Good morning, and thank you for standing by. Welcome to the Fourth Quarter 2021 Fortress Transportation and Infrastructure Investors LLC Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alan Andreini. Please go ahead.

Thank you, operator. I would like to welcome you all to the Fortress Transportation and Infrastructure fourth quarter and full year 2021 earnings call. Joining me here today are Joe Adams, our Chief Executive Officer; and Scott Christopher, our Chief Financial Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including FAD. The reconciliation of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. Now I would like to turn the call over to Joe.

Thank you, Alan. To start today, I'm pleased to announce our 27th dividend as a public company and our 42nd consecutive dividend since inception. The dividend of $0.33 per share will be paid on March 23, based on a shareholder record date of March 11. Now let's turn to the numbers. The key metrics for us are adjusted EBITDA and FAD or funds available for distribution. We ended the year strongly with adjusted EBITDA of $124.8 million in Q4 2021, which is up 29% compared to $96.4 million in Q3 2021, and up 170% compared to $46.2 million in Q4 2020. In a similar fashion FAD was $120.1 million in Q4 2021, up 205% compared to $39.4 million in Q3 2021 and up 122% compared to $54.2 million in Q4 2020. During the fourth quarter, the $120.1 million FAD number was comprised of $161.2 million from our aviation leasing portfolio, $11.0 million from our infrastructure business and negative $52.1 million from corporate and other. Now let's look at all of 2021 versus all of 2020. Adjusted EBITDA was $336.3 million in 2021, up 38% versus $243.3 million in 2020. FAD was $242.2 million in 2021, up 2% versus $237.4 million in 2020. Both our aviation portfolio and infrastructure businesses contributed positive FAD for the year and overall 20% higher compared to 2020. Meanwhile, corporate expenses were higher compared to 2020, primarily due to higher interest expense resulting from higher average debt outstanding during the year. Turning now to Aviation. Aviation had another solid quarter with Q4 EBITDA of $103.7 million. While decreased flying due to Omicron dampened the recovery and leasing activity, we were able to grow our aerospace services EBITDA to $20.3 million for Q4, primarily due to an increasing number of sales and exchanges through our CFM56 module factory. We had approximately 10 active customers in the Module Factory and are seeing growing interest in the products from MROs or maintenance and repair organizations, airlines and lessors. With our recently signed program with Lufthansa Technik covering the seven-year WestJet CFM56 engine maintenance program, we see growing validation and acceptance of the value proposition, which will expand the active customer base across the entire engine ecosystem. Regarding aircraft and engine leasing, we see increased demand for additional equipment starting in Q2 driving higher lease rates and asset prices provided that strong forward travel bookings that we have today hold up. Overall, we see improving demand for assets and aftermarket maintenance services driving 2022 financial performance and strengthening our position in the commercial jet engine aftermarket. Now let's turn to infrastructure. Jefferson, the big story with Jefferson in 2021 was major advancements on multiple product fronts with the two largest refineries in the United States and our largest customers, Motiva and Exxon. We started the year with refined products by rail and added a 10-year contract to operate a 2 million barrel multi-product and refined products export hub. On the crude side, we've been receiving ship cargos, which we store, blend and move now by pipeline. We see a good pickup in crude by rail from Utah and Canada, which brings additional services and values to the terminal. We are actively exploring multiple additional products for both refiners which we expect to add in 2022 and at least one new pipeline connection as well. While throughput volumes are up over 25% in early 2022 versus Q4 2021, we still are only about 33% utilized, but with additional activity from Exxon and Motiva, we have a path to high utilization coming into focus. Repauno had a terrific year in 2021 and is very well positioned for many years of significant growth. First, let me list the 2021 accomplishments. In the first year of operation, we loaded 31 ships with butane for export. Second, we imported our first cargo of polymer-grade propylene, which has not come to the East Coast in many years. Third, we began construction of the double unit train rail loop. Fourth, we expanded the truck rack which will allow direct rail to truck propane transloading. Since we operated a new cavern chiller, we now have refrigerated LPG marine loading capabilities. We also completed a new bypass road providing direct highway truck access. In terms of volumes, in 2020, we moved 4.3 million gallons through the terminal. In 2021, we moved 130 million gallons. In 2022, we expect to move 150 million to 175 million gallons. And then in 2023, with an additional cryogenic tank, we plan to build that number could triple. Repauno is finding its niche with customers to offer unique capabilities for storing and transloading a wide variety of liquid petroleum products and intermediate specialty chemicals for both import and export in a critically important advantageous location. As such, we see upside over time in this terminal fee per gallon potential. Lastly, we've made significant progress on the Clean Planet joint venture and have begun the permitting process for the first plastics recycling plant at Repauno, which we expect to commence construction on in Q2 of 2022 and complete in Q2 of 2023. Turning to Long Ridge. Long Ridge had a good quarter and year due to an earlier than planned start-up of the power plant, which allowed us to take advantage of elevated power prices in October and November before our long-term power sales agreements commenced. On a 100% basis, Long Ridge generated EBITDA of $37.4 million in Q4 and $58.8 million for all of 2021 well ahead of our budget. Starting in January and up until last week, Long Ridge took an unscheduled maintenance outage that was fully covered by GE warranty for repairs to the steam turbine. The outage will reduce EBITDA in Q1 due to the loss of power revenue. We did however perform maintenance scheduled for later in the year, thus avoiding future outages and we completed the hydrogen blending project, giving us the capability to become the first large frame power plant to utilize zero carbon hydrogen as a fuel. Under the recently enacted infrastructure bill, the U.S. government will designate four locations as hydrogen hubs. Long Ridge is ideally qualified and we intend to apply for one of those. We are also in the final stages of negotiating to host a new biodegradable plastics manufacturer at Long Ridge. As part of that agreement, we would provide land, power and natural gas under long-term supply agreements. Turning to Transtar. Transtar generated $16.7 million of adjusted EBITDA in the fourth quarter from continuing operations and for the full year generated an annualized $68 million of adjusted EBITDA. In addition, Transtar generated $4.5 million of incremental cash flow from the sale of non-core equipment and excess land which was more than offset by maintenance CapEx in the quarter. This is a collection of railroads that have very low maintenance CapEx and industry-leading cash conversion, which we expect to continue in 2022. In the fourth quarter, Transtar moved more than 55,000 carloads, slightly above the fourth quarter of 2020 and steel production at Gary and Mon Valley remained stable despite supply chain downstream issues in the automotive and appliance sectors. Some loaded steel carloads in December were held at the origin until cars are offloaded downstream, but are expected to move in Q1 and Q2. The team is carrying forward early into the first quarter of 2022, but we expect to see increased steel movements in Q2 and beyond as pent-up demand is released and the supply chain rationalizes. Looking forward to 2022, Transtar's goal is to grow its third-party businesses at the underutilized railroads. The team is executing on new transloading opportunities in Detroit and exploring large industrial customers for its thousand-acre property in Northeast Texas. As non-core railcars are sold, more than 1,500 storage spots are opening up across the network, and the team has a pipeline of opportunities to fill those vacant spots. We're pleased to welcome Gary Long to the team as CEO of FTAI’s Rail Investments. Gary brings more than 25 years of experience in the rail industry, including most recently as CEO of Genesee & Wyoming's European operations. Gary is very well suited to leverage the Transtar platform to execute on the growth initiatives we have set forth, both organically and through acquisitions. In summary, we're very much looking forward to 2022 with aviation recovery gaining momentum, the company benefiting from our advances in aerospace service revenues and EBITDA. In infrastructure, the maturation of multiple projects which now generate organic growth across all the platforms. Finally, the spin-off of infrastructure is moving ahead with expected completion in April, which will provide simplification of the business strategy combined with eliminating K-1s for investors.

Thank you, Joe. Operator, you may now open the call to Q&A.

Thank you. Our first question comes from Justin Long with Stephens. Your line is open.

Thanks and good morning. Joe, maybe to start, I was just curious if anything has changed in terms of your EBITDA outlook by business for 2022. And then thinking about the longer term, I know you've spoken recently about the aviation business getting to a $1 billion of EBITDA by 2025. Given the split is on the near-term horizon, is there anything you can share around some of your longer-term targets for the infrastructure business as well?

On the EBITDA for 2022, our best estimate is approximately $550 million for Aviation. For the Infrastructure business, we anticipate between $50 million and $90 million of EBITDA; specifically for Long Ridge, our share is likely around $90 million, considering the first quarter will be short, so our share is about $45 million of EBITDA. As for Repauno, that should be around $10 million, and for Transtar, it's approximately $75 million, though it might go up to $80 million; $75 million is a solid estimate.

That's great. And then I guess longer term for the infrastructure businesses.

We still believe that Jefferson is about a third utilized, and with Exxon increasing its capacity from 360,000 to 620,000 barrels a day next year, we expect to fill the terminal. We have engaged in extensive discussions and have a larger array of new product offerings for both refiners than ever before. We are confident that we will fill the terminal, which could lead to annual EBITDA of $150 million or more. We've always maintained that it is a matter of when, not if, despite facing various challenges. We have managed to overcome these obstacles and are optimistic. The terminal is well-positioned, with an excellent product offering and strong relationships with our customers, coupled with the advantage of higher oil prices. Regarding Transtar, we see potential for growth in our right-of-way and storage business, aiming to add around $15 million to $20 million over the next three to four years. Achieving this, along with securing $100 million from a long-term customer like U.S. Steel and an additional $100 million from other third-party customers in a robust economic environment, would significantly enhance our company's value and its market multiple.

That's great, I appreciate all that detail. I'll keep my follow-up brief. Earlier, you mentioned $550 million from aviation this year; does that include the $50 million to $100 million you discussed from aerospace services?

Yes.

Okay. Great. I appreciate the time.

Thanks.

Thank you. Our next question comes from Devin Ryan with JMP Securities. Your line is open.

Hi. Thanks. This is Brian McKenna for Devin. So just looking at Aviation EBITDA returns. I know there were some timing dynamics in the fourth quarter, but returns declined sequentially to 16% from 20% in the third quarter, so could you talk about the outlook for returns in the business? Is 16% the floor in the near term? And then what do you see as some of the bigger drivers for getting returns back to the mid 20% level over time?

We think that, as I mentioned, Omicron slowed down a lot of expansion activity. Airlines previously flying 350 to 400 hours a month on an aircraft might only fly 200 in the fourth quarter, and that affects our revenue from maintenance reserves that we take in. That was an impact to the fourth quarter. However, the first quarter is showing improvement, and we expect to see sequential improvement. We expect Q2 and Q3 to return to our targeted EBITDA margin of about 25% or close to that. We have reasonable visibility on that based on the airlines seeing strong forward bookings. Our expectation is that the demand for additional aircraft will increase as airlines are looking to add capacity and that will drive recovery. Other maintenance shops are reporting high volumes and one of the major engine manufacturers has indicated a return to pre-COVID levels of activity by the end of this year, supporting our outlook.

Great. I appreciate that. And then you also sold several non-core aviation assets in the quarter. This can be lumpy, but how should we think about related asset sales moving forward? Is some level of sales necessary to fund the pipeline of LOIs or do you have ample liquidity and cash flow generation in the business to fund these investments throughout 2022?

Yeah. We have been talking about shifting the mix of the portfolio somewhat. We expect to reduce our Pratt 4000 and CF680 engines by about half this year. We had about $10 million of gains from those types of sales in Q4, and we anticipate more this year. At the same time, we look to increase the percentage of the portfolio in the CFM56 engine. This mixed-shift strategy is designed to create significant value and, as we manage capital, we will focus on turning the portfolio and utilizing asset sales to fund new investments. We have liquidity and don’t expect significant expansion in invested capital, instead aiming to grow the service component until the long-term aspiration is for the aerospace services revenue and EBITDA to equal the leasing activity EBITDA.

Great. Thanks, Joe.

Yeah.

Thank you. Our next question comes from Guiliano Bologna with Compass Point. Your line is open.

Good morning. Okay. So switching topics a little bit, you guys reported that you generated $20.3 million of aerospace services EBITDA in the quarter. I want to ensure I was thinking about this correctly that the components of that are mostly selling new serviceable materials and proceeds from the Module Factory. If I think back to prior statements that you've made Joe, you referenced selling about or generating about $20 million of EBITDA with serviceable materials, which implies roughly $65 million a quarter. If I back into that number, this implies that the Module Factory is probably running at $50 million or more, or larger contributions to the $20 million, already putting you at around $60 million or so in an annualized run rate. Is that a good way of thinking of it? Do you have a ballpark of where the Module Factory is running?

It's close, but it's a little different. In the fourth quarter, most of that $20 million was from the Module Factory, more than 80% of it was Module Factory. The USM contribution was probably under $3 million, between $2 and $3 million in Q4. We do expect $20 million from USM this year in 2022, but again, USM is driven primarily off of shop visits. In the fourth quarter and first quarter, there are still a limited number of shop visits occurring. However, in Q2 and Q3, we are sold out in the shop, which will drive USM sales as the activity volume increases. That will be back-end loaded but we still believe $20 million is a good estimate for the year.

That's great. Regarding the accounting specifics, can you confirm that both the Module Factory EBITDA and proceeds, as well as USM, will contribute to gain on sale? It appears that you had a significant profit from sale this quarter. I just want to ensure that both of these will indeed be counted as gain on sale, especially since the Module Factory seems to represent a more recurring business and potentially users in Ontario rather than being a one-time occurrence.

Well, right now we have part of it. The Module Factory is flowing through gain on sale but USM is probably being booked as revenues minus cost of goods sold. So we have a different treatment which is not ideal from a long-term view. We need to ensure it is classified accurately, but because this is a new area, there has been some back and forth with our accountants on classification.

Got it. That's great and very helpful. I have a question for you. We're curious if there's any update on the second PMA part or the potential approval timeline.

Yes. A lot of very good progress has been made on the part; they're performing well. There is back and forth on information and it’s progressing. We are hopeful that this will be addressed soon, but as you know, it's very hard to put a specific date on it.

And the only other thing is on Jefferson; given the overall pricing is moving around as most of us have seen, I'm curious if there's potential to dial up crude by rail and how this contributes to your kind of $50 million or $90 million guide?

Yes, it's one of the products that we hope will come through this year, as we have several proposals underway. Higher crude prices create more spread and volatility, which is what refiners seek for lowest cost crude sourcing. We see the likelihood of an increase in activity. We've already seen it come from the Utah market, which is a necessary route because of limited options. In Canada, it also creates a supply business as the market will open up.

Thank you. Our next question comes from Josh Sullivan with Benchmark Company. Your line is open.

Hey. Good morning.

Good morning.

Just given the new Lufthansa relationship, how do we frame your overall module capacity at this point? One of the advantages of the Module Factory deal was pitched as the faster turnarounds for airline maintenance. Can you give us any metrics that customers are seeing in the field on terms at this point?

That's a great one. If you think about the lift side of the deal, we just supplied an overhauled LPG low-pressure turbine to Lufthansa, which gets installed in the WestJet engine during shop visits. Lufthansa doesn’t have to perform any maintenance on that and it's an immediate installation in 30 days rather than waiting for parts; that offers considerable savings and reduces their wait. For airlines, a needed LPT could require up to six months sourcing for maintenance; using the Module Factory yields savings of potentially $0.5 million or more, which we do not charge for. These savings will increase as we see shops fill up again. Supply chain issues are also anticipated for aviation components now, as has occurred in every other industry. Previously, there was not much activity, but with increased engine shop visits, we expect long wait times to resurface.

Got it. And then when the split is complete, will you still be reporting recurring FAD under the aviation assets? How are you looking at the dividend and capital allocation between the two?

FAD is probably on the list of items to reconsider; it's likely losing meaningfulness. Capital allocation will prioritize effective investments and if EBITDA contributions hold true, cash flow will ideally support both debt pay down and dividend increases, and as this aligns with expectations post-split, these discussions will become clearer.

Got it. And then just one last one on Jefferson. How does the EBITDA generation work relative to utilization? What would be some representative EBITDA figures at 50% or 75% utilization?

It's highly leveraged; the first 25% covers fixed costs, and then additional volumes significantly increase contribution. Each product has unique contributions, with crude by rail having the highest fees for unloading cars, plus blending fees for additional products, making it the top contributor. Utilization enhances positive contributions, but it’s not a direct relationship; it depends on the mix.

Got it. Thank you for your time.

Thanks.

Thank you. Our next question comes from Chris Wetherbee with Citi. Your line is open.

Hey. Thanks. Good morning, guys. Joe, I was hoping maybe you could help us with the Jefferson bridge on sitting here looking at the last half of the year, running around $2 million of quarterly adjusted EBITDA. I know we have a target for $50 million to $90 million; we’re a few months into the year. Can you give us near-term visibility on the ramp-up, or how do we bridge this substantial step-up?

It's as you've noted, we need higher utilization and volumes. Multiple projects are underway with both crude and fuel oil moving in through various channels creating more significant potential. We’ve observed some increase in Q1, but we expect greater volumes through the year.

Can you provide numerical insight on Q1 performance regarding the full-year projections?

Q1 throughput volumes were up approximately 25% over Q4.

Okay. That's super helpful. Appreciate the time.

Thanks.

Thank you. Our next question comes from Robert Dodd with Raymond James. Your line is open.

Hi, guys. A question on the dividend outlook. In the past you've stated, two times coverage would trigger a review of the dividend regarding FAD. With FAD losing relevance, how should we be framing expectations around dividend growth post-spin?

We expect with the spin that approximately 75% of the current dividend will be paid by Aviation and 25% by Infrastructure. Post-split, as we grow the asset base, we anticipate more free cash flow for potential dividend increases. However, pre-spin is not an ideal time for making decisions on dividend due to other ongoing processes.

Thank you. One last question; you mentioned new serviceable materials and related dynamics being more back-end loaded. Is that also true for the Module Factory, or is that more seasonal this year, and how does it relate to COVID recovery?

For USM, it’s definitely COVID influenced. We saw a drop in shop visits due to COVID, and now with recovery, shops will be full, causing engines to be prioritized for maintenance. Pre-COVID, Q1 had high levels of maintenance since it’s the slowest flying season. The Module Factory isn’t expected to be highly seasonal as it operates year-round.

Thank you.

Thank you.

Thank you. I'm showing no further questions at this time. I would like to turn the call back to Alan Andreini for closing comments.

Thank you all for participating in today's conference call. We look forward to updating you after Q1.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.