Earnings call transcript: FTAI Aviation Q1 2025 sees strong growth despite EPS miss

Published 01/05/2025, 14:16
Earnings call transcript: FTAI Aviation Q1 2025 sees strong growth despite EPS miss

FTAI Aviation (Market cap: $10.98B) reported its Q1 2025 earnings, revealing a mixed performance. The company posted an EPS of $0.87, falling short of the forecasted $0.97. Revenue also came in slightly below expectations at $502.08 million against a forecast of $502.31 million. Following the announcement, FTAI Aviation’s stock dipped 0.57% in premarket trading, reflecting investor concerns over the earnings miss despite robust growth in other areas. According to InvestingPro data, the company has maintained consistent dividend payments for 11 consecutive years, demonstrating long-term financial stability despite short-term fluctuations.

Key Takeaways

  • FTAI Aviation’s Q1 2025 Adjusted EBITDA surged by 64% year-over-year.
  • The company missed EPS expectations by $0.10.
  • Stock price declined 0.57% in premarket trading following the earnings release.
  • Strong future guidance with significant EBITDA targets for 2025 and 2026.
  • Expansion in production capacity and strategic acquisitions underway.

Company Performance

FTAI Aviation demonstrated strong operational performance in Q1 2025, with Adjusted EBITDA increasing by 64% compared to the previous year. The company’s leasing segment and aerospace products segment both contributed significantly to this growth, with InvestingPro data showing impressive revenue growth of 48.17% over the last twelve months. While the earnings per share miss and slight revenue shortfall have raised questions about profitability, analysts remain optimistic, with price targets ranging up to $300 per share.

Financial Highlights

  • Revenue: $502.08 million, slightly below the forecast.
  • Earnings per share: $0.87, missing the forecast by $0.10.
  • Adjusted EBITDA: $268.6 million, representing a 64% year-over-year increase.

Earnings vs. Forecast

FTAI Aviation’s actual EPS of $0.87 fell short of the expected $0.97, resulting in a negative surprise of approximately 10.3%. The revenue miss was marginal, with actual figures slightly trailing the forecast by $230,000. Despite these misses, the company’s strong EBITDA growth highlights its operational efficiency.

Market Reaction

The stock declined by 0.57% in premarket trading, reflecting investor concerns over the earnings miss. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels. However, the stock remains within its 52-week range of $70.08 to $181.64, suggesting that the market might be weighing the company’s strong future guidance against the current quarter’s performance. The company maintains a healthy financial position with a current ratio of 3.53, indicating strong liquidity to meet short-term obligations.

Outlook & Guidance

FTAI Aviation maintains an optimistic outlook for 2025, targeting an EBITDA range of $1.1 to $1.15 billion. The company plans to expand its production capacity and pursue strategic acquisitions to drive future growth. Additionally, FTAI Aviation is focusing on increasing its market share in the aerospace products sector. This aligns with InvestingPro’s analysis, which indicates expected sales growth and profitability improvement in the current year. Subscribers to InvestingPro can access 12 additional exclusive insights and a comprehensive Pro Research Report covering FTAI’s growth trajectory and market position.

Executive Commentary

CEO Joe Adams highlighted the company’s strategic advantage, stating, "We’re able to acquire these facilities at less than replacement cost, and then fill them with our own engines." COO David Marino emphasized the value maximization strategy, noting, "We’re sourcing these parts unserviceable from asset owners and airlines... we can maximize the value through our repair network."

Risks and Challenges

  • Potential supply chain disruptions could impact production schedules.
  • Market saturation in key regions may limit growth potential.
  • Macroeconomic pressures and currency fluctuations could affect profitability.
  • Competitive pressures from other aerospace companies.
  • Regulatory changes impacting the aerospace sector.

Q&A

During the earnings call, analysts inquired about the impacts of tariffs, with management indicating minimal expected effects. Questions also focused on the Strategic Capital Initiative partnership strategy and geographic market opportunities, highlighting investor interest in FTAI Aviation’s long-term growth potential.

Full transcript - FTAI Aviation Ltd (FTAI) Q1 2025:

Conference Operator: Thank you for standing by, and welcome to FTAI Aviation’s First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again.

I would now like to hand the call over to Alan Andrini, Investor Relations. Please go ahead.

Alan Andrini, Investor Relations, FTAI Aviation: Thank you, Latif. I would like to welcome you all to the Eptai Aviation first quarter twenty twenty five earnings call. Joining me here today are Joe Adams, our Chief Executive Officer Angela Nam, our Chief Financial Officer and David Marino, our

: Chief

Alan Andrini, Investor Relations, FTAI Aviation: Operating 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.

Joe Adams, Chief Executive Officer, FTAI Aviation: Thank you, Alan. I’m pleased to announce our fortieth dividend as a public company and our fifty fifth consecutive dividend since inception. The dividend of $0.30 per share will be paid on May 23 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 $131,000,000 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 $234,000,000 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 $59,000,000 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 $440,000,000 We expect adjusted free cash flow to be in the range of 300,000,000 to $350,000,000 for the first half of the year, which is in line with our target to achieve $650,000,000 in adjusted free cash flow for all of 2025. For the Strategic Capital Initiative or SCI, it was great to announce investment management as an equity investor to the partnership. Since then, we have secured an additional equity partner and expect further closings in Q3 of this year. We remain on track to deploy $4,000,000,000 plus in capital by the end of the year through a combination of these commitments and our $2,500,000,000 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 and 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 $1,100,000,000 to $1,150,000,000 excluding corporate and other, rising to approximately $1,400,000,000 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.

Angela Nam, Chief Financial Officer, FTAI Aviation: Thanks, Joe. The key metric for us is adjusted EBITDA. We began the year strongly with adjusted EBITDA of $268,600,000 in Q1 twenty twenty five, which is up 7% compared to $252,000,000 in Q4 twenty twenty four and up 64% compared to $164,100,000 in Q1 of twenty twenty four. During the first quarter, the $268,600,000 EBITDA number was comprised of $162,000,000 from our Leasing segment, dollars 130,900,000.0 from our Aerospace Products segment, and negative $17,400,000 from Corporate and Other, excluding intra entity eliminations. Turning now to Leasing.

Leasing continued to deliver strong results, posting approximately $162,000,000 of EBITDA. The pure leasing component of the $162,000,000 came in at $152,000,000 for Q1 versus $128,000,000 in Q4 twenty twenty four. Included in the $152,000,000 was a $30,000,000 settlement related to Russian assets written off in 2022, which is an additional settlement to the $11,000,000 we announced we received last quarter. For gains on sales, we began the year of $68,000,000 in book value of assets being sold for a 13% margin gain of $9,800,000 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 $500,000,000 in 2025 as we pivot our focus towards an asset light business model.

Aerospace products had yet another good quarter with $130,900,000 of EBITDA at an overall EBITDA margin of 36, which is up 12% compared to $117,300,000 in Q4 of last year and up 86% compared to $70,300,000 in Q1 twenty twenty four. We continue to see accelerating growth in 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 600,000,000 to $650,000,000 in EBITDA, up from $381,000,000 in 2024 and $160,000,000 in 2023. With that, let me turn the call back over to Alan.

Alan Andrini, Investor Relations, FTAI Aviation: Thank you, Angela. Latif, you may now open the call to Q and A.

Conference Operator: Thank you. As a reminder, to ask a question, you will need to press 1, 1 on your telephone. Our first question comes from the line of Giuliano Bologna of Compass Point. Please go ahead, Giuliano.

Giuliano Bologna, Analyst, Compass Point: Good morning. Congratulations on another great successful quarter. The first question I had and it’s something I wanted to dig into is that we can generate a few questions is that it looks like in the Aerospace product segment you had roughly $100,000,000 of revenue that was related to the 2025 partnership or the SCI program. And I’m curious when you think about that, my assumption there is that that was kind of the selective thing where you’re seeding portfolio to help the SEI program launch the program and acquire a

Joe Adams, Chief Executive Officer, FTAI Aviation: lot of

Giuliano Bologna, Analyst, Compass Point: assets. As it relates to the SCI program, it’d be good to see understand the rationale there. And then it’d be good to if you can provide any perspective around the third party or non SCI business, because it seems like this was an opportunistic thing to do and that there’s actually a tremendous amount of demand from third parties, if not growing pretty materially. And the limitation, as you highlighted before, is capacity at Montreal, and that’s expected to increase materially in 2Q and beyond 2Q. So you should have a lot of demand as the assumption, but it’d be great to get your perspective around all of that.

Joe Adams, Chief Executive Officer, FTAI Aviation: Sure, sure. Great question. And let me talk about several points to that. First of all, you’re correct. Today, there’s tremendous demand and for the next few years, see tremendous demand for our rebuilt engines across the entire industry.

And today we are constrained by production, which what that means is we can sell everything that we produce. So for those engines, we have multiple options to sell to third party customers and we could have done so and had no material different financial outcome than selling to the SCI. But we did prioritize SCI for a couple of reasons. One is we’re committed to engine exchanges with the partnership. And we also want to see that partnership grow significantly.

And there are significant benefits and material cost savings for an owner and airline that are achieved through engine exchanges, which is our underlying whole business rationale through the MRE. And that’s why demand across the entire industry is growing for these products because you save money and you save time and money, and it’s very efficient. And so our purpose of creating SCI was to make that entity a better owner of these assets by conferring those benefits onto that partnership, particularly when there are engine maintenance events in the next few years for engines. And that is for the vast majority of assets out there have engine maintenance events coming up fairly soon. So in return, so if FCI becomes a better owner, meaning they make higher returns, that means over time they’ll own more assets, which means FTAI will get more committed engine exchanges, which means we will then have more visibility on our future needs for engine rebuilding, which makes us more efficient, which should lower our costs, which means we end up with better margins.

So it’s really a virtuous circle. And that was the whole point of why we setting this up or one of the main points. In Q1, it’s roughly about 30% of our activity went to SCI. And that’s because we’ve been lining up assets for the last six months. So there was a bit of pent up demand since we started closing and we now own 30 aircraft in partnership.

And we expect overall, it’ll be about 20% of all of 2025. And we think that 20% number is probably representative for future years, as we see both SCI and the market growing significantly. As I mentioned in the opening remarks, our goal is to grow our market share from 5% to 25% of the whole industry. So when we look at what happened, this is exactly what we hoped would have happened in Q1 when we set up SCI. And we view this as a huge positive for both the near term and the long term for EFTAI and the shareholders.

Giuliano Bologna, Analyst, Compass Point: That is extremely helpful. And maybe just a quick follow-up just to make sure I have everything exactly right. But kind of just looking at that 20% number and what that kind of implies, that implies somewhere in the range of $130,000,000 of EBITDA if we’re looking around the EBITDA target basis of $650,000,000 for the year. And that implies that the non FCI would be high 30%, if not 40% growth in kind of a non SEI business. So it seems to me and hopefully, you that you get the same you see it the same way as that, yes, this is additive and there’s no cannibalization happening and it’s just that you’re filling based on your order book or your ability to produce the modules.

And as that goes up, you’ll fill the orders as fast as you can. You have a huge backlog to continue doing that. So this is really additive in the core business. Pre SCI is actually still growing pretty materially at a great pace.

Joe Adams, Chief Executive Officer, FTAI Aviation: Yes. I think that I agree. I think that we would have had growth even without SCI. But we didn’t sell SCI, we would have engines available for someone. So we’ll have growth without it, but you can’t zero it out because we would do something else with those assets.

But no, I agree with the math that you laid out. It’s basically right. We see the entire market growing for the products and there’s no cannibalization. These aircraft that are being acquired into SCI, we would not have been doing these engines on this other than the fact that we now own them in partnership.

Giuliano Bologna, Analyst, Compass Point: That’s very helpful. I really appreciate it. And I will jump back in the queue.

Joe Adams, Chief Executive Officer, FTAI Aviation: Thanks.

Conference Operator: Thank you. Our next question comes from the line of Sheila Kay of Jefferies. Your line is open, Sheila.

Sheila Kay, Analyst, Jefferies: Good morning, team, thank you so much. My first question is maybe on tariffs. If you look at Aerospace products, margins improved sequentially to 36% even with a two 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 workarounds at your disposal?

Joe Adams, Chief Executive Officer, FTAI Aviation: We don’t see any material negative effect from tariffs on our business. And I think there’s three reasons I would cite for that. One is it’s the nature of our business, which is to rebuild assets. And we use a lot of used material and this is not a new asset that’s being delivered into a market. So it’s typically not the target of tariffs.

The second is we operate in three different geographies. So we have a facility in Canada, One in United States and one in The EU. And effectively, do essentially the same thing in each one of those jurisdictions. So we could deliver products to different markets from different sourced location if we needed to do some optimization. But today, we don’t see the need to do that.

And then lastly, we have an ability to pass on price increases to customers. And we see public comments from OEMs and others indicating similar philosophy is if their costs go up, they’re going to they have the power and they have the capability to price to flex price and pass it on. And if that happens, then we would obviously follow suit and we feel like we have a similar capability to pass on as well. And then longer term, ultimately, if these tariffs stick for extended periods of time, you should see the price of new assets go higher, which means ultimately the price comparison for used assets, used assets should be more attractive as a result. And that’s good for us ultimately that if prices increase, it gives our products more value and also more cost savings.

Sheila Kay, Analyst, Jefferies: Great. Thank you for that answer. And maybe, Jo, when you set the or Angela, when you set the $650,000,000 free cash flow guide for the year, it was sort of pre growth CapEx and that you could hit twenty twenty six targets without further investment. You invested $127,000,000 of parts in Q1. So just curious how you’re thinking about growth CapEx and opportunities this year and how that translates into the aerospace products ramp over the next few years.

Joe Adams, Chief Executive Officer, FTAI Aviation: Yeah, I’ll take that. I mean, we are planning to invest about 200,000,000 in parts in the first half of this year as part of our cash flow. And I would characterize this as being heavy on parts inventory. And we view that because we think the cost of having extra parts inventory is way less than the cost of missing a sale. So we don’t want to miss a sale.

And as I mentioned in the beginning, we’re production constrained. And so we are being very heavy leaning towards owning more material than less material at this point. So I think we’re taking the view that we’re going to we’re ramping up our production, we’re going to ramp up our inventory as well. That will level off. It’s not a continuing item.

But I would say in the next few months, that’s what I would expect. And that’s in our assumption for 2025 on the cash flow side. So I think we’re expecting a roughly $200,000,000 of parts increase in the first half of this year. And even with that, we still generate $350,000,000 approximately of free cash flow.

: Great. Thank you.

: Thanks.

Conference Operator: Thank you. Our next question comes from the line of Christine Biewald of Morgan Stanley. Please go ahead, Christine.

Christine Biewald, Analyst, Morgan Stanley: Hey, good morning, everyone. And Joe, just want to follow-up on the commentary you made on cash now. So when you said that the inventory step up of $200,000,000 in cash for the first half for aerospace product and the $350,000,000 of free cash flow, is that at the same time? Or do you mean $350,000,000 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 do you need to make? And when does that become a positive working capital event?

Joe Adams, Chief Executive Officer, FTAI Aviation: Sure. Well, let me first, I’ll walk you through my numbers for the first half of the year in terms of cash flow. I start with operating cash flow, which is effectively EBITDA minus interest and maintenance CapEx of about $450,000,000 for the six months. Then we’re going to have $500,000,000 of asset sales, mostly to the SCI. So you start with $950,000,000 expect to invest in total replacement CapEx of about $300,000,000 which was in our previous numbers for 2025.

And that will be front end loaded in the first half of the year. Then equity in the SCI roughly 100,000,000 So that brings the number to $550,000,000 And then if you take $200,000,000 in the first half of the year for parts inventory, gets you to the $350,000,000 of free cash flow for the first half of twenty twenty five. So that’s kind of the building blocks. As I said, the $200,000,000 of inventory investment is a bit higher than what we would have expected in the first half of the year. But we think it’s a good investment and we still are able to achieve our numbers given the growth in free cash flow and EBITDA from the business.

So do you have any thoughts on going forward the growth rate of parts?

Alan Andrini, Investor Relations, FTAI Aviation0: As we’ve mentioned, we want to provision parts ahead of shop visits. So generally speaking, capital as far as what we have today, we’d like to maintain that and we provisioned ahead for the remainder of the year. So we don’t see that growing materially quarter over quarter.

Christine Biewald, Analyst, Morgan Stanley: Great, thanks. And maybe following up just on this parts thing, the $127,000,000 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 would be part of their strategy to offset some of the pain they could have on tariffs? Thanks.

Alan Andrini, Investor Relations, FTAI Aviation0: Yes, so we’re sourcing these parts in a number of fashions. But where we have a competitive advantage is we’re sourcing these parts unserviceable from asset owners and airlines. So we’re buying, for example, and then we have the back shop capabilities in Montreal to repair them. Montreal, just to give you kind of overall as repair capability for about 70% of the CFM56 in house that includes LLPs, combustor cases, frames, other fan base amongst other parts. So we buy these parts as removed and then we have special repairs where we can repair these parts and bring them back serviceable.

So by doing so, we’re able to really get into them at a much lower cost as well as we have salvage repairs that are able to increase yields. So we’re again, we’re very knowledgeable about scrap rates and specific parts. And we can maximize the value through our repair network. We are starting to see yes, parts starting to increase again, as they mentioned, manufacturers are going to be passing through certain tariff surcharges. So we’re expecting that to flow through like any annual escalation.

So we do expect that to increase the the use parts as well. I think generally speaking, we’re in a positive position because as prices for replacement parts get more expensive for new parts, we can offer more cost savings. So we’re starting to see that unfold. It’s early days at the moment.

Christine Biewald, Analyst, Morgan Stanley: 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 added that you do on repair, does that trigger some sort of tariff piece when you bring it back to The U. S?

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?

Joe Adams, Chief Executive Officer, FTAI Aviation: Yeah, on the first part, the answer is no, we don’t see a tariff impact on the repair portion. And the second part is, yes, we think airlines are increasingly focused on engine maintenance costs as they continue to go up in a disproportionate way for all airlines. So there’s a lot of focus on cost saving techniques and people are opening any alternative they have is on the table and PMA being one. So, we think that that will be you know, obviously we have a huge competitive advantage on PMA and we see that as not really in our numbers yet, but tremendous upside for our margins. And we think industry adoption will be quite good.

Christine Biewald, Analyst, Morgan Stanley: Great. Thank you.

: Thanks.

Conference Operator: Thank you. Our next question comes from the line of Josh Sullivan of The Benchmark Company. Please go ahead, Josh.

: Hey, good morning. You just just following up on the PMA conversation there, can you update us on the approval progress for the remaining PMAs at this point?

Joe Adams, Chief Executive Officer, FTAI Aviation: 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 stop.

: Got it. And then just on aerospace products in general, on PMA’s, how obviously a conversation that continues to be out there is, how accepting our airlines and lessors of PMA parts and can you just expand on the adoption and how any other metrics you have on how important they’ve been to margins for you?

Joe Adams, Chief Executive Officer, FTAI Aviation: Yes, I mean, one of usually the part in the beginning is getting assets into service and then people wanna see how they perform. And that’s what you would hope would happen, As people look at the part for the quality of the part and how it performs when they make the decision. And the history is that these parts have performed extremely well. And that’s what we’re seeing in the first two parts that are in service. And then from there, once the assets are in service, have a lot of have hours flown on them, the adoption increases.

And we also have the ability to increase that adoption rate significantly through SCI. So, that’s a tool that no one ever had. One of the big reasons that PMA always had struggled or struggled in the early periods was lessors not being willing to take a risk on residual value, but we’re over that. So and we’re a pretty big lessor. So that is different market environments than I think we’ve ever had before.

So I think people are open minded, particularly if they have data and facts and the parts perform well.

: Great. Thank you for the time. Thanks.

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

Alan Andrini, Investor Relations, FTAI Aviation1: Hey, good morning, everyone. I know we’re talking about the free cash flow cadence through the year, I think this was first mentioned last quarter. But could you give maybe any more update about how you’re thinking about shareholder friendly capital deployment moving forward?

Joe Adams, Chief Executive Officer, FTAI Aviation: Sure. So we’ve 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, close to three times debt to total EBITDA, which is kind of the low end of the range of what we said. 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 achieve that objective.

Alan Andrini, Investor Relations, FTAI Aviation1: Got it. Got it. I’ll keep it in one, actually. Thanks.

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

Alan Andrini, Investor Relations, FTAI Aviation2: Hey, good morning, team, thanks for taking the question. Joe, maybe just following up on that. I think you guys are targeting you just said three times net leverage, right, that you’re targeting this year?

Joe Adams, Chief Executive Officer, FTAI Aviation: Yes. Well, we’ve communicated previously our range, expect to be in a range of three to three and a half. And we think by the end of this year, we will be at three.

Alan Andrini, Investor Relations, FTAI Aviation2: 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 from a ratings agency perspective too?

Angela Nam, Chief Financial Officer, FTAI Aviation: Sure. So, as Joe mentioned, we had previously said that we’re targeting low threes, three and a half by the end of this year. And with the SEI, we can accelerate that and get closer to three by the end of the year, which would give us a strong double B with the rating agencies, which we’ve communicated that’s our goal. And that’s possible by the fact that in prior years we spent good amount of acquisition CapEx on buying aircraft, which with the SCI, we are no longer required to do. And in addition to that, we’ll generate about $500,000,000 of proceeds from the sales of our seed assets.

So all those things combined, we think we’ll definitely be in position to be as strong as we’ll be with the rating agencies by the end of the year.

Alan Andrini, Investor Relations, FTAI Aviation2: Okay. And Angela, does that give you any opportunity maybe to think about refi ing things in the future and get your costs ready?

Angela Nam, Chief Financial Officer, FTAI Aviation: I think that’s definitely possible. Yeah. Currently, our $3,500,000,000 debt, which isn’t maturing until 2028, we’re at weighted average interest rate of about 6.5. So that’s something that we can definitely look at, but not something that’s a priority given our rates.

Alan Andrini, Investor Relations, FTAI Aviation2: Okay. And then Joe, can you talk to I know you signed the deal with Pratt last year, but have you put any V2500s through that relationship yet? And what’s your initial thoughts the relationship and the margin, the profitability of that business?

Joe Adams, Chief Executive Officer, FTAI Aviation: Oh, yes, we’ve put quite a few engines through their network and we’re very happy with the relationship and how it’s developed. 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 seven thirty seven NGs and A320ceos no matter what engine they have. So it’s a very positive marketing customer relations development for us that we think is going 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 ten years really being the dominant provider for engines in the aftermarket.

: Thank you.

Conference Operator: Thanks. Thank you. Our next question comes from the line of Hilary Kakanongo of Deutsche Bank. Your question, please. Hilary?

Sheila Kay, Analyst, Jefferies: Thank you. So, Joe, I know

: you had guided to, you know, about 100 modules to be sold per quarter. But, you know, now that you’re significantly ramping up production, you know, through the remainder of the year and, you know, you have over 100 customers worldwide, You know, what would you be looking for in order to revise that guidance of, you know, hundred modules per, you know, per quarter?

Joe Adams, Chief Executive Officer, FTAI Aviation: Well, the the original hundred 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. 200 modules per quarter production capacity. Now that doesn’t mean that we have enough mechanics to produce 200 yet, but we are moving as fast as we can to fill up that capacity.

And if you look across, when I talk about a 25% market share, if you think roughly 3,000 engines a year, that’s about 700 to 800 engines. I’m shifting now to engines for modules. Excuse my convention change, but that’s about seven fifty. We currently have capacity, physical capacity across the network of about 600. So we’re pretty well equipped to have the physical capacity we need to build up the manpower and all of the related assets, but we’re doing that as fast as we can.

And David can talk about Montreal more.

Alan Andrini, Investor Relations, FTAI Aviation0: Yeah, 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 of all the progress with the team and where we’re at right now.

: So, the 9,200 module produced right? That’s the production number.

Alan Andrini, Investor Relations, FTAI Aviation0: Correct. This is production. Yeah. Okay. 9,200.

And that’s just in Montreal. Just Montreal only Montreal. Yeah.

: Got it. Great. That’s helpful. Thank you very much. And then just on insurance, you recovered $30,000,000 this quarter, dollars 11,000,000 last quarter.

Could you just remind us how much more you expect to recover this year versus how much was written off originally and where you are in the settlement process?

Joe Adams, Chief Executive Officer, FTAI Aviation: Yes, we’ll have another yeah, thanks. We did have 30,000,000 recovery in Q1. We have agreements. I don’t know if we’ve actually closed, but 24,000,000 in Q2 is committed. And then remaining claims are roughly $100,000,000 And we don’t have necessarily clear visibility on the timing of that.

So we will have collected in excess of what we wrote off without that $100,000,000 So we’re in pretty good position net net, but that 100,000,000 is still to be settled, recovered, litigated, but we’ll have 54 in this year.

: That’s great. Great. Thank you very

: much. Thanks.

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

Alan Andrini, Investor Relations, FTAI Aviation3: 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?

Joe Adams, Chief Executive Officer, FTAI Aviation: Well, we originally go way back, were doing about four modules per customer and then that increased to about six and we think it’s probably closer to eight now, which was our original number. And it’s what we’ve always expected and hoped is that you get somebody to try it. Our pitch is always just try it once. If you don’t like it, don’t do it again. And we find that people like it, so they do it again.

And then they do it for more of their fleet and that’s our goal. So we have some customers who’ve done 25, 30 modules in a year. And we ultimately would love to get 100 of their business, but we’re only shooting for 25% of market share. So we won’t we’re not going to get that. But we do see usage per customer going up and numbers of customers continuing to go up, which is a great multiplier.

And then as we have more cost savings from PMA, we’ll see margins per module go up. So that’s how you get to the original algorithm was, if you double the modules per customer, you double the customers and you double the margin, that’s a factor of two cubed is eight. So it’s a great multiplier effect, and that’s why we think this is just such a great business.

Alan Andrini, Investor Relations, FTAI Aviation3: Okay. Great. That’s helpful. And then maybe just a governance question for you, Joe. You’re still the Chairman of the Board of EFTAI 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?

Joe Adams, Chief Executive Officer, FTAI Aviation: We haven’t really discussed any changes. I mean, Ken and I have worked together for twenty years and we have a great relationship and we don’t have any intention of changing that to my knowledge at this point. All right. It’s controlled by Fortress. So I don’t just Fortress is the manager so they could change that equation, but I don’t intend to.

Alan Andrini, Investor Relations, FTAI Aviation0: Yep, got it. That’s helpful. I’ll leave

Alan Andrini, Investor Relations, FTAI Aviation3: it there and congrats on another great quarter.

Joe Adams, Chief Executive Officer, FTAI Aviation: Thanks.

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

Alan Andrini, Investor Relations, FTAI Aviation4: Yes. Hi. Good morning, Joe and team. Thanks for the time. I wanted to maybe first ask Joe, with all the uncertainty just not only from tariffs but the macro backdrop, can you comment on what you’ve seen in lease rates on either aircraft or engines in the first quarter around either sort of absolute lease rates year over year and what you’re seeing there?

And I guess also as part of that lease extensions, which had been running incredibly high for the last few years, have you seen any softening in either of these metrics? And can you level set us on just what you’re seeing there in terms of the underlying demand?

Joe Adams, Chief Executive Officer, FTAI Aviation: 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 fifteen year old 737NG 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 narrow bodies 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 numbers I saw were a little bit under five.

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 is, it’s a global market.

Alan Andrini, Investor Relations, FTAI Aviation4: 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 product segment?

Joe Adams, Chief Executive Officer, FTAI Aviation: No, I think we’ve been indicating over the last few quarters, we see probably the biggest growth in our portfolio will be Southeast Asia. But that’s just because we were underrepresented there previously. So we don’t see any weakness or change significantly. We have talked about China because originally we thought of China as kind of a zero for us, but increasingly, we see that as potentially a big upside in that China has significantly under ordered for the last four years really. And which means to keep their flying levels, they’re going to have to maintain and keep assets older assets longer.

And older assets longer flying in China need engines. And so we have the ability to do engine exchanges into China. We have the Rome facility that we just are acquiring has a CAAC, which is a Chinese equivalent of the FAA for China license. So we see China as a potential wildcard on the upside. We have virtually no exposure there at all or very little, but it’s all upside from our point of view and it could be significant.

Alan Andrini, Investor Relations, FTAI Aviation4: Great. Thanks, Joe. I’ll pass it back there.

: Yep. Thank

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

Alan Andrini, Investor Relations, FTAI Aviation1: Thanks. Good morning. Joe, 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 Versus CFM56? And is that similar to the 30 aircraft you had in the first quarter?

Joe Adams, Chief Executive Officer, FTAI Aviation: So we currently own in the partnership like 30 aircraft, 98 under ROI. It’s probably 90% CFM, right?

Alan Andrini, Investor Relations, FTAI Aviation0: Yeah, the vast majority is CFM.

Alan Andrini, Investor Relations, FTAI Aviation1: Okay. And in terms of your target customer base to acquire the assets from and the two fifty 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 are you seeing the most activity?

Alan Andrini, Investor Relations, FTAI Aviation0: Yeah, we’re sourcing from two avenues. The first are from lessors, where they’re large lessors looking to keep their fleet young. They’re motivated by maintaining rating agency by maintaining investment grade. So as a part of that, they have mandates to sell older equipment. So we’re a fantastic buyer and we’re buying quite a bit.

So we have the ability to do bilaterals. So over the last few months, we’ve been executing on bilaterals with large lessors. We expect that to continue for the remainder of the year. The second avenue is direct from airlines. So airlines, many airlines had expected, let’s say, new orders.

So now, let’s say, one airlines, you have engines that are tired and they need to continue to operate these aircraft for longer. So here, we’re really a source for them to offload maintenance. So we’ve entered into numerous sale leasebacks with airlines where we take on the maintenance. So effectively, we power everything through engine exchanges and those type of transactions were really one of one, because the airline really is focused on the counterparty’s ability to execute on engine exchanges. And based on our capabilities and our asset, we’re the only folks that can deliver that service.

So we’ve seen tremendous opportunities from the sale leaseback side and we expect that to continue. Quite a bit of that 98 aircraft relate to sale leasebacks as well.

Alan Andrini, Investor Relations, FTAI Aviation1: Okay, got it. And maybe one for Angela, the $7,000,000 of profit ELIMs, is that simply your 20% stake on the $100,000,000 of sales to the SCI or about 35% margins? And then what should we expect from the full year corporate and ELIM sort of contra account to total reported EBITDA?

Angela Nam, Chief Financial Officer, FTAI Aviation: Yeah, sure. Yeah, that’s correct. The 7,000,000 ELIM is the intra entity profit on the $100,000,000 on aerospace products we’re eliminating. On the corporate and other, I think included in that are these ELIMs. Also included are about a little over $3,000,000 in costs that we’ve incurred this quarter related to the short sale report.

So that is also not included in the run rate. So I would incorporate both of those items.

Alan Andrini, Investor Relations, FTAI Aviation1: Okay, got it. And last one, Joe, just to square it for me, sorry for the question on cash flow again. Slide nine, you have sort of two different cash flows. You’ve got one adjusted cash flow and one cash flow from operations less investing. When you talk about the $350,000,000 for the first half, is that comparable to the $54,000,000 of cash flow or the $73,000,000 of cash flow listed on the Slide nine?

Joe Adams, Chief Executive Officer, FTAI Aviation: 70 three.

Alan Andrini, Investor Relations, FTAI Aviation1: Okay. Got it. Understood. Thanks so much.

: Yep.

Conference Operator: Thank you. Our next question comes from the line of Steven Trent of Citi. Please go ahead, Steven.

: Good morning, everybody, and thanks for taking my question. The first one for 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.

Joe Adams, Chief Executive Officer, FTAI Aviation: Sure. So I think long term that is an option. And it’s something we’ll look at short term that we’re in the process of acquiring Rome and we want to make sure we get that set up embedded down and manage that. So I would say in the near term, wouldn’t that’s not a corporate priority for us. And we will be able to serve that market pretty efficiently from Rome.

It’s and as I mentioned, just a few minutes ago, it also has a CAC license. So we could serve Rome into China as well. So for the near term, I would say, we’re good on what we’ve got longer term. If you look at a few years and he said, where would you think you might end up with a facility? I would say it’s probably likely it would be Southeast Asia.

We’ve done in acquiring these facilities though is interesting in that we if you think about our facilities, they’re all former airline engine shops. So in Montreal, was an ex Air Canada shop. In Miami, it was an ex Pan Am engine shop. And in Rome, it’s an ex Alitalia engine shop. And the characteristics they all had is they had tremendous physical capacity and no business.

And so we’re able to acquire these facilities at less than replacement cost, and then fill them with our own engines. And that’s a unique capability that we bring. No other party can come in and say, I am going to deliver engines to this facility immediately, because most people are relying on getting third party customers to give them business and then move the engines in. We bring our own business. So we’re a great buyer for assets at very low cost, low price, because we bring our own business to the table.

: That’s super helpful, Joe. 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 accounting perspective longer term, should we think about eventual equity method inclusion of those earnings? Or am I thinking about that indirectly?

Thank you.

Angela Nam, Chief Financial Officer, FTAI Aviation: I think you’re asking currently, we do pick up our equity income related to the SEI partnership now. 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 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 further, I’ll maybe follow-up with you guys offline, but that’s very helpful. Thanks very I

Joe Adams, Chief Executive Officer, FTAI Aviation: 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 it is at a certain level of materiality, but that could become a significant source of income for us.

: Very helpful, Laura. Thank you very much.

Joe Adams, Chief Executive Officer, FTAI Aviation: Thanks.

Conference Operator: Thank you. I would now like to turn the conference back to Alan Andrini for closing remarks. Sir?

Alan Andrini, Investor Relations, FTAI Aviation: Thank you, Latif, and thank you all for participating in today’s conference call. We look forward to updating you after Q2.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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