AerSale (ASLE) Q4 2025 Earnings Call Transcript

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DATE

Thursday, March 5, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Nicolas Finazzo
• Chief Financial Officer — Martin Garmendia
• Senior Vice President of Marketing — Jacqueline Carlon

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TAKEAWAYS

• Revenue -- $90.9 million in the quarter, down 4%, with volatility attributed to flight equipment sales.
• Adjusted EBITDA -- Increased 17.1% to $15.2 million, up from $13 million the prior year.
• Flight Equipment Sales -- $20.9 million this quarter (four engines), compared to $31 million (six engines) in Q4 last year.
• Revenue Excluding Flight Equipment -- Rose 9.8% for the quarter and 18.7% for the year, led by component MRO, USM, leasing, and higher AirSafe product sales.
• Full Year Adjusted EBITDA -- Increased 38.2% to $46.1 million, from $33.4 million last year.
• Full Year Revenue -- $333.34 million, a decrease of $9.8 million, primarily due to lower flight equipment sales.
• Asset Management Segment Revenue -- Declined 11.1% to $56.9 million in Q4, but excluding flight equipment, grew 9.1% due to expanded USM and leasing.
• TechOps Segment Q4 Revenue -- Grew 10.7% to $34 million, with success in new Aerostructures and landing gear MRO contracts.
• TechOps Full Year Gross Margin -- Improved to 25.6%, up from 16.6% last year, driven by efficiency measures and favorable sales mix.
• Selling, General, and Administrative Expenses -- $90 million, including $4.9 million of non-cash equity-based compensation; lower payroll led to year-over-year savings.
• Adjusted Diluted EPS -- $0.33 for the year, up from $0.18 the prior year.
• Feedstock Acquisitions -- $15.4 million acquired in Q4; $99.6 million for the year, with a 4.8% quarterly and 6% annual win rate, both below prior-year levels.
• Inventory Position -- $364 million at year-end, with $150 million ready for USM channels and $118 million in whole assets suitable for USM or leasing deployment.
• Boeing 757 Freighter Aircraft -- Two leased; five remain in inventory, two under letters of intent at year end.
• Liquidity -- $71.6 million total, including $4.4 million in cash and $67.2 million revolver, expandable by $20 million.
• FAA Approval -- Landing gear MRO capabilities expanded to include Boeing 737 MAX and 787 platforms.
• On-Airport MRO Initiatives -- Millington facility now operational with a new multiyear maintenance agreement; Goodyear and Roswell refocused for higher profitability and offsetting margin loss.
• Component MRO Expansion -- 90,000 sq. ft. Aerostructures facility completed, with additional pneumatic shop capacity online by end of Q1 2026.
• AirSafe Product Backlog -- Q1 2026 backlog already exceeds total 2025 sales, driven by the upcoming FAA FQIS AD deadline.
• Strategic Outlook -- Management expects revenue and profit growth in 2026, led by expanding recurring and predictable business lines, and efficiency initiatives.

SUMMARY

The quarter was defined by margin expansion despite lower overall revenue, underpinned by growth in recurring business and disciplined feedstock acquisition. New contract wins in Aerostructures and landing gear MRO, alongside continued ramp-up of facility expansions, are expected to add incremental profitability in the coming year. Management anticipates a surge in AirSafe-related sales in advance of the 2026 FAA compliance deadline, with a backlog already surpassing last year’s total. The company is positioned to fund growth using substantial liquidity and inventory reserves, as it targets more stable, recurring revenue streams and reduces exposure to flight equipment sale volatility.

• The balance sheet strength, supported by $364 million in inventory and liquidity resources, is expected to facilitate organic growth for the Asset Management and TechOps segments.
• Management noted, "we are starting 2026 with about $364,000,000 of inventory," allowing continued expansion without aggressive feedstock procurement.
• FAA grounding of alternative freighter fleets and customer interest are driving expected placement of all remaining 757 freighters in 2026.
• Upcoming expansion into higher-margin engineered solutions beyond AirSafe, and new STCs, could offset future declines in AirSafe volumes post-deadline.
• Efficiency initiatives undertaken in 2025 have reduced SG&A and unfavorably affected payroll but contributed to improved operating margins.
• Management forecasts "steady incremental improvements as new revenue streams ramp up and the efficiency initiatives continue to gain traction" during 2026.

INDUSTRY GLOSSARY

• Feedstock: Aircraft, engines, or major components acquired for disassembly, leasing, or resale through aftermarket channels.
• USM (Used Serviceable Material): Aftermarket aircraft or engine parts salvaged from disassembled assets, refurbished for resale or lease.
• MRO (Maintenance, Repair, and Overhaul): Services and facilities providing scheduled maintenance, repairs, modifications, and end-of-life disassembly for aircraft and components.
• FQIS AD (Fuel Quantity Indication System Airworthiness Directive): Regulatory mandate requiring upgrades to aircraft fuel tank safety systems by a specified date.
• STC (Supplemental Type Certificate): FAA approval for major modifications or engineered products to be installed on aircraft outside their original certification.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the AerSale Corporation Q4 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. To ask a question, please press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. I would now like to hand the conference over to your speaker today, Jacqueline Carlon, Senior Vice President of Marketing. Good afternoon. I would like to welcome everyone to AerSale Corporation’s fourth quarter and full year 2025 Earnings Call.

Jacqueline Carlon: Conducting the call today are Nicolas 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 12/31/2025, filed with the Securities and Exchange Commission (SEC), to be filed on 03/09/2026, 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 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 material made available on the Investors section of the AerSale Corporation website at investors.aersale.com. With that, I will turn the call over to Nicolas Finazzo.

Nicolas Finazzo: Thank you, Jackie. Good afternoon, everyone, and thank you for joining us today. I will begin with an overview of our fourth quarter and full year 2025 results, highlight key operational developments, and then discuss our priorities for 2026 before turning the call over to Martin to review the numbers in greater detail. We finished 2025 on a strong note. Our fourth quarter adjusted EBITDA increased $2,200,000, or 17.1%, to $15,200,000, compared to $13,000,000 in 2024. Fourth quarter revenue was $90,900,000, a 4% decrease from the prior-year period. Excluding flight equipment sales, which tend to be volatile quarter to quarter, fourth quarter revenue actually increased 9.8%, reflecting continued growth across our component MROs, USM, and leasing.

Sales of our engineered solutions product, AirSafe, also increased as operators began upgrades in advance of a Federal Aviation Administration 2026 compliance deadline for a Fuel Quantity Indication System Airworthiness Directive related to fuel tank safety systems. You will hear me refer to this as the FQIS AD. This overall growth has improved profitability and provides more consistency in our quarter-over-quarter performance. This also led to improvement in our adjusted EBITDA supported by stronger operating performance and the continued benefits of the efficiency initiatives we implemented in early 2025. For the full year, we generated $333,335,300,000 in total revenue, a decrease of $9,800,000, or 2.8% year over year, primarily due to fewer flight equipment sales.

Excluding flight equipment sales, full year revenue increased 18.7%, driven by stronger USM demand, higher average lease rates and asset yields, and robust growth in sales at our component MROs and of AirSafe products. Full year adjusted EBITDA also increased $12,800,000 to $46,100,000, up 38.2% year over year, reflecting higher volumes, favorable mix and margin, and cost benefits from our efficiency program. During 2025, we acquired $15,400,000 of feedstock, bringing full year acquisitions to $99,600,000. While the feedstock environment remains constrained, we have been steadfast in our disciplined acquisition pricing and believe opportunities will improve as OEM production normalizes. Our win rate in the quarter was 4.8% versus 17.2% in 2024.

We disclose this number to provide investors with a measure of how conservative we are when buying feedstock in a hypercompetitive environment, although a quarter-over-quarter comparison may not fully reflect this discipline. Year over year, our win rate was 6% in 2025 versus 8.6% in 2024. Regarding our Boeing 757 passenger-to-freighter converted aircraft, we ended 2025 with two on lease and five aircraft we converted remaining in inventory. We are actively engaged in discussions with potential customers. Increased demand for cargo and the FAA's recent grounding of the MD-11 freighter fleet continue to make us bullish we will deploy all our 757 freighters in 2026, with two of these aircraft under letters of intent at year end.

During 2025, we made several strategic adjustments across our on-airport MRO facilities. In Goodyear, we transitioned from an expiring contract to new business at higher rates, resulting in improved profitability. In Roswell, we shifted our focus to storage and end-of-life fleet activities, largely offsetting lost heavy check margin. Our on-airport MRO expansion project in Millington is now fully operational and productive, with heavy check work that began in December following the award of a multiyear maintenance agreement with a regional airline, positioning the facility to significantly contribute to profitability in 2026. Regarding our component MRO facility expansion initiatives, we moved into our new 90,000 square foot Aerostructures facility in January 2026.

With existing customer approvals and more underway, we expect Aerostructures volumes to ramp up throughout 2026. Our pneumatic expansion project is also progressing, with all construction now complete; we expect this additional capability will come online by the end of the first quarter. As these three expansion initiatives begin to contribute in 2026, we remain confident in their revenue potential. While we previously communicated an incremental annualized opportunity of approximately $50,000,000, updated assessments indicate that the full capacity potential is likely to exceed that original estimate. As we ramp up in 2026, we will provide an update on the progress of these projects as contributions from this additional capacity and capability are realized.

We are also proud to announce that our landing gear shop received FAA approval to overhaul Boeing 737 MAX and 787 landing gear, which supplements our existing authority to overhaul gear for 737 Classic and NG series, 757, 767, and the Airbus A320 series of aircraft. This expansion to include MRO for new-technology flight equipment allows us to better support our expanding customer base as mid-technology flight equipment is eventually replaced. Looking ahead to 2026, we are mitigating earnings volatility by growing the more recurring and predictable parts of our business.

These initiatives include filling capacity at all our on-airport MRO facilities, growing USM sales, generating significant additional component MRO revenue with our available expanded capacity and new capabilities, increasing the number of assets deployed in our lease pool, and continued strength in AirSafe revenue as the FAA's November 2026 deadline to comply with the FQIS AD comes due. Finally, we remain committed to the success of our revolutionary enhanced flight vision system, AeroWare, by marketing this to select interested customers, both commercial and governmental.

Concurrently, we are taking steps to educate our U.S. regulators and the agencies responsible for the safety of our air transportation system on how the unique features of AeroWare will improve safety and provide economic efficiency to the industry. On the cost side, the enhanced efficiency programs we implemented last year have allowed us to streamline workflow at each facility with a goal to better match facility scheduling with volume while opening available capacity at other facilities to maximize profitability. Taken together, we expect 2026 to be another growth year for AerSale Corporation on both the top and bottom lines.

Our strong balance sheet will support increased USM sales and leasing, thereby providing improving recurring revenue from our asset management segment. Customer expansion, increased capacity, and efficiency initiatives have put us in a position with all our MROs to see significant incremental revenue progression quarter over quarter. I want to conclude by thanking our employees for their dedication and hard work in meeting our growth initiatives in 2025 and our investors for their continued support as we work on maturing the business and reducing volatility. We look forward to updating you on our progress throughout 2026. With that, I will turn the call over to our Chief Financial Officer, Martin Garmendia.

Martin Garmendia: Thanks, Nick. And good afternoon, everyone. I will walk through some additional details on our fourth quarter and full year financial results, then touch on cash flow and liquidity, and close with our outlook for 2026. Fourth quarter revenue was $90,900,000, which includes $20,900,000 of flight equipment sales consisting of four engines. This compares to $94,700,000 in the fourth quarter of last year, which included $31,000,000 of flight equipment sales consisting of six engines. As we note each quarter, flight equipment sales can vary meaningfully from period to period. As a result, we believe performance is best assessed over time with a focus on feedstock acquisition, monetization of those investments, and profitability trends.

Fourth quarter revenue for Asset Management declined approximately 11.1% year over year to $56,900,000 due to fewer flight equipment sales. Excluding flight equipment sales, revenue increased 9.1%, driven by continued strength in USM and an expanded lease pool. For the full year, Asset Management revenue was $2,211,600,000, down 1.8% year over year. Excluding flight equipment sales, segment revenue increased 47.3%, supported by strong inventory levels and demand that allowed us to grow our USM and leasing activity. Turning to TechOps, fourth quarter revenue increased 10.7% to $34,000,000, driven by higher sales in our Aerostructures and landing gear MROs, as we have been successful in winning new contracts.

A focus on higher-margin opportunities and the efficiency measures taken in early 2025 allowed us to further improve our profitability and set the foundation to grow our on-airport MROs beyond historical levels and with a greater profit profile in 2026 and beyond. TechOps was also strengthened by strong demand from our component MROs and continued momentum in AirSafe products as customers prepare for the 2026 compliance deadline. For the full year, TechOps revenue declined 4.5% to $123,700,000, primarily due to lower on-airport MRO activity. However, improved mix and efficiency initiatives improved gross margin for the year to 25.6%, compared to 16.6% in the prior-year period, due to favorable mix and benefits of the efficiency measures taken in early 2025.

Selling, general, and administrative expenses for the year were $90,000,000, including $4,900,000 of non-cash equity-based compensation, compared to $94,200,000 last year, which included $4,300,000 of non-cash equity compensation. The decrease was primarily driven by lower payroll-related expenses, which also benefited from the efficiency measures taken in 2025. Income from operations was $15,800,000 for the full year of 2025, compared to $9,700,000 in the prior year. On an adjusted basis, net income for the year was $15,800,000, compared to adjusted net income of $9,500,000 last year. Adjusted diluted earnings per share for the year was $0.33, compared to adjusted diluted earnings per share of $0.18 in 2024.

Adjusted EBITDA for the year was $46,100,000, compared to $33,400,000 in the prior-year period, which benefited from a higher-margin product mix as well as improved overall margins and lower expenses. Year to date, cash used in operating activities was $23,000,000, primarily related to feedstock acquisitions as we continue to make strategic investments to grow the Asset Management segment. We ended the year with $71,600,000 of total liquidity, including $4,400,000 in cash and $67,200,000 of revolver availability on our $180,000,000 asset-backed revolver, which can be expanded by an additional $20,000,000. This available liquidity and our strong inventory position provide us with the fuel to continue to grow our business into 2026.

Looking ahead, as we shift our emphasis away from trading and toward expanding the more recurring core elements of our business, we expect both full year revenue and profitability to increase relative to 2025. We anticipate steady incremental improvements as new revenue streams ramp up and the efficiency initiatives continue to gain traction. We will now open for questions. Thank you. Press 11 on your telephone and wait for your name to be announced. To withdraw your question, press 11 again. One moment for questions. Our first question comes from Michael Ciarmoli with Truist. You may proceed.

Michael Ciarmoli: I guess, Nick or Martin, do you have a sort of a goal in mind of, you know, kind of how much material feedstock you think you can buy? I know you are being pretty conservative, and it is still a tight market out there. Just trying to get a sense of, you know, what do you think you can close, and maybe the other part, out of what you have on hand right now, you know, do you think you can move all of that product this year?

Nicolas Finazzo: As far as feedstock purchases—this is Nick speaking. Thanks for the question, Mike. As far as feedstock purchases, we anticipate a lower level of feedstock purchases this year than we did last year. And why is that? The market is just hypercompetitive at this point. The pricing that we see—the reason that I mentioned our win rate, not that it is materially different from last year—it is just under 10%, which means that we lose nine out of ten deals that we bid on, not to mention the hundreds of deals that we do not bid on at all because we just do not think we would be competitive.

And because of the extreme competition in the market for, I candidly believe, less-informed people who do not understand how difficult it is to make money buying used flight equipment and then parting it out, and then finding a way to extract value out of it, that we see people buying stuff at prices—and I have said this many quarters in a row—at prices that are well beyond what we believe we can make in total margin based on what they have to pay to win the deal. So we will continue to be disciplined on our buy side. And look, I have been doing this for a long time.

This is not the first company I have been with or that I have founded that has bought in the aftermarket. In my prior experience, lots of money moves into the space. Uneducated investors do not know what they are buying, do not know how to properly monetize it. They spend too much money. Then eventually they go away. And so we have to remain disciplined because overpaying kills companies. So as far as what do we think we could do this year, we think we can do—last year, we did $100,000,000. We do not think we will do $100,000,000 this year, but it could happen.

And as far as monetizing the existing inventory that we have, I may defer a little bit of that to Martin. We have ample inventory to continue to grow our business without buying as much as we did last year. I do not know if, Martin, you want to add any more color to that.

Martin Garmendia: Yeah. No. Absolutely. I was going to say we are starting 2026 with about $364,000,000 of inventory. That includes roughly $150,000,000 that is ready to be deployed in the USM channels, as well as almost $118,000,000 that is still in whole assets that we can put as USM or continue to grow our leasing portfolio. So on a positive, even as we are being very prudent, as we always have been, in deploying capital, we have more than enough to continue our growth trajectory, and that will increase our liquidity. So when the opportunities are right, we will continue to deploy capital.

Michael Ciarmoli: Okay. Okay. Got it. That is really helpful. And then just on that growth trajectory, I think the press release mentioned some of the storage revenues may have been benefiting from GTF. If I think about kind of GTF revenues and if that normalized and then you have got the AirSafe 2026 deadline, which, you know, we kind of always see this dynamic across various end markets and industries. That probably is going to create a big uptick this year, but then maybe backfilling that. Should we think about GTF normalization, maybe AirSafe, kind of how you backfill that, maybe some of the new capacity coming online?

And I guess I am thinking into 2027 too as maybe those two trends normalize a bit with the GTF and AirSafe. Is that maybe the right way to think about it?

Nicolas Finazzo: Well, I am not 100% sure I got your question. But with regard to the GTF situation, we do not see that normalizing in 2026 because we are hearing that before Pratt can get the engines back to the aircraft that it is going to drag into 2027. So the opportunity for us is not so much in the GTF storage as it is in returning the aircraft that have been parked now for several years and returning those to service. Those aircraft require heavy checks. And we have, I do not know how many, 70, 80 airplanes sitting in Goodyear and Roswell? Happy holidays.

So we have got a lot of GTF-powered airplanes sitting in our facility in Goodyear and Roswell. The Goodyear ones are going to require return to service if they are not parted, believe it or not. We are seeing the part-out of brand-new, relatively brand-new, several-year-old A320neos. But the opportunity for us is really yet to come. It is not through storing these airplanes and pulling engines off and putting engines on. That is helping. And at this point, because of the volume of it, it kind of reminds me of the COVID situation where we had 500 airplanes parked.

And although you would not think you make much money doing storage, when you are removing engines, putting engines on, putting airplanes into storage, taking airplanes out of storage, and then prepping them for the next lessee, with that number of airplanes in one facility, that really creates a capacity issue, not so much a demand issue. So the demand is there. We see that will continue through 2026 and 2027 as we begin doing return-to-service work on the aircraft that are parked and are getting engines, are coming back from Pratt. Now the other part of your question was AirSafe.

Michael Ciarmoli: Yeah. Okay. Yeah. Just AeroWare. Does that create a big headwind next year as everybody preps for the deadline later this year?

Nicolas Finazzo: With regard to—it is AirSafe, actually. With regard to AirSafe, the greatest amount of sales are going to happen this year. We have a backlog that already exceeds all sales for all of last year, and we are still in the first quarter. It does not mean that it goes away altogether, but it will be significantly diminished. Not so that we are sitting around waiting to sell these, and then we have nothing else to sell. We are working on other engineered products and STCs that airlines have asked us about to say, hey, can you make this product for us? Can you help us resolve this technical issue?

So our engineering group is working on airline demand for engineered products that they need to keep their fleets flying because it is not getting properly addressed by the OEMs that are producing those components. So that is an active business that we are pursuing now, which will help us with our customers. Not to mention that we continue to look for opportunities to deploy our AeroWare product not just across the 737, but we are talking across multiple other platforms, including 757 and even ATR 72.

Michael Ciarmoli: Got it. Okay. Good stuff, guys. Very helpful. Thank you.

Nicolas Finazzo: Okay, Mike. Thank you.

Operator: Thank you. I am not showing any further questions at this time. I would now like to turn the call back over to Nicolas Finazzo for any closing remarks.

Nicolas Finazzo: Okay. Thank you very much. Thanks again. So, as we explained and mentioned last quarter, even with just a few whole asset trades, no AeroWare sales, and no incremental revenue from our facility expansion projects in the fourth quarter, our operating margins have continued to grow. I believe this validates our unique, multidimensional, and fully integrated business model and, as our businesses continue to develop, will put us in an excellent position to achieve substantial growth in the years ahead. As always, I want to thank Michael Ciarmoli for his questions, which I believe provide additional insight into our business model and progress to date.

I very much appreciate your interest in listening to our call today and look forward to bringing you up to date during our next earnings call. I wish you all a good evening.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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