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AerSale Corp (ASLE) Q1 2024 Earnings Call Transcript Highlights: Strong Revenue Growth and ...

GuruFocus Research
·4 min read

  • First Quarter Revenue: $90.5 million, up $15.7 million from the first quarter of 2023.

  • Adjusted EBITDA: Grew 80% year-over-year to $9 million.

  • Net Income: $6.3 million, significantly up from $5,000 in the first quarter of 2023.

  • Diluted Earnings Per Share (EPS): $0.12, compared to $0 in the first quarter of 2023.

  • Adjusted Diluted EPS: $0.11, up from $0.07 in the first quarter of 2023.

  • Gross Margin: 31.8%, slightly up from 31.2% in the first quarter of 2023.

  • Asset Management Sales: $59.3 million, increased by 22.4% year-over-year.

  • TechOps Segment Sales: $31.3 million, up from $29.8 million in the year-ago period.

  • Cash Used in Operating Activities: $21.5 million, primarily for increasing inventory availability.

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • AerSale Corp reported a strong start to 2024 with first quarter revenue of $90.5 million, up $15.7 million from the first quarter of 2023.

  • Adjusted EBITDA grew 80% year-over-year to $9 million, indicating improved profitability.

  • The company successfully acquired $31 million of feedstock and has an additional $52 million under LOI, enhancing their US and parts business.

  • AerSale Corp's TechOps segment showed robust commercial MRO demand, with sales improving across all facilities and additional growth from the sale of components.

  • The company is actively engaged in new contracts for its Engineered Solutions business, with AIRWARE and AirSafe products expected to contribute positively to future results.

Negative Points

  • Despite strong performance, AerSale Corp faces challenges with OEM production and delivery delays, which substantially limit their ability to acquire feedstock.

  • The company's leasing portfolio sales declined by approximately 45% due to fewer assets under lease.

  • The cargo market environment continues to be under pressure, impacting the demand for AerSale Corp's 757 freighters.

  • The company's revenue levels are volatile quarter-to-quarter due to the nature of whole asset sales, making it difficult to predict future performance.

  • AerSale Corp is experiencing a competitive and challenging supplier environment, which could impact their ability to secure necessary feedstock at reasonable prices.

Q & A Highlights

Q: Could you comment on whether you see any used equipment monetizations in the second quarter and what your visibility is for that in general for the remainder of the year? A: Nicolas Finazzo, CEO of AerSale Corp, mentioned that there are no pending sales or transactions involving the 757s for the second quarter. However, the company is negotiating several engine sales and expects to see continued growth in whole asset opportunities in Q2. Martin Garmendia, CFO, added that they are also working on opportunities in Q3 and Q4 and starting to monetize inventory through the USM line.

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Q: What do you think is the hesitation on the side of customers pulling the trigger on the Airwear product? A: Nicolas Finazzo explained that there isn't a specific sticking point but rather a complex process involving multiple facets of an airline. He highlighted that the safety aspect of their system could be a catalyst for accelerating the adoption process among airlines.

Q: Have your pricing expectations for the Airwear product changed given what you've learned over the last several months? A: Nicolas Finazzo confirmed that the list price for the Airwear system has increased from about $770,000 to $1,495,000, which includes significant room for discounting on large orders. The cost to AerSale remains in line with original expectations, suggesting a strong potential for attractive profit margins.

Q: Can you provide an update on the FAA's publication of the Airwear training documentation? A: Nicolas Finazzo indicated that the FAA validation process for the Airwear training program is expected to conclude within the next 30 days, which will facilitate the adoption process for airlines installing AIRWARE in their fleets.

Q: Are you seeing improvements in visibility and business conditions compared to three months ago? A: Martin Garmendia noted an overall improvement in visibility and business conditions, driven by strong inventory positions and new contracts in the component MRO space. However, AerSale is not planning to return to providing guidance until these new business aspects become more established.

Q: How are you managing the inventory of 757 freighters given the current market conditions? A: Nicolas Finazzo discussed strategies for managing the 757 freighters, including potentially leasing out their engines, which are in high demand. This approach allows flexibility in responding to market conditions while waiting for the freight market to rebound.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.