Greetings. Welcome to the AerSale Second 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, Kristen Gallagher. Thank you. You may begin.

Good morning. I’d like to welcome everyone to AerSale’s second 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. Important factors that can cause actual results to differ materially from forward-looking statements filed 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 on March 16, 2021, and its other filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward-looking statements on this call. We’ll also refer to non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of those non-GAAP metrics to the nearest GAAP metrics 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 a brief overview of the quarter followed by operational updates and progress we're making on our major strategic priorities. I'll then turn the call over to Martin for a closer look at the numbers. For those of you who are new to AerSale, we operate a purpose built fully integrated, multi-dimensional adaptive business model serving the commercial aviation after-market. 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 equipment purchases, and deliver a higher overall value to our customers as we touch nearly every aspect of the aircraft maintenance cycle. Before reviewing our results, I'd like to remind investors of a few important things to consider. 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 a cornerstone of our success and account for large transactions at irregular periods 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. That being said, our performance in the second quarter of 2021 was strong, driven by improving commercial aerospace activity, as airlines recommissioned parked aircraft, coupled with solid execution against our strategic Boeing 757…

Thanks, Nick. I will start with an overview of our financial performance before ending with an update on our guidance. Our second quarter revenue was $91.9 million, which included $42.7 million of flight equipment sales, compared to $45.4 million in the second quarter of 2020, which had $3.1 million of flight equipment sales. As a reminder, 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 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, whose purchase we announced in September of last year. During the quarter, we signed contracts for the sale of three aircraft and one airframe. And we have commitments for the sale of another 11 aircraft and one airframe. Second quarter revenue for asset management solutions or AMS, increased to $60.3 million from $20.9 million in the second quarter of 2020. The increase was largely due to flight equipment sales of three aircrafts, one airframe and two engines sold during the quarter. These gains were partially offset by lower leasing volumes, resulting from three 747 passenger aircraft leases that expired as scheduled at the end of 2020. As stated flight equipment sales AMS revenue was also higher as we've benefited from the pickup in consumption of used serviceable material USM parts for maintenance and overhaul activity due to air travel recovering and airlines bringing portions of their grounded fleet back online. We expect the consumption of USM parts to continue improving during the second half of the year. Second quarter revenue from TechOps was $31.6 million up from $24.5 million in the second quarter of 2020. Our MRO facilities business benefited from…

Thank you. At this time, we will be conducting a question and answer session. [Operator Instructions] Our first question comes from Gautam Khanna with Allen & Company. Please proceed with your question.

Yes, Hey guys, this is Dan on for Gautam. Good morning, and nice quarter. So congratulations. So I was curious, first of all, are you seeing -- like what are you seeing in terms of engine overhauls is there any uptick in demand there?

Not on the narrow -- we don't see it on the narrowbody side at this point. There continues to be strong demand on the wide body site, which is primarily supporting the freighter operators.

Okay, got it. And then what are you kind of anticipating in terms of -- kind of like the snapback in demand from -- I guess the rotation of airlines fleets? Is that kind of the right way to think about how -- like what's going to drive after-market recovery? Are you factoring that into your outlook in ‘21 or ‘22?

We don't -- it depends on whether we're speaking of the narrowbody market or the widebody market, that those two markets we think are just really completely different. Narrowbody market, maybe recovering in the U.S. presently. However, it is trained in in Europe with the spread of COVID. Europe did not enjoy the summer, the summer level of flying that was hoped to enjoy at this point. It's not going to happen for the balance of the summer. U.S. has recovered significantly during the summer. We are hearing of declines in passenger bookings as a result of the Delta variant of the of the coronavirus. So we're not so certain that there's not going to be a -- many more aircraft brought into storage for maintenance and decommissioning until -- really this pandemic clears. Our best guess is this isn't going to happen for six months or more. But again, that's just our opinion, we believe that international traffic will continue to stay depressed on the passenger side. So widebody traffic internationally will stay depressed demand for widebody engines on the passenger side will stay depressed but not on the freight side, freight side internationally primarily widebody aircraft. So we do anticipate strong demand continued demand on the widebody engine side to support the international freight operators. On the narrowbody engine side, we don't see a recovery in that for a significant period of time, our belief and we -- and we have this factored into our projections is there won't be a recovery on the narrowbody side engine side for -- till 2023 early 2024.

Okay, that's interesting. And then could you -- would you mind providing an update on the AerAware certification efforts? I know you glanced over briefly in the prepared remarks. Q4 -- I guess are you expecting it certified in Q4? And then -- and how are these sales reflected into your guidance currently?

I'll address the technical aspects of the certification, and I'm going to let Martin talk about what we have in the numbers. On the technical side, we did our first round of flying with the FAA. And the aircraft performed well did what we expected it to do. The FAA addressed the identified a number of symbology issues that they wanted to see changed. We've focused on making those changes. We -- they're all made now, those are primarily software issues that our partner, Universal Avionics Elbit have done. Our airplane is scheduled to fly again with the FAA next week to demonstrate to them that all the symbology issues that were previously identified have been corrected. And once that happens, our expectation is that will then be able to technically freeze the software. So we can do our final study on that to confirm that it complies with all requirements, and simultaneously have the FAA then allow us to do our final flight testing to demonstrate that the system does everything that's required. We expect this there'll be a third round of flight testing, which will be done after the software is validated. That's where -- that's why we believe at this point, we'll be into the late third quarter potentially early fourth quarter to be able to finish our final flight testing, possibly at the end of the third quarter and the hope is that we will then get FAA certification and start delivering kids to customers that are -- that have asked in our waiting. Don't have a identified committed customer yet. And we haven't identified customer, we don't have a commitment yet. What we need to do is we need to get this much closer to final certification, I believe to get an order.

As far as the forecast, our internal forecasts do not include any AerAware sales in the fourth quarter. Even without those sales, we are still confident that we will meet the range that we have previously provided. But we do have those sales commenced in the second half of next year that's starting to contribute to the bottom line.

Okay, so your outlook doesn't include AerAware until H2 of next year. Got it? And so last question, I think, how are you doing on the labor side? Or are you facing any constraints or any requirements to increase hiring. And related to that is the payroll support program finished. There's no more inflows from that I guess?

[indiscernible] no payroll support program is finished. We don't expect to receive any benefit from that in the second half of this year, or going forward unless something changes. With respect to personnel supply issues, clearly, that is a -- the industry is facing stress when it comes to labor supply. Fortunately, we have enough labor to do all the work that we have planned for the balance of this year's forecast in the foreseeable future. But we also struggled to gain additional labor to be able to grow the business at this point. And we're working on things that we've previously done to help supply -- to help attract additional labor to our business. And we're going to have to implement those in earnest to gain additional labor so we can continue to grow our MRO business. There's no hiding from the fact that labor is an issue across the industry.

Got it. Thanks, guys. I appreciate it. Answered all my questions.

Okay, you're welcome.

Thank you. [Operator Instructions] Our next question comes from [indiscernible] Point Capital Management. Please proceed with your question.

Thank you. Hi, guys. So I think that you just said that you don't expect to get a final order for AerAware until you're closer to final certification. But I guess implied in that is that you do expect an order from your potential launch customer to come before the approval correct?

Not 100% certainly, but indications are for close. That we will -- that we believe we can get an order because the airline wants the system is fastest we can produce it.

Got it. And are you seeing interest for AerAware from other airlines besides this one launch customer?

Yes, let's be careful potential launch customer and the answer is yes.

Okay, thank you. That's all for me.

You're welcome.

You're welcome.

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. And I will now turn the call over to Nick Finazzo for closing remarks.

All right, again, ladies and gentlemen, thank you for your interest in AerSale and listening to our call today. And we look forward to speaking with you again, as we give our third quarter financial results. Thanks again. Goodbye.

This concludes today's conference. And you may disconnect your lines at this time. Thank you for your participation. And have a wonderful day.