AerSale Corporation (ASLE) Q1 2021 Earnings Report, Transcript and Summary

Greetings. Welcome to the AerSale First Quarter 2021 Earnings Conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Christine Padron. Thank you. You may begin.

Good morning. I like to welcome everyone to AerSale’s first quarter 2021 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 facts, 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. Factors discussed in the Risk Factors section of the company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission, SEC, on March 16, 2021, and its other filings with the SEC including its quarterly report on Form 10-Q for the period ended March 31, 2021 to be filed 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.

Thanks, Christine. Good morning to everyone on the line and thank you for joining our call today. I’ll begin with brief comments about AerSale and our strategy, followed by an overview of the quarter, operational updates, and progress on major programs and initiatives. I’ll then turn the call over to Martin for a closer look at the numbers. For those of you unfamiliar with AerSale, we operate a purpose-built fully-integrated multidimensional aftermarket aviation model that includes part procurement, flight equipment sales and leasing, MRO, FAA certifications, and aircraft storage and decommissioning. This allows us to keep a close pulse on the market, identify attractive flight asset purchase opportunities, and deliver a higher overall value to our customers, as we touch every part of the aircraft maintenance cycle. Our battle tested model has proven very effective, even under extreme stress in the industry, as we’ve demonstrated during the COVID-19 pandemic. As the effects of COVID resulted in a massive reduction of flight capacity by the airlines, our aircraft storage facilities quickly filled up with decommissioning work and storage maintenance revenue helping to offset much of the decline in routine MRO work and Used Serviceable Material, USM part sales. Further, insight gained from firsthand observation of passenger aircraft coming out of service has allowed us to quickly pivot our efforts to cargo aircraft that remained in high demand throughout the pandemic. This allowed us to identify feedstock opportunities to serve the freighter market, specifically through our 24 aircraft Boeing 757 fleet acquisition announced last year and expansion of our passenger to freighter conversions being performed at our Goodyear Arizona MRL. We are currently scheduled to convert 5 of the aircraft acquired using the industry preferred precision aircrafts cargo conversion kit, with the first completion expected later this month and under contract for sale to a Canadian cargo operator. Conversions 2, 3 and 4 are also under LOI and in the lease documentation phase with the U.S. cargo operator. We’re in discussions with multiple additional customers for our 5th conversion, with scheduled cargo completion in the first quarter of 2022. As we acquire or repair more engines, we have an option with precision to purchase up to 5 more cargo conversion kits to modify aircrafts 19 through 23, potentially leaving only 1 of the original 24 aircraft fleet for partout. Our capacity to acquire a large fleet of aircraft, perform cargo conversions, secure coveted precision cargo conversion kits, and find the cargo customers for aircraft converted on spec differentiates us from our peers and provides yet another high-margin revenue outlet for the company’s flight equipment. As we review our business results, there are a few important things to keep in mind. First, we generally don’t focus on quarterly year-over-year analysis to assess our financial performance, which you’ll notice throughout our commentary. The rationale for this is simple, our asset management, acquisition and flight equipment sale businesses are one of the cornerstones of our success, and account for large transactions at regular times throughout the year. As we discuss our results, we’ll make it a point to update our investors on these key transactions for both the current year and prior-year periods. More importantly, we believe relevant indicators for our business performance, our asset acquisitions and activities, the outlook for flight equipment sales throughout the year, progress on engineered solutions, STC development and contracts and the underlying performance of our MRO business. With that in mind, we’re performing well and as expected in 2021, with first quarter consolidated sales of $58.4 million, sales in the prior year with $57.1 million. Sales levels in 2021 have been primarily supported by $13.8 million of flight equipment sales, continued demand for aircraft storage, maintenance and strong MRO demand, which was offset by lower leasing from aircraft, whose lease has expired, combined with lower USM part sales volume, which is still under pandemic related pressure. Turning to profitability, our first quarter 2021 adjusted EBITDA was $16.5 million or 28.2% of sales, compared to $9.4 million or 16.5% of sales in the prior year. Higher adjusted EBITDA margin during this period was attributable to strong cost controls and higher gross margin mix. The period also included $6.4 million of CARES Act proceeds, which did not occur in the prior quarter and are not excluded, because we cannot reduce the associated labor costs for the year to remain in compliance with CARES Act grant restrictions. On the specific quarters that include CARES Act proceeds, it does create a lift to margin performance. To dig into the specifics by segment, and beginning with Asset Management. During the quarter, we sold $13.8 million of flight equipment representing the sale of 1 Boeing 737-800 NG airframe; and 2 Pratt & Whitney PW4000 engines to cargo operators; and 1 Pratt & Whitney PW4000 engine for parts. As we took advantage of market dynamics where there was strong interest in purchasing whole engines in support of USM needs. Our aircraft and leasing revenue was down compared to the prior year as a result of 3 Boeing 747 passenger aircraft leases that expired. We decided not to invest in returning this aircraft to service, as we concluded they have a higher value as whole engines, USM airframe and engine parts. Of the 12 General Electric and Pratt and Whitney engines removed from these 3 747s. The serviceable ones have been added to our engine lease pool, and the engines needing extensive repairs and the airframes will become feedstock for our USM parts business, as we take advantage of strong demand in this platform from cargo operators. This reduces our fleet – aircraft lease fleet to just 4 aircraft, 2 passenger and 2 freighter, all of which have been performing well. This aircraft portfolio reduction is not a coincidence. Over the past several years, we have been anticipating a market downturn and have been strategically reducing our leased aircraft fleet. Unlike pure-play aircraft leasing companies’ post-COVID, we’ve not had to forgive rent in order to keep the aircraft on lease. As such, all of our flight equipment is generating an acceptable amount of revenue, keeping our balance sheet clean with no debt and plenty of capacity to add more flight equipment assets to our portfolio, as the industry recovers. We continue to mark to market for asset purchases and believe that opportunities will become more attractive in the back half of 2021, once airlines are able to resume more normalized service levels and can better assess their fleet requirements. Regarding our 24 aircraft Boeing 757 fleet acquisition program, we’ve made good progress on either the sale or lease of the first 18 aircraft. In the balance of our Asset Management business, we’re seeing an uptick in USM part sales as carriers gear up for a stronger anticipated summer. But overall volume is still down from pre-pandemic levels. We’re also challenged in this business by limited feedstock availability at attractive prices. However, we expect this dynamic will become more favorable over the next 18 months. Turning to our TechOps business. Total sales in the quarter were quite strong and driven by continued demand at our aircraft storage locations, along with high demand for MRO as airlines begin to recommission aircraft. Aircraft storage maintenance has been a strong offset to lower pandemic-related volume in other parts of our business. We do expect our facilities to remain full even as some aircraft are recommissioned as storage demand has far exceeded capacity, and an extended recovery will continue to fill any vacancies for some time. Reviewing the product development side with Engineered Solutions, we produce highly specialized products that comply with regulatory mandates and/or enhance the safety of commercial aircraft. We’re currently marketing 3 products including AerSafe and AerTrak for which we hold supplemental type certificates, STCs issued by the FAA. Sale of our existing STCs have netted strong margins, and all of our STC products will serve a customer base of over 16,000 aircraft. Regarding AerAware, which is expected to have the largest addressable market of any of our STCs, we made substantial progress towards gaining STC approval and completed additional flight tests with a potential launch customer during the period. We continue to work with the FAA both in reviewing our proprietary engineering data and performing test flights using our Boeing 737-800 NG prototype test aircraft. In summary, after our first full quarter as a public company, we’re exactly where we anticipated we would be. Our MRO facilities are full and our diversified portfolio continues to support our business performance in a dynamic operating environment. We remain very enthusiastic about the future and look forward to updating our investors in the coming quarters. Over a year into the pandemic, our employees have shown great flexibility and resiliency. Our strong financial performance is the result of their dedication and the multi-dimensional and fully integrated business model we spent the last decade building. The diversity of our revenue sources has created a counter cyclical hedge, enabling AerSale to thrive in a challenging commercial aviation market. I’ll be back to answer questions in a few moments. But for now, I’ll hand it over to Martin for a look at the numbers.

Thanks, Nick. I will start with an overview of our financial performance before ending with an update on our guidance. Our first quarter revenue was $58.4 million, compared to revenue in the first quarter of 2020 or $57.1 million. As Nick noted, our business may fluctuate from quarter-to-quarter and year-to-year based on flight equipment sales and, therefore, it is important to monitor our progress based on asset purchases and sales over the long-term. Looking ahead to the rest of 2021, we continue to work with our customers to finalize the sale of the 24 Boeing 757s, who’s purchased we announced in September. We are very pleased to note that we have commitments for 18 of these aircraft contracted or under letters of intent for sale or lease, including 4 Passenger-to-Freighter converted aircraft being completed at our Goodyear facility. This ability to sell, lease, convert and break down flight equipment into parts is key to our ability to generate higher margins than our competitors. First quarter Asset Management Solutions or AMS revenue was $29.3 million, compared to $30.8 million in the first quarter of 2020. Aside from the shift and expected timing of flight equipment sales, AMS revenue was lower because revenue from used serviceable material or USM, declined compared to the first quarter of 2021 when the COVID-19 pandemic was just beginning. On a positive note margins from USM has increased which is partially offset the impact of these declines to net income. Since the start of the COVID-19 pandemic, we saw fewer opportunities to buy feedstock, lower demand for existing inventory and the drop in utilization rates on our flight equipment. As you’re aware, demand for USM overhaul activity and short-term engine leasing declined passenger air travel dropped and airlines grounded a significant portion of the global passenger fleet. However, with the recovery strengthening and passenger air travel beginning to increase, especially as we approach the summer, we should benefit from the rise in demand for USM parts consumption for maintenance and overhaul activity as airlines begin to bring portions of their grounded fleet back online. Our TechOps segment offset some of the decline in our Asset Management Solutions volume with total segment revenue of 10.9% compared to the first quarter of 2020, increasing to $29.2 million. Our MRO facilities continue to benefit from the increased maintenance demand from the fleet groundings that resulted from the pandemic. Looking forward, we remain confident that we will benefit from reactivation work, heavy maintenance and cargo conversion activity as well as have a strategic advantage and identifying feedstock for Asset Management segment as a commercial passenger market recovers given the large number of aircraft at our on-airport MRO facilities. Gross margin increased to 33.9% in the first quarter of 2021, compared to 26.8% in the corresponding period in the prior year. This is a result of higher flight equipment sales and increased maintenance storage demand during the quarter. Selling, general, and administrative expenses for the first quarter of 2021 were $13.3 million, which is about $100,000 lower than the same quarter last year. This amount was offset by CARES Act contributions of $6.4 million, recognized in the first quarter of 2021. Cost savings and efficiency measures taken during 2020 have helped to offset higher public company costs being incurred in 2021. Income from operations was $12.9 million in the first quarter of 2021 compared to $1.9 million in the first quarter of 2020. Net income was $10.1 million or 17.3% of sales, up from $1.1 million or 1.9% of sales. First quarter adjusted EBITDA was $16.5 million, or 28.3% of sales, up from adjusted EBITDA of $9.8 million, or 17.2% of sales in the corresponding period in the prior year. Adjusted EBITDA was $7.1 million higher primarily due to the Payroll Support Program contributions. However, adjusted EBITDA would have been higher, even after excluding the payroll support benefit as contributions from flight equipment sales and storage activity offset lower leasing revenues. As Nick noted, we do not adjust the Payroll Support Program proceeds out of our numbers, as there are associated costs embedded in our operating expenses that are required for receipt of these proceeds. Cash Flow used in operating activities was $14 million in the first quarter of 2021, compared to cash flow provided of $21.4 million in the corresponding prior-year period. The main driver of cash utilization during the quarter was the acquisition of the flight equipment, primarily related to the Boeing 757 transaction. At quarter end, AerSale had approximately $20 million of cash on its balance sheet, and then undrawn revolver of $150 million. This provides us with ample financial flexibility to fund our asset acquisition priorities in 2021 and beyond. Finally, our guidance update in summary. We continue to expect revenue of $340 million to $360 million, and adjusted EBITDA of $60 million to $70 million in 2021. This outlook reflects an increase in activity in our asset management segment, continued strong demand for on-airport MRO services, accelerating demand in cargo and e-commerce markets, and increased requests for passenger to freighter conversion and other TechOps products and services. We expect the main growth driver of the asset management segment to be the monetization of the Boeing 757 package secured in 2020. Because of the strong demand for cargo conversion aircraft, we continue to project selling the majority of the available aircraft in 2021. For TechOps, in addition to the continued contributions from our storage, maintenance and component MRO activities, we are on track to commence sales of our AerAware product in late 2021. Our projected ranges for 2021 do factor in a possible delay in the start of sales for AerAware, due to uncertainties regarding the pace of initial scale of production activities. We continue to diligently work on solutions that will allow us to meet anticipated demand for this product from our potential launch customer. Lastly, since we reported our fourth quarter 2020 and full year 2020 results on March 15, 2021, we were awarded grant proceeds of $5.5 million under the American Rescue Plan. These proceeds are in addition to the CARES Act grant proceeds of $9.2 million awarded to us in 2020. This award extends restrictions on the company related to retention of employees, which could result in higher associated operating costs required to be in compliance with the agreement. In summary, over a year into the pandemic, our employees have shown great flexibility and resiliency. Our strong financial performance as a result of the dedication and multidimensional and fully integrated business model, we have spent the last decade building. Our continued investment in business units experiencing the greatest demand is beginning to pay off. The diversity of our revenue sources has created a countercyclical hedge, enabling AerSale to thrive in a challenging commercial aviation market. We believe we are well positioned to outperform our competitors as the recovery gains steam in the months ahead. With that, operator, we are ready to take some questions.

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from Gautam Khanna of Cowen. Please state your question.

Yeah, so thanks. Good morning. I had a couple of questions. First, I was curious, when you talked about selling the majority of the available aircraft, 757 this year, how many will be available, if you will? How do we define that?

Well, hi, good morning, Gautam. This is Nick. We have 24 total aircrafts that we’re purchasing in the transaction we announced last year. We don’t believe we have in that package enough engines to basically market all 24 aircrafts. So we think we have enough in the first 18 to basically consists of 2 airframes that we’re selling – or sold or are selling, and 16 aircrafts. We have 32 engines that were either serviceable as part of that transaction or that we’re making it serviceable through repairs on those engines to supply the first 18 aircrafts. Additional aircrafts will require additional engines which were in the market for acquiring. So available aircrafts to us is what we have engines for that we don’t have to spend major overhauls on. Cost of a major overhaul on an RB211 is excessive. And the benefit of this package is that we were able to pick up a significant number of contingent time serviceable engines.

That makes sense. And could you talk a little bit about the acquisition environment, equipment acquisition environment that you’re seeing? Do you have any bids out there and maybe if you could characterize how it’s changed over the past 3 or 6 months?

It doesn’t really feel from our perspective that it’s changed substantially. We still feel the tide is coming in. As far as equipment that’s going to be available to us at attractive prices. It’s not that we’re not seeing an increase in volume, but it’s not the level of volume that we would have expected at this time. We think that it’s going to take the next 6 to 18 months before the tide fully comes in and more aircrafts are available for sale – or more aircrafts, I’m sorry, are available for purchase. The pricing of this equipment coming out of aircraft leasing companies continues to remain beyond the levels at which we feel comfortable acquiring that equipment, because aircrafts are parked. We think that leasing companies have yet to determine whether they should hold those aircrafts or continue to – or basically bite the bullet and sell the aircraft at their current value. Having said that, there are aircrafts coming out of leasing companies, that have one engine that might be unserviceable and an airframe, and what we’re finding is that the leasing companies are holding on to engines, because they can keep their book costs higher on engines, and they’re disposing of the unserviceable engines that require significant maintenance and/or the airframes, which would require significant maintenance to return to service. So for us, we see the opportunity on both the airframe side and the unserviceable engine side, because that’s what we’ve been built to refurbish or part out and monetize. Now, with respect to the airlines, the airlines remain focused on recovering aircrafts that have been put into storage, performing the maintenance they need to put them back into service. And [indiscernible] trying to figure out what their future fleet plans are. The market continues to remain the – the passenger market continues to remain severely depressed, even though it’s improving. And the airlines don’t have really the focus at this point to figure out what they should sell. They’re more focused on putting aircraft back in the air to service their – what they believe, what I believe, we all believe will be a summer surge in travel. So we’re not also seeing yet the amount of aircrafts that we would have expected to come out of the airlines, because they can’t focus on it. We feel that as the market starts to recover and the airlines will have time to focus on their fleet disposition or their excess fleet needs, more aircrafts will become available from the airlines that will be at prices that make sense for AerSale to acquire and then redistribute to the marketplace using our machinery.

That makes sense. And then, one last one for me on AerAware, any update to the certification timing, is it still expected in the second quarter. And you mentioned some potential supply constraints, if you could elaborate on those?

Okay. So we had a very nice conversation with our counterpart at Universal. And, as a result of their discussions with their parent company with respect to supply side, my concern on the supply side was alleviated. I’ve been assured that Elbit/Universal can make whatever equipment is necessary to supply the needs for our potential launch customer and anyone else. I have no control over that. And I take that at face value that supply constraint is not going to be an issue. From the AerSale side, we’re already gearing up to produce the kits required for our potential launch customer. We’ve basically put in place all the infrastructure to do that. We’re discussing with our subcontractors, the availability of material, or any work that we choose to subcontract out. With respect to the development stage of AerAware, I think, it’s unrealistic at this point to assume, we could complete and get FAA certification at this time by the end of the second quarter. The reason I say that is, one, we didn’t fully appreciate, because we didn’t fully understand how complicated it was for Elbit to do the software modifications to the system. For us to – prepare the conversion kits to extract the data from the flight deck to modify the aircraft to incorporate the components that Elbit supplied us. That didn’t seem to be difficult in comparison to the – what we didn’t appreciate is how difficult the time consuming it is to modify the software to make sure that all the symbology that comes out of the flight deck displays correctly in the head wearable display. I think that we’ve learned it’s in the ordinary course of business for them to take this long; we just didn’t have a good appreciation for it. So we were off in our projections thinking that that would move as fast as we were able to move. But it’s a different business. It takes different timing to complete the process. And they won’t be able to – Elbit/Universal won’t be able to complete their software testing until we finish with the FAA, any modifications to the system. When we did our first set of flight testing with the FAA, we had about a dozen FAA people on the airplane. There were a few minor items that came up that we think are simple to fix. And they won’t take long to fix. But until we fix those and retest the aircraft, and give it to Elbit to do the software testing, which is going to add 6 to 8 more weeks to this process, we’re not going to be able to get certification completed until that’s completed. So I think that in the best case, we’re more looking at the end of the third quarter and potentially at the very beginning of the fourth quarter to receive FAA certification.

Okay. And does the customer – the launch customer order follow the certification? Or will they actually place an order – a contingent order in [advance, so that you have something ability] [ph]?

I believe we’ll get a contingent order subject to having this approved by the FAA in advance.

Thank you very much, guys.

You’re welcome.

Our next question is from Pete Skibitski of Alembic Global Advisors. Please state your question.

Hey, good morning, guys. Hey, Nick, kind of a top level question similar to Gautam’s second question. I just wanted to get your perspective, presumably, kind of going through the worst downturn in commercial history. I would presume your goal would be to buy more assets than probably you guys ever have, just because of the depth of the downturn? So, I guess, is that kind of your goal, understanding you expect pricing to improve over the forward roughly 12 months? And do you guys feel like you had the financing in place to buy – to acquire a large number of assets over that timeframe?

The answer is yes. And not necessarily do that we have all of the financing available to acquire a large fleet of assets, hundreds of millions of dollars. However, we are in discussions with multiple financial parties that do have the capital to acquire hundreds of millions, if not, billions of dollars of assets, where we would work with those parties to use their financial resources to acquire the package. We would take a piece of it, we would manage it, and we would, therefore, receive the kind of returns that we would typically expect by us to playing our capital, and still permitting our financial buyer to receive an outsize return that they couldn’t do on their own in this space.

Okay, okay…

Just to add to that we do have $150 million available in the revolver, we sat with $20 million of cash at the end of the quarter. We’re actually got to be monetizing the 757s in the remaining of the period. So we’re going to have cash coming in during that overall period. So it will give us additional capital to be able to redeploy in additional sources [indiscernible].

Okay. It’s very helpful, because I just – I know, sometimes you guys monetize these over 10 years or longer, so I’m just trying to think over an entire cycle, how the other assets could play out? So – but that’s great color. I appreciate it.

And we also – I’ll further add, we also expect as we have the requirement to hold more assets as we’re replenishing our portfolio. Our credit facility will be adjusted to reflect a higher carrying value of aircraft and engines on lease.

Okay, okay. Thanks, guys.

You’re welcome.

[Operator Instructions] Our next question is from Ken Herbert of Canaccord. Please state your question.

Good morning, Nick and Martin. Nick, your comments sounded like you’ve clearly seen some positive or more recent positive strength in the cargo market, with the conversions and everything else. Do you view coming out of sort of COVID at the high level that the cargo markets are structurally different than previously? And to what extent do you see potential risk to the cargo markets as belly capacity incrementally comes back online?

I don’t see it being structurally different. Again, we’ve been discussing the – if you consider the e-commerce market booming being structurally different than, yes, that’s – something that’s evolved over the past decade. What’s exacerbating or actually, what is fostering the freight market today again is the lack of belly capacity on passenger aircraft. So, we do expect that the cargo market will return to more normalcy adjusted for the booming e-commerce market as the passenger airlines recover. But thinking about the wide-body market, the wide-body market has been the one carrying the wide-body passenger market has been the one carrying the greatest amount of cargo. And that market continues to remain severely impacted by COVID-19, as wide-body traffic is way down. So until the international wide-body market recovers which will follow the resolution of the pandemic and a majority of the world being vaccinated or free of COVID. It’s going to continue in our opinion to be a boom for the cargo airlines. And we don’t see that there’s going to be any significant change in that for several years. Now, as that changes and I’ve mentioned before, we will refocus our shift, our strategy on the passenger side of the business. But to us, it doesn’t matter whether we’re selling equipment to the passenger side or the freighter side. Previously, we didn’t deal with many freighter customers as we are today. As you’ve heard from the transactions that we’ve announced, that shift is now very focused on the freighter side of the business. So our ability to kind of pivot and move from 1 business segment, which is the passenger side to the cargo side. It makes us really agnostic to what’s happening in the industry, whether it’s the cargo side is booming, or the freight side – or the passenger side is booming.

Okay. Very helpful. Can you talk about the sequential trends you saw from the fourth quarter to the calendar first quarter in either the USM or the MRO businesses? Are you seeing? I know USM, you’ve talked about the lack of feedstock is limiting growth there, but maybe in terms of unmet demand and the requirements that we’ve seen from the fourth quarter to the first quarter.

As I mentioned, we are seeing an uptick in demand for material. Availability has still been scarce at attractive prices, as I previously discussed. One of the things that is different at this time is typically our repair cycle is 45 days for sending used serviceable material out. It feels like it’s doubled at this point. And therefore, we have demand for some used serviceable material that – for some used serviceable material on the engine side, but we can’t get the parts out of the shop. So until those engine shops or those parts component shops recover and bring back their employees, we’re going to continue to experience a lag between the availability of our used serviceable material, and the ability to put that used serviceable material in the market post repair. So we are seeing demand uptick, but it is being slowed by the long lead-time for parts re-servicing.

And just finally, when you think about pricing within USM, as we get to a situation in the summer, where we see utilization go up, do you get a sense that airlines from a pricing standpoint might be a little more or pricing could be a little easier, just depending upon some of the urgency at the airlines or what are the trends you’re seeing on USM pricing into the spring and summer?

We don’t see a significant change in pricing. Pricing has been consistent. We haven’t seen any significant reduction in the parts that people need to buy. So I can’t tell you that we’ve seen or expect to see significant pricing in the material that generally moves quickly. Now, as more oh-by-the-way material comes onto the market, pricing on that will soften, and as more – as the supply of that material exceeds the demand. But for the stuff that we put value on, we continue to see strong demand, subject to availability. And as aircraft recover – I’m sorry, as the industry recovers, and there’s more aircraft flying they demand parts. The stuff that typically moves will continue to move. And we believe it’ll continue to move at consistent pricing, if not increasing pricing, because with the effects of COVID and what it’s done to the industry, we’re not seeing anything go down in pricing, cost of material repair, it is not going down. If anything is staying consistent. I would expect at some point, there’ll be some upward pressure on material pricing for repairs, not seeing it yet, but would expect to see that over time. So if material cost of repair is going to go up, cost of material is going to go up, inflationary cost which we’re not seeing yet eventually will kick in. So we do expect to see a – we don’t expect to see a softening in pricing. To the contrary, we expect to see pricing hold and eventually pricing will escalate.

Great. Thank you very much for the time.

You’re welcome, Ken.

We have reached the end of the question-and-answer session. I will now turn the call back over to Nick Finazzo for closing remarks.

Again, ladies and gentlemen, thank you for listening to our call this morning and for the great questions from Gautam, Pete and Ken. We look forward to speaking to you all next quarter. Thanks, again.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.