Good day and welcome to the AerSale Corporation First Quarter 2025 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event has been recorded. I would now like to turn the conference over to Jackie Carlon, Vice President of Marketing and Communication at AerSale. Please go ahead.

Good afternoon. I'd like to welcome everyone to AerSale's first quarter 2025 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, on March 11, 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 Investor's section of the AerSale website at ir.aersale.com. With that, I'll turn the call over to Nick Finazzo.

Great job. Thank you, Jackie. 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. Our first quarter results were highlighted by continued growth in our USM, landing gear, and component MRO business units, higher leasing revenue, and increased sales of AerSale. This was offset by fewer aircraft in work at our Goodyear facility and Roswell on-airport MROs, which was anticipated due to the completion of a multi-line customer contract at Goodyear and reducing our service offering at Roswell by eliminating aircraft heavy maintenance and performing only lower top-line revenue but higher margin aircraft storage and part-out. Sale of a single engine during the period also contributed to the decline in revenue, although additional engine sales that were anticipated to close in the quarter did close in April. Taken together, our consolidated revenue for the first quarter was $65.8 million compared to $90.5 million in the prior year period. Excluding whole asset sales, the underlying fundamentals of our business were strong and in line with our expectations as demonstrated by a $23.4 million increase in revenue to $64.0 million. As we note every quarter, due to the nature of our business and the impact of whole asset sales, our revenue levels tend to be volatile quarter-to-quarter and we believe our business should be evaluated based on aggregate performance over a longer period of time, with a focus on feedstock acquisitions and the value our team is able to extract from these investments. First quarter adjusted EBITDA was $3.2 million compared to $9 million in the prior year. This was partially offset by increased contributions from the rest of the business and cost reduction…

Thanks, Nick. Our first quarter revenue was $65.8 million, which included $1.8 million of whole asset sales consisting of one engine. Revenue in the first quarter of 2024 was $90.5 million and included $38.6 million of flight equipment sales, consisting of one aircraft and four engines. As we have pointed out during all of our earnings calls, flight equipment sales may 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. First quarter growth margin was 27.3% compared to 31.8% in the first quarter of 2024 due to lower whole asset sales, which carry higher margins. Selling, general, and administrative expenses were $24.6 million in the first quarter of 2025, which included $1.2 million of non-cash equity-based compensation expenses. Selling, general, and administrative expenses were $24.1 million in the first quarter of 2024 and included $0.8 million of non-cash equity-based compensation expenses. In the first quarter of 2025, we reported a loss from operations of $6.6 million compared to income from operations of $4.7 million in the first quarter of 2024. Net loss for the first quarter of 2025 was $5.3 million compared to net income of $6.3 million in the same period last year. Adjustment for the following items, stock-based compensation of $1.2 million, restructuring costs of $1.1 million, illegal settlement of $0.4 million, facility relocation costs of $0.4 million, a $57,000 change in the fair value of the warrant liability, and $18,000 in payroll taxes related to stock-based compensation, partially offset by $0.4 million income tax benefits related to these items. Adjusted net loss for the first quarter of 2025 was $2.7 million. This compares to adjusted net income of $5.5 million in the first quarter of 2024, adjusted for…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Ken Herbert with RBC Capital Markets. Please go ahead.

Hi, good afternoon, Martin and Nick. Hey, Nick, maybe I just wanted to first start on the whole asset sales. I can appreciate the lumpiness here, and I know you guys don't like to give guidance, but with what you've done in the second quarter so far, is it fair to assume that whole asset sales could be at 2024 levels this year, just considering what you're seeing in the marketplace? Or maybe any benchmarks or framework you can provide on how we should think about that this year over the course of the year, would be very helpful.

Yeah, it's really difficult for us to determine exactly what will end up as a whole asset sale or will end up being put in our lease pool. We had expected to close more engines in the first quarter than the one that we did, but we closed them at the beginning of the second quarter. So we were off a little bit on that, but that's not unusual. I mean, we've said this quarter after quarter after quarter. Sometimes these things happen, and we get a bunch in one quarter and none in the next, and sometimes they just delay from one quarter to the next. As we look at the whole year, we have enough whole assets, both on hand. I think we've got 10 available engines on hand to either put in our trading or leasing pool, and another 11 in work that are coming out. As we continue to buy engines, we will take those engines, most of the engines we're buying, by the way, we're having to put through shops or do some minor repairs. It would be best, but sometimes we're having to do a heavier repair. So, the equipment that we're buying, we're putting through the shops, we're getting them repaired, we're making them available for sale or lease. So, as you think about it, we're at the fifth month of the year, we've got 21 engines that we are working to put on to be able to trade or lease, and we'll probably have significant greater amount, well, a significantly higher amount of engines becoming available in the second half of the year as we continue to buy engines. So, trying to predict exactly how many engines we're going to have or compare that to year-over-year and say which ones are going to be sold as a whole assets and which ones are going to be leased, we don't have that information. We make those determinations based on the particular opportunities at the time, and if we feel we're better off to lease an engine because the risk associated with the leasing and the reward associated with leasing is far greater than we can get trading currently, then we lease. If we feel that we can recover on a trade, significantly all of the money that we would recover on a lease without any risk and just for present value, we get substantially all that money up front, we'll trade, and that's been the dilemma for everybody, which is you see this, this trading revenue that bounces from quarter to quarter, and I understand it's frustrating for you as an analyst to try to predict it and for our investors to see the volatility, but we're making the decisions we feel are the best decisions to generate the proper amount of revenue for the company, risk adjusted.

Maybe one other question for me, obviously, as you look at the optionality of putting the assets into the lease pool or parting them out or, of course, trading them or selling them as whole assets, as you look at those different streams, as we've gone through the first quarter and now into sort of April and early May, have you seen any fundamental shift in demand from your airline customers or other customers, either in terms of the desire to in terms of reflected in pressure on lease rates or values at all that could be pushing down on these assets? I'm just wondering what you're seeing from a demand perspective here five months into the year, and if anything has shifted just with some of the broader macro concerns.

That's a conversation we discussed at our deal call this week, and the comment made by Craig Wright, who heads up our trading and leasing group, is that we've never seen, we've never experienced a period of time where just about every engine type we own is in high demand. So, it's -- there's no lack of demand for engines today, there's just a lack of supply. And the time it takes to get an engine through the shop has not gotten any better, and that's also creating the issue of the lack of demand to satisfy, the lack of supply, rather, to satisfy the demand, because everything just takes forever to get through the shop.

Yeah, I think we've been in a good position for the last few -- for the last few quarters that we have been investing in repairing engines and getting them out and getting ready to be deployed. So, we have engines available, and as Nick noted, we have some engines that are coming out of maintenance that are going to give us that optionality, whether we can continue to increase our leasing portfolio and also take advantage of some whole asset opportunities, and we've been fortunate with a strong win rate that we're going to be able to potentially grow both, obviously understanding and managing cash flow expectations.

Thank you. [Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Nicolas Finazzo, Chief Executive Officer, for any closing remarks.

Thank you. As always, I want to thank Ken for his insightful questions. It always helps when he asks them and allows us to further explain our business. And for the rest of you listening, thank you, and for your interest in AerSale. I hope you all will, again, join us when we provide our second quarter earnings in our earnings call to come. All of you have a good evening, and again, thanks for listening. Good night.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.