Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter 2024 FTAI Aviation's Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would like now to turn your conference over to Alan Andreini, Investor Relations. Please go ahead.

Thank you, Michelle. I would like to welcome you all to the FTAI Aviation second quarter 2024 earnings call. Joining me here today are Joe Adams, our Chief Executive Officer; Angela Nam, our Chief Financial Officer; and David Moreno, our Chief Operating 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 EBITDA. 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 37th dividend as a public company and our 52nd consecutive dividend since inception. A dividend of $0.30 per share will be paid on August 20 based on a shareholder record date of August 12. Now let's turn to the numbers. The key metric for us is adjusted EBITDA. We continued the year strongly with adjusted EBITDA of $213.9 million in Q2 2024, which is up 30% compared to $164.1 million in Q1 of this year, and up 40% compared to $153.1 million in Q2 of 2023. During the second quarter, the $213.9 million EBITDA number was comprised of $125 million from our Leasing Segment, $91.2 million from our Aerospace Products segment and negative $2.3 million from Corporate and Other. Turning now to leasing. Leasing had a great quarter, posting approximately $125 million of EBITDA. The pure leasing component of the $125 million came in at $112 million for Q2 versus $98 million in Q1 of 2024. Additionally, we sold $59 million book value of assets for a gain of $13.5 million. With exceptionally strong demand for assets and the continuation of a robust Northern Hemisphere summer travel season, we now expect to generate $500 million in EBITDA in 2024, which includes $50 million in gains on asset sales versus our prior estimate of $475 million. Aerospace Products had yet another excellent quarter with $91.2 million of EBITDA at an overall EBITDA margin of 37%. We're seeing tremendous growth in the aerospace products business in general and feel good about raising our estimates for 2024 EBITDA in Aerospace Products from our prior estimate of $250 million, up to $325 million to $350 million. We also are experiencing expansion in Aerospace Products margins as demand for refurbished modules and engines remains very high, while increasing efficiencies at our two CFM56 maintenance facilities in Montreal and Miami is controlling or, in some cases, lowering our costs. Overall, looking ahead, we now expect annual aviation EBITDA for 2024 to be between $825 million to $850 million, excluding corporate and other, versus our original estimate of $675 million to $725 million. And finally, about two years ago, we first outlined our corporate financial goal of generating in 2026, $1 billion of EBITDA, comprised of $500 million from Leasing and $500 million from Aerospace Products. So now that we're halfway through this time period and ahead of plan, we're resetting the target. Our new goal is $1.25 billion of EBITDA in 2026 comprised of $550 million of Leasing EBITDA and $700 million of Aerospace Products EBITDA. With that, I'll turn the call back to Alan.

Thank you, Joe. Michelle, you may now open the call to Q&A. Hello?

The first question comes from Jason Holcomb with Morgan Stanley. Your line is now open.

Good morning, Joe, Angela, and David.

Good morning.

Good morning.

Within Aerospace Products, you've historically mentioned that you target an EBITDA margin of around 35%. The last couple of quarters, we've seen you surpass that target. It would be great if you could talk about where you see margins going from here, as you continue to grow and develop the business. Also, it would be great if you could speak to how that margin path may differ between both the CFM56 and the V2500 engines. Thank you.

Thank you for the question. As I mentioned earlier, we are observing an upward trend in margins. This is primarily due to our revenues increasing while our expenses remain either stable or decrease. The revenue growth is largely driven by demand, particularly because equipment is in limited supply and maintenance shop turnaround times are lengthening. This situation allows us to command slightly higher prices while still delivering significant savings to our customers. Additionally, we are controlling costs by optimizing our own facilities, which involves managing labor costs and enhancing specialization within our operations. We are focusing on high-volume engine production and training our staff accordingly, which improves efficiency over time. We're also becoming more efficient in utilizing used serviceable materials, improving our demand forecasting, and preparing repairs ahead of time. Therefore, as revenue rises and expenses fall, we anticipate growing margins. We expect further savings once we complete the acquisition of Lockheed Martin, and we foresee margins approaching 40%, with continued improvement as we gain more experience and increase volume at the facility. Overall, the outlook is positive for the present and near future. Regarding your question about Pratt versus CFM, we confirm that the Pratt & Whitney V2500 deal will not negatively impact margins, and we are experiencing very strong demand for those engines along with favorable turnaround times in the shop. We expect the performance of the V2500 to be comparable to or better than that of the CFM engines.

Thank you for that, Joe. I’ll leave it at one.

Thanks.

One moment for the next question. The next question comes from Sheila Kahyaoglu with Jefferies. Your line is open.

Hi, team. This is Kyle Wenclawiak on for Sheila.

Hello.

Hi, guys. Very nice quarter here and first half really in Aero Products. It's not just the EBITDA growth, but the margins like you said, kind of trending towards 40% is now kind of the watermark. So maybe just drilling in on your comments, Joe, about the Lockheed facility. How are you thinking about the margin opportunity within that facility as that deal is going to close in the second half and kind of what it means for the productivity, the throughput and the piece part opportunity there for the modules?

We expect to realize approximately $30 million in annual savings once we conclude the CFM56 overhaul operations, which should enhance our margins by 3 to 4 percentage points. While we have not fully incorporated efficiency gains yet, we observed a notable improvement in throughput per person after taking control of the Miami facility, and we anticipate similar results at the new facility. Additionally, we plan to accelerate the growth of our piece part repair business, which has significant untapped potential at the Lockheed Martin facility. We expect this could generate an additional $10 million to $15 million in EBITDA starting around 2025, with potential for further growth. Every time we explore the engine, we uncover substantial financial opportunities, so we are confident in our ability to continue improving, as we have done over the past several years, and we still have many opportunities ahead of us.

Great. Super helpful. I’ll leave it at one. Thanks, guys.

Thanks.

One moment for the next question. The next question comes from Josh Sullivan with The Benchmark Company. Your line is open.

Hey, good morning. Congratulations on the quarter here. What is the relative turnaround time for an airline or lease or using the module factory versus the open market at this point?

The typical industry turnaround time ranges from 120 to 180 days. Our turnaround time on modules is about 30 to 60 days for construction, and the execution of that module takes between 5 to 25 days. From the customer's viewpoint, they can complete a module swap in 5 to 25 days compared to the industry standard of 120 to 180 days, which is lengthening. We are in a stronger position for four main reasons: first, we have capacity and workforce in Montreal and Miami; second, we have access to used service materials through our AAR program; third, we can repair parts at Lockheed; and fourth, we have the flexibility to mix and match modules within our fleet. As industry turnaround times decline, we anticipate increased demand for modules since they offer a quicker solution than traditional MRO.

Got it. And then just as a follow-up on the piece part repair business expansion. Is that an organic effort or do you see opportunities to bolt-on inorganically at Montreal?

I believe our primary focus is on organic growth, but we've been in discussions with various parties in the industry over the last two years to explore different options. It's possible that our strategy could involve a combination of organic growth and collaboration with another player. We remain open and flexible, and we will consider any opportunities that align with our capabilities and operational needs. Currently, there is insufficient capacity in the global piece part repair market. Last year, we spent $50 million on third-party services, and despite being a significant buyer, we were never approached or marketed to effectively. It's astonishing how the industry operates mostly on order-taking. We see numerous possibilities for growth in this business, and we are just beginning to tap into that potential.

Great. Thank you for the time.

Yeah.

One moment for the next question. The next question comes from Hillary Cacanando with Deutsche Bank. Your line is open.

Thank you. Good morning. You had previously mentioned that savings this year from internalization would be about $30 million. So given that you're raising guidance, does that number change? And could you now expect more savings from internalization for 2024 and how should we think about that number for 2025 and beyond?

Yes. It will increase as we've raised our expectations for this year and for 2026. We initially indicated that we would save $30 million annually from the internalization, which we believe we will achieve this year, and that amount is expected to grow to $40 million or $50 million in the coming years and potentially even higher. We are very confident that the savings will exceed what we had anticipated a couple of months ago.

Okay. So then we should probably assume for modeling purposes is probably assume like $30 million this year and then maybe like $40 million to $50 million next year and then maybe even higher in 2026, had of upward trending in terms of savings?

Yes.

Okay. Perfect. And then in Slide number 8 in the Leasing segment, it says that you performed 10 engine exchanges for aircraft leases year-to-date. I think this is the first time you discuss engine exchanges with your lessee. Could you just over exactly what that is? And if those 10 engine exchanges are included in the 82 module sold number and all these engine exchanges with lessees one-offs or do you have contracts with them to do more?

I'll let David walk through that.

Hey, Hillary. In addition to the 82, we manage our entire aircraft portfolio through exchanges. We're manufacturing engines ahead of their removal and providing exchanges instead of lessees conducting shop visits, which is typically how contracts are structured, adding value. We appreciate this approach because we can charge OEM rates as outlined in the contract for every hour flown while manufacturing those engines at a significantly lower cost. This margin is reflected in the maintenance revenue on our financial statements. Airlines favor this model because it allows them to avoid major shop visits, resulting in zero turnaround time. Usually, they would need to lease an engine during that interim, which can be quite costly, and they often bear the risk of any unexpected issues that arise, such as overruns during shop visits. Therefore, they really value this service as part of our aircraft leasing business.

Okay. Well, thank you so much, David. Thank you, Joe.

Yes. Our business model focuses on engine maintenance. Unlike most lessors who avoid maintenance and shift the responsibility to airlines, we take on the maintenance ourselves because we excel at it. We offer airlines an outsourced solution so they don’t have to handle shop visits, an area where many airlines struggle.

And I'm sure when you're talking to potential like potential lessees, this is something that you pitch as well, right? Like, if we continue to do exchanges as well and that's probably a selling point, I assume?

Yeah. We’re saving them time and money and eliminating a major possible negative surprise in the lease.

Okay. Great. Thank you very much.

Thanks.

One moment for the next question. The next question comes from Giuliano Bologna with Compass Point. Your line is open.

Good morning. Congratulations on another incredible quarter, especially on the product side of the business. As the first question, I'd be curious, looking at the leasing side of the business, you outperformed pretty strongly, especially on even on core leasing. I'm curious what drove the leasing outperformance and that's a trend that we should expect to continue going forward.

The two main factors are the increase in rents and a slowdown in hours. Both of these are on the rise. The demand for equipment, especially older equipment that we possess, is very high as airlines globally are extending leases instead of returning the aircraft. This is due to their inability to operate many GTF-powered engine aircraft and delays in deliveries from Boeing. Consequently, there is significant demand for older equipment and the engines associated with them. Additionally, the second and third quarters generally experience high utilization rates for airlines because of increased demand for flying, which is reflected in our maintenance revenues. Therefore, both rent and maintenance reserves are showing growth.

That's very helpful. Considering the global storage engines and the various supply chain challenges, several industry leaders have indicated that normalization in the industry may not occur until between late 2026 and 2030. I'm interested in your perspective on what this means for FTAI's opportunities and how you envision normalization in that context. I understand this is a long way off, so there's a solid run-rate here.

We have always operated our business with the assumption of normalization. This current situation is an unexpected advantage for us. We believe our business is strong even in a stable environment. However, projecting the future is challenging. It's important to note that the transition won't happen abruptly; we won't suddenly find everything back to normal in 2027. Instead, it will be a gradual process over an extended time frame. Restoring supply chains and rehiring staff takes a considerable amount of time, and any issue within the supply chain can disrupt the entire system. Therefore, we’re likely looking at a scenario that falls somewhere in between extreme predictions, with gradual normalization rather than an immediate shift.

That's very helpful. And then one last one. Thinking about the product segment and kind of the demand for CFM56 and V2500. I'm curious what the pipeline or the order backlog looks like in the third quarter and fourth quarter relative to the second quarter, and how we should think about what that pipeline is already indicated or telling us?

We have some long-term contracts in place, such as with WestJet, LATAM, and Avianca, which are secured for six to eight years. This provides us with strong visibility for that part of our business. For more transactional work, we typically have visibility ranging from three to six months. We're encouraging customers to provide us with forecasts for when they will need equipment, which helps us order materials and plan more effectively. Our visibility has improved compared to a year ago, and we are urging airlines to fully engage with us after they have tried and appreciated our product. They are then more willing to commit to their business and share their timelines for needs. We believe this will lead to more programs, increased visibility, and extended preparation time, benefiting everyone involved.

That’s very helpful. All right. I appreciate it. Congrats on the quarter and I’ll jump back in the queue.

Thanks.

One moment for the next question. The next question comes from Ken Herbert with RBC. Your line is open.

Yeah. Hey, Joe. Good morning.

Good morning.

I just wanted to ask you, you did 82 modular swaps this quarter. What percentage of the global sort of CFM56 operator universe are you currently working with, and how quickly is that expanding and what sort of the time frame as you think about an airline today with everything going on that may not have been a customer that comes to you and ultimately becomes a customer? Sort of how is that sales cycle compressing?

There are many elements to your question. To start, we now have 50 customers in our module factory. Reflecting back to 2022, when we outlined our goal of reaching $1 billion, we anticipated $50 million in revenue by 2026. Now, we're already at 50% of that target in 2024, indicating rapid progress. In times of crisis, businesses often seek to adapt their models, which is what we're seeing as more customers are open to outsourcing engine maintenance, a service we provide. Those 50 customers represent about 300 potential clients overall, meaning we've captured roughly one-sixth of the operator base. However, we still aren't obtaining 100% of their business, though we aim to do so since we believe once they realize the cost savings, time efficiency, and elimination of unexpected issues, they will be more inclined to choose us. The market is vast; considering around 3,000 shop visits globally per year, we are managing about 400 to 500, which is still under 10% of the total market. Our own maintenance capacity allows for 300 shop visits annually in Montreal and 150 in Miami, equating to a total of 1,350 module rebuild capacity. Targeting 400 to 500 visits represents about 5% market penetration today, while we can potentially manage 15% based on our capabilities. We've found that every customer who has used our product wants to return, which is a significant marker of satisfaction. We're encouraging positive experiences, leading to word-of-mouth referrals, with clients sharing their success stories on social media. For instance, someone recently shared about an LPT swap that took two weeks instead of the usual six months in a shop. Our viral marketing is also helping drive further growth. I may not have addressed every part of your inquiry, but these are the key points.

No, that's great. If I could just one follow-up. I mean obviously, you're benefiting from the supply chain disruptions and turnaround times and lead times on material, but you obviously also buy a lot of material to fulfill demand while we're waiting for PMA parts and other stuff. Are you seeing an extension in the material you're looking to buy, the new OEM material or even on the USM side and has that been maybe a headwind to some of throughput?

I mean there's two parts. There's the CFM part and in the Pratt part. Talking about the CFM, I'll talk about Pratt.

Sure. So on the CFM side, yes, we are seeing a delay for, let's say, repairing parts. I think we're well positioned because we have the inventory ahead of time, right? So we are carrying down 40 to 50 engines per year with AR. We're able to recall those parts and use them ahead of time. So really, it's having the USM available and then number two is planning, right? So before module comes in the shop, we understand and we have a kitting process ahead of time. So we produce the kit what exactly is needed in that module. So we're able to be one step ahead in that process, right? Typically, what would happen is that you're engaging in third-party work, an engine would show up and you'd have a very limited amount of time to react in order parts. So that's all happening ahead of time. So we feel like we're well positioned, and that's why our turn times have not been impacted.

We recently met with Pratt regarding the V2500 and discussed material availability and turnaround times. They expressed strong confidence, noting that while there were some production delays earlier this year for certain V2500 parts, those issues are now resolved. As a high priority customer with an order of 100 shop visits, we are at the top of their list. They are confident in meeting the quoted 90-day turnaround times. Additionally, our flexibility allows them to allocate our engines to any shop within their network, which they said is beneficial for managing their workflow.

Great. Thank you very much.

Thanks.

One moment for the next question. The next question comes from Brandon Oglenski with Barclays. Your line is open.

Hey. Good morning, everyone and thanks for taking my question. Joe, I appreciate the updated guidance for this year and longer-term outlook on the business. I guess though, with how tight the market is, I mean, I know you're generating better margins now, but when we think of acquisition costs, especially for new engines, does this get more challenging looking ahead or is it the swap aspect that makes this so viable?

We've been quite effective at sourcing engines, especially when they are due for a shop visit soon. Most buyers see an upcoming shop visit as a major drawback, but we view it positively. We believe this allows us to perform the shop visit at a lower cost compared to others and take advantage of options like module swaps. We can sometimes conduct hospital shop repairs and utilize green time that others can't capitalize on. This gives us an edge in securing a significant portion of that market. There are many engines that haven’t undergone maintenance during COVID, creating a strong pipeline of acquisition opportunities. Our core business model is to acquire run-out engines, refurbish them, and then lease, sell, or exchange them. We also appreciate the exchange option because it allows us to receive another run-out engine at a favorable price, enabling us to repeat the process, creating a beneficial cycle for our sourcing efforts.

Okay. I appreciate that, Joe. And then I guess, as you transition more earnings in the business mix to aviation products, how should investors think about free cash flow in the business? And maybe longer-term, where do you want to see leverage on the balance sheet too? Thanks, Joe.

Yeah. So the second question, we just did an $800 million high-yield deal, and we indicated that our goal is to be strong BB by all agencies and have debt to total EBITDA in the 3 to 3.5 times range. And this quarter, we’re at the bonds have traded up. I think we’re trading pretty much like a strong BB at the moment. And that’s something we think is achievable this year in the near future. So we’re going to maintain that leverage and that rating. In terms of free cash flow, what we do is we take the EBITDA, subtract corporate and interest, and then we use a number for maintenance CapEx, what we would use – what we need to invest each year to maintain the engines so that they can fly forever at infinitum. And that number tends to be between $60 million and $80 million a year of maintenance CapEx. So when you get – when you run the math, we’ll generate hundreds of millions of free cash flow in the near future. And that’s – then our goal since as you remember back from 2022, when we set those targets is not to be in a perpetual cycle of always buying more equipment, but just turning it faster and generating a lot of cash.

Thanks for that. Appreciate it.

Thanks.

One moment for the next question. The next question comes from Stephen Trent with Citi. Your line is now open.

Good morning, everybody, and thanks very much for taking my question. The first, I recall you had commented about your global footprint and opportunities you sought to expand, for example. And I believe you previously called out Southeast Asia geographically. And I was wondering, since that time, what sort of elements you've seen in the market that might be reinforcing your view on that being an attractive footprint. Thank you.

Thanks.

Hi, Stephen. This is David. Southeast Asia is a very important region for us, with a high concentration of 737NG and A320 fleets that are relatively new. As time passes, these fleets are maturing, and engines are undergoing shop visits, making it a key focus for us. Recently, we began collaborating with an airline by conducting all module swaps at their hangar facility, where they also perform airframe and light engine work. We’ve initiated a large program doing module swaps on LPTs with that airline. Additionally, we recently started offering this service as a third-party business, allowing other airlines to bring in aircraft needing module swaps. We are completing these swaps in 15 to 20 days, effectively operating like a pit stop. We've begun with a few third-party customers, and we are excited to expand our presence in Southeast Asia.

I appreciate that, David. Very helpful. And just as a follow-up on the M&A side. You guys seem to be really putting together a potent story on MRO I know you've done your own acquisitions like quick turn and what have you. Long term, would you ever consider a larger competitor acquiring you?

Well, it's up to the shareholders. We are very focused on their interests. We all own a lot of stock, and if the right offer came along and someone was interested, we would certainly consider it. However, that decision is made at the board level, not just by an individual.

Fair enough, and I appreciate that, Joseph. Thank you for the time.

Thanks.

One moment for the next question. The next question comes from Brian McKenna with Citizens JMP. Your line is open.

All right. Great. Thanks. Good morning, everyone. Most questions have been asked. But it would be great just to get an update on capital management. I'm assuming returns on new investments today are quite high. So I suspect your top priority for capital is investing back into the business for longer-term growth. But can you just walk through your capital priorities today as it relates to new investments, further deleveraging strategic M&A and then dividends and buybacks?

Our main focus is to achieve and maintain a strong BB rating and keep our debt at 3 to 3.5 times debt to total EBITDA. We are currently on track, and we anticipate being in a solid position by the end of the year. The second priority is investments, where we have a solid pipeline of acquisitions and are also accelerating the sale of modules and engines. Our aim is to avoid a significant increase in net assets owned this year. At the start of the year, we indicated that with the V2500 program, we expected to grow our engine count from about 6 TV2500 at the beginning of the year to around 150 to 200 by year-end. We are currently at 130 and expect to meet this goal. Given an average engine value of approximately $5 million, adding 100 engines would result in about $500 million of capital. Thus, our focus this year has been on the V2500. Once we reach 400 to 500 CFM56 engines and 150 to 200 V2500 engines, we won't need to significantly increase those numbers. After that, our attention will shift to shareholder returns, dividends, and stock buybacks as our third priority.

Okay. Great. Helpful. And then just one more follow-up for you, Joe. Just given how much the business has grown over the past couple of years, how are you splitting your time between managing the two segments? And then somewhat related, is there an opportunity to lean in on hiring here just given the broader macro environment to further accelerate growth in some of the emerging opportunities within the aerospace products.

Well, I spend 100% of my time on FTAI, whatever is needed. So I don't think of it as like splitting. I've said to people, my dream is that one day, people will not do a sum of the parts calculation. And think of this as we do as an integrated product. We go to the airlines and we say, look, we can provide your engine maintenance without you having to do it. You outsource it to us, and we'll always have an engine for you. And we'll save you time and money and provide you a lot of flexibility, and that's our pitch. And so what we do is we go buy run-out engines, we rebuild them, and then we can offer either a lease, a sale or an exchange to an airline. And so the leasing is just one spoke, one arm of what we offer, but it's an important one because having that ability gives the airline the flexibility to say, well, what, I only want three years, I think is what I'm going to need, and somebody else wants six years. And so you have the ability to customize and say whatever you want, will deliver that for you. And that integrated product is extremely powerful. So we don’t think of it as two different businesses. We report it that way, but someday, we’ll – hopefully, people will stop doing some of the parts and they’ll say this is just a – this is a great product. This is an outsourced engine maintenance business for aftermarket for the most popular engines in the world.

Yeah. Got it. Makes sense. I’ll leave it there and congrats on another great quarter.

Thanks.

One moment for the next question. The next question comes from Myles Walton with Wolfe Research. Your line is open.

Thanks. Good morning. And Joe, I was wondering if you could maybe decompose the $700 million of EBITDA in '26. The $500 million previously, I think, had $50 million of PMA third-party parts and a couple of hundred million of better drop-through in the module business. Is the PMA contribution at $700 million about the same and the remainder's better business elsewhere plus the V2500?

Yes. So there are similar PMA and USM, each about $50 million, and then we've added probably between 100 and 150 for the V2500 program. And then the rest is just higher margins and more volume on CFM modules.

Is that higher margin volume on CFM required that PMA because that was sort of the selling point to get to that higher margin or is the market now so robust that you don't need the PMA for that drop-through?

We're going to get it. So I don't think of it as the PMA will come, and that will increase the margins. I think we're going to increase margins even without PMA, but definitely, we're planning on PMA and PMA increasing margins.

Okay. And there's been a lot of news about airlines and clearly, yields are working against them, and they're running more into cost questions about containment. Are you finding that this business that you have has more durability in a market where airlines are cost cutting. Where are your weak points where your strengths if we go into that cash conservation mode that sometimes cyclically happens with airlines.

Yeah. It does help us. And we’re providing, as I said, cost savings. So when everybody is told to look at every line item in the P&L, one of the line items that always pops up is engine maintenance as a big one and one that they seem to never be able to get it to go down. So we can provide a flattening out of that in savings. And so when people do have an intense focus on cost savings and outsourcing of these types of activities goes up, the demand for that goes up. So we’re happy in any environment, but particularly when people are focusing on – that’s what we’re providing is expense management reduction.

Okay. All right. Great. I’ll leave it there. Thank you.

Thanks.

One moment for the next question. The next question comes from Sherif Elmaghrabi with BTIG. Your line is open.

Hey, good morning. I want to start with an update on PMA. How is industry acceptance going for your first part? And can you talk through what the second PMA part does within the engine and timing for approval there, please?

The timing we mentioned is imminent. We are closer today than we were last quarter. While we do not provide specific timing forecasts, we have made significant progress on all fronts and are quite confident. The first part has been installed in 15 engines and has been operating with another airline without any issues. It is a high-quality product, as always with Cromwell, and we believe industry acceptance will increase. Some airlines tend to wait for multiple parts to be approved before adopting PMA, and once those additional cards are available, we anticipate a strong uptake in the industry. There is also a current supply chain consideration; PMA offers not just cost savings, but also availability, presenting an important alternative if OEM parts cannot be obtained in a timely manner.

And then on the corporate side, both of the well intervention vessels are now on charter, and it looks like the rate that their earning has melted up nicely. So how are you progressing on the sale of these vessels? And are there any recent transactions you can point you to give us a sense of how they're valued?

Yeah. So you’re right. The market is improving nicely, we have a handshake deal on both vessels today, which we expect to close by the end of the year, subject to a couple of conditions that we think will be met, but the market has strengthened and we expect for the next few years, it’s going to be a strong market. So the vessels are both on charter are doing well, generating EBITDA and the values have gone up. We originally said we thought we would get approximately $150 million, and we’re in that ZIP code. So we’re very happy with that the end of that chapter is close.

Thanks for taking my questions, Joe.

Thanks.

I show no further questions at this time. I would now like to turn the call back over to Alan Andreini for closing remarks.

Thank you all for participating in today's conference call. We look forward to updating you after Q3.

This concludes today's conference call. Thank you for participating. You may now disconnect.