Good afternoon, everyone, and welcome to the AerSale Inc. Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Christine Padron, Vice President of Compliance.

Good afternoon. I'd like to welcome everyone to AerSale's Fourth Quarter and Full Year 2024 Earnings Call. Conducting the call today are Nick Finazzo, Chief Executive Officer; and Martin Garmendia, Chief Financial Officer. Before we discuss this quarter's results, we want to remind you that all statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of the federal securities laws, including statements regarding our current expectations for the business and our financial performance. These statements are neither promises nor guarantees but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results. Important factors that could cause actual results to differ materially from forward-looking statements are discussed in the Risk Factors section of the company's annual report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission, SEC, to be filed on March 10, 2025, and its other filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward-looking statements on this call. We'll also refer to non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of those non-GAAP metrics to the nearest GAAP metric can be found in the earnings presentation materials made available on the Investors section of the AerSale website at ir.aersale.com. With that, I'll turn the call over to Nick Finazzo.

Thank you, Christine. Good afternoon, and thank you for joining our call today. I'll begin with a brief overview of the quarter, then provide operational updates before turning the call over to Martin to review the numbers in greater detail. We concluded the year positively with fourth quarter revenue amounting to $94.7 million, which was slightly higher than the previous year, even with a $16.4 million reduction in whole asset sales compared to 2023. When excluding whole asset sales, which can be volatile on a quarterly basis, our fourth quarter sales increased by 35.5%. This growth was evident across USM, leasing and sales of our engineered solutions product, AerSafe. Increased revenue boosted profitability with adjusted EBITDA up 118% to $13.1 million. Operational performance improved in 2024 due to strategic initiatives such as deploying capital to cost-effective feedstock, expanding our lease pool to stabilize revenue, monetizing our remaining 757 assets and growing our MRO capabilities amid strong demand. This strategy is gaining momentum and is reflected in our results. For the full year of 2024, we reported revenue of $345.1 million, representing an increase of 3.2% compared to 2023. Excluding whole asset sales, revenue for the full year increased by 18.7%, reflecting stronger USM volume, robust demand for MRO services and an expanded lease pool. Full year adjusted EBITDA rose to $33.4 million from $12.3 million last year. This increase was due to higher volume, a favorable sales mix and better cost controls, although it was partially offset by lower whole asset sales. In Asset Management, sales fell by about 1% year-over-year to $64 million due to fewer whole asset sales. Excluding whole assets, revenue rose by 91.7%, driven by strong USM engine part sales and a larger lease pool. For the full year, sales remained flat at $215 million. Excluding…

Thanks, Nick. Our fourth quarter revenue was $94.7 million, which included $31 million in flight equipment sales, consisting of 6 engines. Revenue in the fourth quarter of 2023 was $94.4 million and included $47.4 million of flight equipment sales, consisting of 5 engines and 1 P2F converted Boeing 757 aircraft. As we point out during all of our earnings calls, flight equipment sales will significantly vary from quarter-to-quarter and we believe monitoring our progress based on asset purchases and sales over the long-term is a more appropriate measure of our progress. Fourth quarter gross margin was 31.4% compared to 25.9% in the fourth quarter of 2023, primarily driven by sales mix that included higher-margin engine leasing and flight equipment sales. Selling, general and administrative expenses were $24.8 million in the fourth quarter of 2024, which included $1.2 million of noncash equity-based compensation expenses. Selling, general and administrative expenses were $25.5 million in the fourth quarter of '23 and included $3.1 million of noncash equity-based compensation expenses. The decrease in selling, general and administrative expenses were primarily driven by the lower payroll-related expenses during the quarter. Fourth quarter income from operations was $4.9 million compared to a loss from operations of $1.1 million in the fourth quarter of 2023. Net income was $2.7 million in the fourth quarter compared to a net loss of $2.7 million in the fourth quarter of 2023. Adjusted for noncash equity-based compensation, mark-to-market adjustment to the private warrant liability, facility relocation costs, inventory reserves, restructuring costs and gain on the insurance proceeds, adjusted net income was $4.8 million in the fourth quarter of 2024. Adjusted for the same items, the fourth quarter of 2023 had an adjusted net loss of $0.1 million. Fourth quarter diluted earnings per share was $0.05 compared to diluted loss per share…

[Operator Instructions] Our first question comes from Michael Ciarmoli from Truist.

Nick, I think just on AerAware, you mentioned some enhancements. You obviously mentioned 2 more customers. Can you maybe just talk to us how the enhancements kind of sync up with your already existing inventory? Presumably, I wouldn't imagine there's any rework. And then maybe just what's kind of happening with your other partners on that program, Elbit? It seems like it's just in a holding pattern, I guess, but is everybody presumably ready to ramp if orders do come?

Mike, answering the question. The enhancements that we have been working on mostly are being done by Elbit's subsidiary, Universal in Tucson. So most of them are software. Some of them are hardware. As an example, our head wearable display today is not foldable. All the new head wearable displays that we've ordered and we are receiving are actually replacing the initial order of head wearable displays, which were not foldable. So that just allows us to stow the head wearable displays differently. The customers have requested that we add capability to the system. And I may have mentioned some of these before, and this comes from different customers. So it's not all the same one that's requesting these. But some have requested that we add runway length so that as the pilot is approaching the runway, whether he's taking off or landing, he knows what the remaining runway length is as he's making that approach or taking off and verifies whether he's got enough runway to stop or enough runway to take off. So that's one additional feature besides the folding of the skylines. Another is a tail strike indication, which allows the pilots to see if the airplane is likely to incur a tail strike, whether it be on landing or take off. Today, with a lot of young pilots transitioning from smaller regional aircraft up to these larger transport category aircraft, airlines are having issues with pilots suffering tail strikes and tail strikes can be extremely damaging to an aircraft, take it out of service for a prolonged period of time, expensive to repair. Finally, I think that this is the most important feature that is in work. Now the certification of this has yet to happen, but it's in flight testing, not on our aircraft at…

Sure. Makes sense. That's pretty interesting. And then I guess on AerSafe, I mean, it sounds like the incoming order flow is exceeding expectations. I mean any color on maybe the revenue cadence, '26 isn't that far off. I mean, do you expect sort of a wave of further orders as we get closer to that mandate?

Previously, I anticipated that we would reach a $20 million backlog. We're at $14 million now. I think last year, we were at $11 million, and we have delivered kits. So we are seeing a backlog growing. No one wants to spend money today if they can push the expenditure of funds off into a later year. But because of the volume of aircraft that need to be made compliant, airlines don't really have much of a choice because they really want to install these kits when an aircraft is down for maintenance. So if you've got 5 or 10 or 15 aircraft that need to be done, you can't wait until November because you'll put all these aircraft down at the same time. And obviously, that's not good for an airline. So what we're finding now is that, yes, airlines have been pushing this off as long as they can. But as we get closer to that compliance deadline, I would bet by the time we get to November, December, because of scheduling issues, we will probably see a peak backlog as we approach the end of the year.

And our next question comes from Ken Herbert from RBC Capital.

Martin, this is actually Steve Strackhouse on for Ken Herbert. So just to touch on MRO services, it looks like your revenue was about $108 million for the full year '24. Can you maybe discuss how that will maybe grow organically? And then maybe just some cadence on some of the new MRO capacity that you have coming online in the quarter as well or in the year, excuse me.

Yes. So as Nick noted, we expect our component MRO to continue to increase throughout the year, even from Q4's levels. One, as we've talked about some of the some of the cost reductions that we've done and really kind of greater efficiency in running those units, so not only do we expect revenue growth, but we're expecting margins to also improve. Nick did note that we did have a program that did cease at our Goodyear facility that was a line maintenance program or heavy maintenance program. That is causing a temporary decline. And I think the biggest impact of that you're going to see is in the first quarter of this year compared to the fourth quarter of last year. Again, we've rightsized that unit, and we expect that profitability to start to increase in the second quarter and then really to grow in the second half of the overall year. So we're in a good position. We still see a real focus on improving our profitability in our heavy MROs. We've also rightsized our Millington facility, understanding that it's better economies to focus on the Goodyear facility, fill all the 8 days in that facility before we move over to filling Millington. But having said that, we're already getting customer interest in that facility due to its central geographic location, and then we'll have plans to start increasing that. But we're taking a much more cautious approach, being very cost conscious and making sure that we focus on profitability as we grow.

Great. And then maybe just separately on AerAware, I'm thinking more so in terms of like a testimonial where is there may be some way you can demonstrate to an airline customer or even to the FAA administrators a way in which AerAware might have prevented or reduced the likelihood of maybe one of the aircraft incidents, whether it was weather-related or just site visibility? It just seems like you guys might have an opportunity there.

On the recent event, remember again, I don't really comment on that because all the details about that event are yet to be determined. So we don't know if our system would have helped or not. But I will say this, as far as improving pilot awareness of their surroundings and other aircraft regardless of whether it's a day or night, but probably especially at night, we believe and we've seen -- our pilots have told us that their -- what they see is dramatically improved when they look through the head wearable display versus looking through the naked eye. So whether in the circumstances that caused this recent tragedy, whether our system would have made a difference or not, we don't know. We just don't have enough facts to conclude that one way or the other. We may eventually give an opinion on that, on whether we think that would have helped. But in general, we think it does help with visibility. And anything that improves a pilot situational awareness is going to improve safety. So whether you're landing in inclement weather, whether you're approaching a runway with traffic on the runway that you didn't see for whatever reason, but you have a head wearable display that has got a camera that is going to display what's on the runway. And we think that all of the events that have led to tragedies recently could be helped by using a system that has an enhanced light vision camera and a head wearable display.

[Operator instructions] We do have a follow-up question from Michael at Truist.

Just Nick, maybe any color on the availability of feedstock as we're almost through the first quarter here and anything loosening up? I think it was maybe in early January, one of your competitors reported and talked about some availability hitting the marketplace. But anything you're seeing out there? I know Boeing and Airbus are obviously still struggling to get planes out the door. So the in-service fleet remains high and retirements are down, but any color you could add?

We continue to see a very tight feedstock market because of the OEM production issues, engine issues and FAA issues that are preventing the 2 OEMs from putting aircraft out that are staying in service and enable the displacement of the older equipment that's kind of -- that's what we're looking for. Notwithstanding what I just said, we continue to win deals. And why do we continue to win deals? If it's not an aircraft on lease or an aircraft that's coming off lease that meets all kinds of return conditions and is in perfect condition, that's not our -- we don't win those deals. The deals we win, and I've said this many times in prior quarter earnings calls, we win deals when flight equipment comes out and it needs a lot of work. And because of the infrastructure we have and the multiple ways that we can work that flight equipment to get value, that's how we're finding that when we win a deal. And we win deals today, not even from being the most aggressive bidder, and we typically are not the most aggressive bidder. There's other people who bid more than we do, but we close. And we may not pay the most, but we close. And today, there's a lot of money that's chased assets in this space. And investors that have placed money with companies that can't get the value out of -- can't squeeze the sponge like we can and are finding that they're stuck with assets that the assets have less value than their carrying cost. And so we're not seeing as much new money being invested with potential competitors out there on the buy side. And the sellers are figuring that out and they've now come across potential buyers that they…

And ladies and gentlemen, at this time, we will be ending today's question-and-answer session. I'd like to turn the floor back over to Nick Finazzo for any closing remarks.

I want to thank Mike from Truist and Steve from RBC for their insightful questions, which I believe will help investors understand our business model and the progress that we've made to date. I also very much appreciate your interest in listening to our call today, and I look forward to bringing you up to date during our next earnings call. I wish you all a good evening. Thank you.

And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.