and get a higher margin than selling it at the piece part level and a large incremental dollar amount, not so much additional effort because we're using our existing infrastructure to do it, but by just piecing it back together rather than taking it apart at the piece part level. That's why we pull USM and use it in the repair of our own flight equipment. And we'll continue to do that as long as we feel that the...

That is really, really helpful, Culler. And a couple of questions here are really just around, I can appreciate the investment that you guys are making to really kind of get the revenue model into a recurring stream and to really take advantage of the margin potential. So maybe my second question is also in a similar line of thought where I know you talked about the CRJ ramp and the Goodyear labor investments that you're making, maybe not even kind of when they turn accretive to like the back half, but what can kind of some of the incremental margins or the margin capability look like on that MRO work in, like, 2027 or 2028?

In our on-airport MRO, margins have, usually when we're running at full operations, have been in the 20% to 30% overall range. Now, margins improve, and as you would understand, the more volume you have, the better absorption you have of your fixed costs. So, you know, one of the things that we're suffering from now is that as we're ramping up, volume is low. We have to ramp up and get the staffing that's needed to support that value, whether it's the Millington ramp up or in Goodyear in preparation for the large amount of work that we're seeing ahead of us. And that's where we're seeing kind of a lower margin profile. As we start increasing that volume and give an example, as Nick noted on Goodyear, as there's this need to run aircrafts and run them quickly through our pipeline, we'll add additional shifts and that will start improving our margin profile going forward. And again, as Nick has noted, specifically for Goodyear, there's a large amount of aircrafts that when those assets start becoming available, there's going to definitely be a need from our customers for us to ramp up to go through that increased volume.

That's helpful as well. And then the very last question from me, I can appreciate that there's a bit of a drop-off after AirSafe in the peak of like 3Q26. But can you talk about the investment cycle that you could be making in new product offerings? We've heard a lot from a lot of other peer companies this quarter on their earnings calls talk about new product development. I was wondering if you could share any investments that you're making into other new products that could eventually replace AirSafe and drive some longer-term growth.

We are looking at other PMA opportunities or even DER repairs, a solution that they can't get from the existing OEM of a part or they can't get the parts altogether. and we could manufacture parts. They can't get it. And what we're seeing, the CRJ line that we're doing, is there's a lot of need for additional services. We'll use our PMA capability. Really need to understand is, okay, guys, what do you need? What can we do for you? So although in all candor, we don't have any additional PMA developments at this time, There's a number that we're working on that we will look to potentially. I don't expect any of that to make a substantial contribution. It takes a better part of a year to identify a product that you're going to develop, and then if you want it, anything on a list. We did that with AeroWare. We had a very interesting... The next time we do something, when we develop it, it's going to be for a customer who says, But give me this, and I'll give you an order. I can't tell you that.

I really appreciate the color. Thank you.

There are no more further questions at this time. I will now turn the call back over to Nick Sinazo, CEO, for closing remarks.

Okay, thank you. I really want to thank you, gentlemen, for your good questions and gave me an opportunity, Martin and I, an opportunity to explain in a little more detail some of the things maybe we missed during the call. I want to thank everyone else who's expressed an interest by listening to AirSail today for your interest. Thank you very much. The numbers don't reflect the story. And we're going to show you. The second half this year is not going to look like the first half this year. And you'll see that if you listen to us next quarter and in the last quarter of the year. So we remain optimistic and confident, and we're eager to make things happen here. So again, everyone, thanks for listening. We'll hope you listen in next time we have our earnings call. I hope everyone has a really good night.

Concludes today's call. Thank you all for joining, and you may now disconnect.