Thank you for joining us for FTAI Aviation's First Quarter 2025 Earnings Conference Call. All participants are currently in listen-only mode. After the presentations, we will have a question-and-answer session. I will now pass the call to Alan Andreini from Investor Relations. Please proceed.

Thank you, Latif. I would like to welcome you all to the FTAI Aviation first quarter 2025 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. I'm pleased to announce our 40th dividend as a public company and our 55th consecutive dividend since inception. The dividend of $0.30 per share will be paid on May 23rd based on a shareholder record date of May 16. Angela is going to take you through the numbers in more detail. But before that, I wanted to highlight a few things. We started the year with momentum, recording another strong quarter in aerospace products with $131 million in adjusted EBITDA at a margin of 36%. With a consistently growing backlog of purchase orders for 2025 and beyond, demand for our aerospace products and services continues to accelerate, strengthening our position as a leader in the engine maintenance aftermarket. Turning to production. We refurbished 138 CFM56 modules this quarter between our two facilities in Montreal and Miami. We anticipate a significant ramp to occur in Q2, particularly in Montreal, as we execute on our growth initiatives and operational throughput to enhance efficiency. As we expand production of refurbished modules and engines, our core focus is to increase our market share of restorations beyond the current 5% to 25%. Now, let's talk about adjusted free cash flow. In the first quarter, we closed on approximately $234 million of aviation equipment at attractive prices as replacement CapEx for the seed portfolio of aircraft, which are being sold to Strategic Capital Initiative, or SCI. The transition of these aircraft started in Q1, where we sold four aircraft for $59 million, and we are proceeding on plan to have completed the sale of the remaining assets by the end of Q2, generating a significant inflow of approximately $440 million. We expect adjusted free cash flow to be in the range of $300 million to $350 million for the first half of the year, which is in line with our target to achieve $650 million in adjusted free cash flow for all of 2025. For the strategic capital initiative or SCI, it was great to announce one investment management as an equity investor to the partnership. Since then, we have secured an additional equity partner and expect further closings during Q3 of this year. We remain on track to deploy $4 billion plus in capital by the end of the year through a combination of these commitments and our $2.5 billion secured asset-level financing facility with ATLAS, a wholly-owned affiliate of Apollo and Deutsche Bank. Finally, we've been working extensively on operational plans with our partner IAG Engine Center Europe in Rome and are confident we can ramp up production immediately following the acquisition to support our regional customer base in Europe and the Middle East. We already have five engines in the facility and expect to close the new joint venture very soon. Therefore, overall, we feel increasingly confident in our business segment EBITDA 2025 goal of between $1.1 billion to $1.15 billion, excluding corporate and other rising to approximately $1.4 billion in 2026. While tariffs create some challenges and opportunities, we do not currently see tariffs having any material negative effect on our business, and we are reiterating our guidance for both 2025 and 2026, as we continue to see growing and accelerating demand for our proprietary set of aerospace products. With that, I'll hand it over to Angela to talk through the numbers.

Thanks, Joe. The key metric for us is adjusted EBITDA. We began the year strongly with adjusted EBITDA of $268.6 million in Q1 2025, which is up 7% compared to $252 million in Q4 2024 and up 64% compared to $164.1 million in Q1 of 2024. During the first quarter, the $268.6 million EBITDA number was comprised of $162 million from our Leasing segment, $130.9 million from our Aerospace Product segment, a negative $17.4 million from corporate and other, excluding intra-entity eliminations. Turning now to leasing. Leasing continued to deliver strong results, posting approximately $162 million of EBITDA. The pure leasing component of the $162 million came in at $152 million for Q1 versus $128 million in Q4 2024. Included in the $152 million was a $30 million settlement related to Russian assets written off in 2022, which is an additional settlement to the $11 million amount we received last quarter. For gains on sales, we began the year with $68 million in book value of assets being sold for a 13% margin gain of $9.8 million, which will significantly increase next quarter as we close out the transition of the seed assets to the SCI. Looking ahead, we remain comfortable assuming leasing EBITDA will be $500 million in 2025 as we pivot our focus towards an asset-light business model. Aerospace products had yet another good quarter with $130.9 million of EBITDA at an overall EBITDA margin of 36%, which is up 12% compared to $117.3 million in Q4 of last year and up 86% compared to $70.3 million in Q1 2024. We continue to see accelerating growth and adoption and usage of our aerospace products and remain focused on ramping up production in both of our facilities in Montreal and Miami as well as commencing operations in Rome. In 2025, we continue to expect to generate $650 million in EBITDA, up from $381 million in 2024 and $160 million in 2023. With that, let me turn the call back over to Alan.

Thank you, Angela. Latif, you may now open the call to Q&A.

Thank you. Our first question comes from Giuliano Bologna of Compass Point. Please go ahead, Giuliano.

Good morning. Congratulations on another successful quarter. I wanted to delve into the Aerospace Products segment, where it appears you generated about $100 million in revenue related to the 2025 partnership or the SCI program. I'm curious about the strategy behind this, as it seems to be a selective initiative aimed at supporting the SCI program's launch and acquiring numerous assets. Additionally, I would appreciate your insights on the third-party or non-SCI business, as it appears there is significant and growing demand from external parties. As you mentioned earlier, the main limitation has been capacity at Montreal, which is expected to increase significantly in the second quarter and beyond. It would be helpful to hear your thoughts on this situation.

Great question. There is indeed significant demand for our rebuilt engines across the industry, and we anticipate this will continue for the next few years. Currently, our production is limited, meaning we can sell everything we produce. We have several options to sell these engines to third-party customers and could have opted to do so without a significant financial impact compared to selling to SCI. However, we chose to prioritize SCI for a few reasons. We are dedicated to engine exchanges within that partnership and want to see it grow significantly. Engine exchanges offer substantial benefits in cost savings for owners and airlines, which is the foundation of our business model. This is why demand across the industry is increasing, as it saves time and money and enhances efficiency. Our aim in creating SCI was to ensure it becomes a better owner of these assets, especially given that many engines are due for maintenance in the near future. If SCI becomes more successful and generates better returns, it will acquire more assets, allowing us to have more committed engine exchanges, which will improve our visibility into future engine rebuilding needs, enhance our efficiency, reduce costs, and ultimately lead to better margins. It's a beneficial cycle, and this was one of our main objectives in establishing SCI. Approximately 30% of our activity has been directed toward SCI, and we've been positioning assets for the past six months, resulting in some pent-up demand since we started closing. We currently own 30 aircraft in the partnership and expect this to comprise about 20% of our activity in 2025, a figure we believe will remain relevant in the years ahead as both SCI and the market continue to grow. Our goal is to increase our market share from 5% to 25% of the total industry. What happened in Q1 aligns perfectly with our expectations for SCI, and we regard this as a substantial positive for both the immediate and long-term prospects of FTAI and our shareholders.

That is extremely helpful. I just want to confirm what I understood. Looking at that 20% number suggests around $130 million in EBITDA growth, given a target of $650 million for the year. It also indicates that the non-SCI business could see growth in the high 30% range, possibly even 40%. It seems to me, and I hope you agree, that this growth is additive and not cannibalizing anything; rather, it's about fulfilling your order book based on your production capacity. As your ability to produce modules increases, you'll be able to fill those orders quickly. You have a significant backlog that supports this. Therefore, the core business, excluding SCI, continues to grow substantially at a healthy rate.

Yes. And I think I agree. I think that we would have had growth even without SCI, but even if we didn't sell to SCI, we would have had engines available for someone. So we'll have growth without it, but you can't zero it out because we really do something else for those assets. But no, I agree with the math that you laid out, it's basically right. But we see the entire market growing for the products, and there is no cannibalization. These aircraft that are being acquired in SCI, we would not have been doing these engines other than the fact that we now own them in the partnership.

That’s very helpful. I really appreciate it, and I’ll jump back in the queue.

Thank you. Our next question comes from the line of Sheila Kahy of Jefferies. Your line is open, Sheila.

Good morning and thank you very much. My first question is maybe on tariffs. If you look at aerospace products, margins improved sequentially to 36% even with a 2-point drag from legacy Montreal in the quarter. So how are you sizing the potential impact and opportunities with tariffs to the business and any work around at your disposal?

We do not anticipate any significant negative impact from tariffs on our business for three main reasons. First, our business involves rebuilding assets using a considerable amount of used materials, rather than delivering new assets that are typically subject to tariffs. Second, we operate in three regions—Canada, the United States, and the EU—allowing us to deliver products from different locations as needed for optimization, although we currently see no need for that. Lastly, we can pass price increases onto our customers, with indications from OEMs and others suggesting that they would also adjust prices if their costs rise. If that were to happen, we would follow suit and believe we have a similar ability to adjust prices. In the long run, if tariffs remain in place for an extended period, the prices of new assets are likely to increase, making used assets more appealing in comparison. This would ultimately benefit us, as higher prices would enhance the value of our products and provide greater cost savings.

Thank you for that answer. Joe or Angela, when you set the $650 million free cash flow guidance for the year, it was before growth CapEx and suggested that you could meet the 2026 targets without additional investments. You invested $127 million in parts during Q1. I'm interested in your thoughts on growth CapEx and opportunities this year, and how that impacts the ramp-up of aerospace products over the next few years.

We are planning to invest about $200 million in parts in the first half of this year as part of our cash flow. This investment will be focused on building up our parts inventory because we believe that the cost of maintaining extra inventory is much lower than the risk of losing a sale. We want to ensure we don’t miss any sales opportunities. Currently, we are constrained in production, so we are prioritizing having more materials on hand rather than less. We expect to ramp up both our production and inventory levels, and while this will stabilize over time, it's part of our strategy for the next few months and is included in our cash flow projections for 2025. Accordingly, we anticipate an increase of around $200 million in parts in the first half of this year, and notwithstanding that increase, we still expect to generate approximately $350 million in free cash flow.

Great. Thank you.

Our next question comes from the line of Kristine Liwag of Morgan Stanley. Please go ahead, Kristine.

Hey, good morning everyone. Joe, just want to follow-up on the commentary you made on cash now. So when you said that the inventory step-up of $200 million in cash for the first half for aerospace product, and that $350 million free cash flow, is that at the same time? Or do you mean $350 million of positive free cash flow for the full year? I guess my question is, ultimately, trying to understand the cash stream with aerospace product, especially if you're trying to grow from 5% to 20%, how much more inventory investment you need to make? And when does that become a positive working capital event?

Sure. First, let me share my cash flow numbers for the first half of the year. I start with operating cash flow, which is essentially EBITDA minus interest and maintenance CapEx, totaling about $450 million for the six months. We will also see $500 million from asset sales, primarily to the SCI. This brings us to $950 million. We plan to invest around $300 million in replacement CapEx, which was included in our earlier projections for 2025, and that will be concentrated in the first half of the year. Additionally, we expect to see approximately $100 million in equity in the SCI, bringing the total to $550 million. If we account for $200 million in parts inventory in the first half of the year, that results in $350 million of free cash flow for the first half of 2025. The $200 million investment in inventory is slightly above our initial expectations, but we believe it’s a solid investment, and we are still positioned to meet our targets due to the growth in free cash flow and EBITDA from the business. Do you have any thoughts on the growth rate of parts moving forward?

As we mentioned that we want to provision parts ahead of shop visits. So generally speaking, working capital as far as what we have today, we'd like to maintain that. And we provision ahead for the remainder of the year. So we don't see that growing materially quarter-over-quarter.

Great. Thanks. And maybe following up just on this parts thing, the $127 million CFM56 that you acquired at opportunistic attractive prices, can you talk more about how you source that? How you're able to get a deal like that in this environment, where there's a lot of demand, not enough supply? And also, as you provision ahead of time, are you seeing these prices go up more? I mean, in anticipation of the tariff costs, the engine OEMs have been pretty clear that pricing pass-throughs will be part of their strategy to offset some of the pain they could have on tariffs?

Yes. We're sourcing these parts in various ways, but our competitive advantage comes from acquiring unserviceable parts from asset owners and airlines. For example, we purchase LLPs and have back shop capabilities in Montreal to repair them. Overall, Montreal has the capacity to repair about 70% of the CFM56 in-house, including LLPs, combustors, cases, framings, and other fan blades, among other parts. We buy parts as they are removed and then perform specialized repairs to make them serviceable again. This approach allows us to acquire them at a much lower cost, and our salvage repairs help increase yields. We're very knowledgeable about scrap rates for specific parts, enabling us to maximize value through our repair network. We are noticing an increase in parts availability. As mentioned, manufacturers are likely to implement tariff surcharges, which we expect to affect OEM annual price increases. Therefore, we anticipate that the prices for used parts will rise as well. Overall, we believe we are in a strong position because as the cost of new replacement parts continues to rise, we can provide significant savings. We are beginning to see this trend develop, although it is still early.

Thanks. And then a follow-up to that, if I may. On the repair that you're doing in Montreal, it sounds like the tariff duties are on places of manufacture. The value add that you do on repair, does that trigger some sort of tariff piece, when you bring it back to the US? Or is that why you're having a lower expected tariff impact? And then as a second question to that, with airlines being more focused on cost, are you seeing more adoption of your PMA parts in engines today?

No, we do not anticipate a tariff impact on the repair segment. On the other hand, we believe airlines are becoming increasingly attentive to engine maintenance costs as they rise significantly across the board. This has led to a strong emphasis on cost-saving strategies, and all alternatives are being considered, including PMA parts. We have a substantial competitive edge in PMA, which we expect will boost our margins considerably, even though it's not fully reflected in our current numbers. We foresee good industry adoption of these parts.

Great. Thank you.

Thanks.

Our next question comes from the line of Josh Sullivan of the Benchmark Company. Please go ahead, Josh.

Hey, good morning. Can you provide an update on the approval progress for the remaining PMAs at this point?

I would say that we continue to make excellent progress, and we are very close on approval on the next part, and that's kind of where I stopped.

Got it. Regarding aerospace products and PMAs, there's an ongoing discussion about how airlines and lessors are accepting PMA parts. Could you provide more details on the adoption and any metrics you have on how they impact your margins?

Yes. Typically, the initial phase involves getting assets into service, after which people want to see their performance, which is what we aim for. Decision-makers assess the quality and performance of the parts. Historically, these parts have performed exceptionally well, which we've observed with the first two parts now in service. Once the assets are operational and accumulate usage hours, adoption tends to increase. Additionally, we have the capability to significantly enhance that adoption rate through our unique tool, SCI. This has helped address the challenges PMA faced in earlier periods, particularly regarding lessors' hesitance to take risks on residual value, which is no longer an issue for us as a significant lessor. The market conditions now are different from any we have experienced before. I believe there is a growing openness among stakeholders, especially if they have access to data and evidence showing that the parts perform strongly.

Great. Thank you for the time.

Thanks.

Thank you. Our next question comes from the line of Andre Madrid of BTIG. Please go ahead, Andre.

Hey, good morning, everyone. I know we're talking about the free cash flow cadence through the year, and I think this was first mentioned last quarter. But could you give us maybe any more update about how you're thinking about shareholder-friendly capital deployment moving forward?

Sure. So the priorities we've set are growth CapEx, number one, debt repayment number two; and third, shareholder repayments. So we expect by the end of this year to be on the debt side, down close to three times debt-to-total EBITDA, which is kind of the low-end of the range of what we set. So if we assume we don't have significant growth CapEx opportunities and we've paid down debt to three times, then we would move to the third bucket, which is shareholder repayment or dividends or stock buybacks. And I would say probably towards the end of this year was when we achieved that objective.

Got it. Got it. I'll keep it one actually. Thanks.

Thank you. Our next question comes from the line of Brandon Oglenski of Barclays. Please go ahead, Brandon.

Good morning, team. Thank you for taking my question. Joe, just to follow up on that, you mentioned that you're targeting three times net leverage this year, correct?

Yes. Well, we've communicated previously our range. We expect it to be in a range of three to 3.5, and we think by the end of this year, we will be at three.

Okay. I mean, maybe this question is really for Angela, but how do we think about the moving pieces with the SCI aircraft out, new assets in impacting the debt profile of the business and maybe like from a ratings agency perspective, too?

Sure. So as Joe mentioned, we had previously said that we're targeting low-threes, 3.5, by end of this year. And with the SCI, we think can accelerate that and get closer to three, by the end of the year, which would give us a strong BB with the rating agencies, which Dave, we've communicated that's our goal. And that's possible by the fact that in prior years, we've spent a good amount of acquisition CapEx on bonding aircraft, which with the SCI, we are no longer required to do. And in addition to that, we'll generate about $500 million of proceeds from the sales of our seed assets. So all those things combined we think we'll definitely be in a position to be the strong BB with the rating agencies by the end of the year.

Okay. Angela, does that give you any opportunity maybe to think about refining things in the future and get your cost...

I think that's definitely possible, yeah. Currently, our $3.5 billion debt, which is maturing until 2028, we're at a weighted average interest rate about 6.5%. So that's something that we can definitely look at, but not something that's a priority given our rates.

Yes. We've put quite a few engines through their network, and we're very happy with the relationship and how it's developed. And the margins, as I said, would not be dilutive to our aerospace products business, and that's been true the actual results. And we see that as a very important part of our product offering because, as I mentioned, we are offering to airlines and owners full coverage of 737NGs and A320ceos, no matter what engine they have. So it's a very big positive marketing customer relations development for us that we think is going to be in place for many years. And we don't see anybody with the market position that we have coming in at this stage. So we feel very good about that market for the next 10 years really being the dominant provider for engines in the aftermarket.

Thank you.

Thanks.

Thank you. Our next question comes from the line of Hillary Cacanando of Deutsche Bank. Your question please, Hillary.

Thank you. So Joe, I know you had cited to about 100 modules to be sold per quarter. But now that you're significantly ramping up production through the remainder of the year and you have over 100 customers worldwide, why would you be looking for in order to revise that guidance of 100 modules per quarter?

Well, the original 100 modules per quarter was only Montreal. So, when you add in Miami and then soon to be Rome, that total capacity will be, what do you think?

200 plus.

Our production capacity is currently set at 200 modules per quarter. While we are not yet fully staffed to produce that number, we are working diligently to reach that capacity. When considering a 25% market share, approximately 3,000 engines a year translates to about 700 to 800 engines. I am now referring to engines for modules, which amounts to around 750. At present, we have a physical capacity of about 600 across our network. We are well-equipped in terms of physical capacity, and we are focusing on building our manpower and related resources as quickly as possible. David can provide more details about Montreal.

Yes, we're keenly focused on output in Montreal. For Q1, we produced 77 modules, which is in line with our plan of 100 modules per quarter on average. It's been just to recap, it's been six months since our acquisition. We acquired the facility in September, really focused on specialization as well as moving out any non-CFM56 work. We're very proud of all the work that's been done in Montreal, and we've officially now completed the specialization effort, which we're going to see significant benefits going into Q2 and the remainder of the year. Just to give you a little more color. For Q2, we're expecting between 90 to 100 modules in Montreal, and we're expecting to grow thereafter. So we're very happy with all the process with the team and where we're at right now.

So, the 90 to 100 module produced, right? As a production number?

Correct. This is production yes, 90 to 100, and that's just in Montreal.

Just Montreal.

Got it. Great. That's helpful. Thank you very much. And then just on insurance. You recovered $30 million this quarter, $11 million last quarter. Could you just remind us how much more you expect to recover this year versus how much was written originally and where you are in the settlement process?

Yes, we had a $30 million recovery in Q1. We have agreements for $24 million in Q2 that are committed, though I'm not sure if they've officially closed yet. The remaining claims are approximately $100 million, and we don't have clear visibility on when those will be resolved. However, we expect to have collected more than what we wrote off with that $100 million. Overall, we are in a good position. The $100 million is still pending settlement, recovery, or litigation, but we should collect 54 this year.

That's great. Great. Thank you very much.

Thanks.

Thank you. Our next question comes from the line of Brian McKenna of Citizens. Please go ahead, Brian.

Thanks. Good morning, all. It's great to see that the module factory now has over 100 customers globally. I'm curious though, is there a way to think about the usage or consumption per third-party customer on average at the module factory today, and then where this ultimately goes over the next couple of years?

We initially had around four modules per customer, which then increased to about 6%, and we believe it's now closer to eight, aligning with our original expectations. Our strategy has always been to encourage customers to try it just once, and if they don't like it, they can stop. However, we find that once they try it, they tend to stick with it and expand its use across their fleet. Our goal is to have customers using more modules; some have even reached 25 or 30 modules in a year. While we aspire to capture 100% of their business, we are realistically targeting 25% market share. We see an increase in usage per customer as well as the number of customers, which serves as a strong multiplier. Additionally, as we achieve more cost savings from PMA, we expect margins per module to rise. The initial premise was that doubling the modules per customer, customers, and margin equates to an eightfold increase. This robust multiplier effect is why we believe we have a promising business.

Okay, great. That's helpful. And then maybe just a governance question for you, Joe. You're still the Chairman of the Board of FTAI Infrastructure. So do you plan on being the Chairman of FIP longer term? Or should we expect that role to transition to someone like Ken over time?

We haven't really discussed any changes. Ken and I have worked together for 20 years, and we have a great relationship. To my knowledge, we don't intend to change that at this point. It's managed by Fortress, so they could alter that arrangement, but I have no intention of doing so.

Yeah. Got it. That’s helpful. I'll leave it there and congrats on another great quarter.

Thanks.

Thank you. Our next question comes from the line of Ken Herbert of RBC Capital Markets. Please go ahead, Ken.

Good morning, Joe and team. Thank you for your time. I would like to ask, given the uncertainty surrounding tariffs and the overall macroeconomic environment, can you provide insights on lease rates for aircraft or engines in the first quarter? Specifically, how do current lease rates compare year-over-year, and what trends are you observing? Additionally, have you noticed any changes in lease extensions, which have been quite high in recent years? Could you clarify what you're seeing in terms of underlying demand?

Sure. So no, we haven't seen any softening. I think rates are pretty relatively stable, no deterioration, and modest increases. We do see tremendous demand for extensions. When you go talk to airlines, virtually every airline in the world would take a 15-year-old 737 NG if you could find it for them. So the demand is very high. The number that I always watch in terms of market strength or weakness is the percentage of fleet that's in storage. And so I track how many narrowbodies are stored, and a very strong market is 5% and a weaker market is 10%. And it kind of tends to move between those two numbers. And I think today, the last summer, I saw were a little bit under 5%. So it's a very, very strong market. And you can see traffic weakness in the United States, which tends to get a disproportionate amount of headlines and United might retire some A319s, but those assets are probably going to go to Indonesia or Philippines or the Middle East or 20 other places they could go. So that ultimately is good for us if they go out of the hands of the majors into the second, third-tier operators, which is what usually happens. So I think there's a very strong bid globally for assets, and that's kind of what we look at as the most important indicator of strength. These are the most easily repositioned assets in the world. So that’s the beauty of it. It's a global market.

That's helpful. And coming out of the first quarter, can you just remind us, either in terms of aerospace products, any discrepancies or any underlying geographic exposures we should think about; I know, obviously, now with the geographic footprint, it helps offset tariff risk from a delivery standpoint. But are you over-indexed to any part of the world as we think about the Aerospace Products segment?

No. I think we've indicated that Southeast Asia is likely where we'll see the most growth in our portfolio, mainly because we were previously underrepresented in that region. We don’t observe any significant weakness or changes. Regarding China, we initially viewed it as a non-factor for us, but we are increasingly recognizing its potential as a significant opportunity. China has greatly underordered over the past four years, which means they will need to maintain older assets to keep their flying levels. These older aircraft require engines, and we can facilitate engine exchanges in China. Additionally, the Rome facility we are acquiring has the necessary Chinese aviation license. Therefore, we see China as a potential wildcard for growth, with minimal current exposure, but substantial upside from our perspective, which could be quite significant.

Great. Thanks, Joe. I’ll pass the floor.

Thank you. Our next question comes from the line of Myles Walton of Wolfe Research. Please go ahead, Myles.

Thanks. Good morning. Joe, I was wondering if you could comment on the SCI ownership assets. And of the 98 you have either now owned or under MOUs, about what percentage is powered by these versus CFM56? And is that similar to the 30 aircraft you had in the first quarter?

So we currently own in the partnership like 30 aircraft, 98 under OI. It's probably 90% CFM, right?

Yes. The vast majority is CFM.

Okay. And in terms of your target customer base to acquire the assets from in the $250 million for the year, can you give us some color as to airlines, lessors, other financial sponsors or buyers or owners what's the target audience and where you're seeing the most activity?

We are sourcing from two main avenues. First, we're acquiring from lessors who want to keep their fleets modern and are motivated to maintain investment grade ratings. They have mandates to sell older equipment, making us a strong buyer. We've been actively executing bilateral agreements with large lessors and anticipate this will continue through the rest of the year. The second source is directly from airlines. Many airlines expected to receive new orders, but some, particularly Tier 1 airlines, have aging engines that need to keep operating for a longer time. We're providing them a way to offload maintenance through sale leaseback agreements, where we assume the maintenance responsibilities. In these transactions, we are uniquely positioned because airlines prioritize a counterparty's ability to execute engine exchanges, and our capabilities and assets allow us to deliver that service. We've identified significant opportunities in sale leasebacks, and we expect this trend to persist, with a substantial portion of the 98 aircraft related to sale leaseback agreements as well.

Okay. Got it. And maybe one for Angela. The $7 million of profit elims is that simply your 20% stake on the $100 million of sales to the SCI program or about 35% margins? And then what should we expect from the full year corporate and elims sort of contra account to total reported EBITDA?

Yes, sure. Yes, that's correct. The $7 million elims is the intra-entity profit on the $100 million on aerospace products that we're eliminating. On the corporate and other, I think included in that is, are these elims also included about a little over $3 million in costs that we've incurred this quarter related to the report, so that is also not included in the run rate, so I would incorporate both of those items.

Okay. Got it. And last one, Joe, just to square it for me. Sorry, for the question on cash flow again. Slide 9, you have sort of two different cash flows. You've got one adjusted cash flow on one cash flow from operations less investing. When you talk about the $350 million for the first half, is that comparable to the $54 million of cash flow or the $73 million of cash flow listed on the slide 9.

$73 million.

Thank you. Our next question comes from the line of Stephen Trent of Citi. Please go ahead, Stephen.

Good morning, everybody, and thanks for taking my question. The first one from me, just sort of keen to follow-up on the geographic color you mentioned Southeast Asia, and I believe in the past, you may have even been considering potential acquisitions in that region. And I'm kind of curious whether the noise from tariffs has accelerated or decelerated the extent to which you might still be looking for targets in that market. Thank you.

Sure. In the long term, that could be an option we explore, but for now, our focus is on acquiring Rome. We need to ensure that we set that up properly and manage it effectively. In the immediate future, it's not a corporate priority for us, and we can serve that market quite efficiently from Rome. Additionally, Rome has a CAC license, allowing us to serve China as well. So, for now, we're satisfied with our current setup. Looking ahead a few years, it's likely we would consider a facility in Southeast Asia. What’s interesting about our acquisitions is that all our facilities were previously airline engine shops. For example, in Montreal, we acquired a former Air Canada shop, and in Miami, it was an ex-Pan-Am shop, while Rome was an ex-Alitalia shop. They all shared the characteristic of having significant physical capacity without any business. This allowed us to acquire these facilities for less than their replacement cost and fill them with our engines. This is a unique advantage for us, as we can deliver engines to these facilities immediately, unlike others who depend on third-party customers. We are an attractive buyer for these assets because we bring our own business to the table.

Okay. That's super helpful, Joe. I appreciate that. And maybe just a quick sort of accounting follow-up for Angela maybe. When we think about the partnership you guys have the SCI from an iconic perspective longer-term, should we think about eventual equity method and inclusion of those earnings or am I thinking about that incorrectly. Thank you.

I think you're asking, currently, we do pick up our equity income related to the SCI partnership now. So, if you're asking will we include earnings of that going forward, it depends on materiality that we'll do every quarter and if it meets the materiality threshold for that equity investment then, yes, you're required to include the earnings and assets related to that equity investment, if that's your question.

Yes. Yes. And if I have anything for both, maybe follow-up you guys offline, but that's very helpful. Thanks very much.

I would just add on that as that business grows, the asset side of the business, the management fees from that will grow, and we will break that out as a separate line item and once a certain level of materiality, but that could become a significant source of income for us.

Very helpful color. Thank you very much.

Thank you. I would now turn the conference back to Alan Andreini for closing remarks. Sir?

Thank you, Latif, and thank you all for participating in today's conference call. We look forward to updating you after Q2.

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