0:04 Greetings and welcome to the AerSale Corporations Fourth 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]. As a reminder this conference is being recorded. 0:26 I’d now like to turn the conference over to your host, Ms. Kristen Gallagher, Director of Human Resources. Thank you, ma'am. You may begin.

0:34 Good afternoon. I’d like to welcome everyone to AerSale’s fourth quarter and full year 2021 earnings call. Conducting the call today are Nick Finazzo, Chief Executive Officer, and Martin Garmendia, Chief Financial Officer. 0:50 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. 1:10 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 are discussed in the Risk Factors section of the company’s Annual Report on Form 10-K and quarterly report on Form 10-Q filed with the Securities and Exchange Commission 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. 1:59 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. 2:19 With that, I’ll turn the call over to Nick Finazzo.

2:23 Thank you, Kristen. Good afternoon to everyone on the line and thank you for joining our call today. I’ll begin with a brief overview of the quarter and full year, followed by operational updates and progress we're making on our key objectives. I’ll then turn the call over to Martin to review the numbers. 2:42 We finished the year strong with total fourth quarter revenue of $116.8 million, which more than doubled the prior year period of $49.4 million. Strength in the quarter was largely related to progress on our 757 freighter conversion program along with other flight equipment sales, which collectively accounted for $73.1 million of our fourth quarter sales. 3:08 We also benefited from an improving commercial aerospace market as airlines continue to recover from pandemic lows. These gains versus the prior year were partially offset by a decrease in sales in our TechOps segment as we reallocated resources in our Goodyear facility to support the 757 freighter conversion program. I will elaborate more on this strategy in a moment. 3:35 We also reported strong profitability during the quarter with an operating profit of $19.8 million compared to a $26,000 loss in the prior year. Adjusted EBITDA during the quarter was $28.6 million or 24.5% of total sales and set a single quarter company record. Higher profitability resulted from the strength of our 757 cargo conversion program coupled with an improving operating environment. 4:09 Our full year 2021 results also set a single year record for financial performance with total sales of $340.4 million an increase of more than 60% year-over-year. Adjusted EBITDA for the full year was $89.3 million, an increase of 72% year-over-year. We are proud that we demonstrated exceptional growth and performance in our first year as a public company, exceeding the commitments we've…

14:34 Thanks, Nick. I will start with an overview of our fourth quarter financial performance and end with our guidance for 2022. Our fourth quarter revenue was $116.8 million, which included $73.1 million of flight equipment sales. Revenue in the fourth quarter of 2020 was $49.4 million and did not include any 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. 15:13 Fourth quarter Asset Management Solutions, or AMS revenue increased to $93.6 million from $17.4 million in the fourth quarter of 2020, mainly due to the flight equipment sales mentioned previously. Consumption of USM parts for maintenance improved through the quarter as airlines returned aircraft into operation against the backdrop of an upswing in air travel. We remain on track to monetize the remaining 15 Boeing 757 aircraft through 2022 and 2023, with the majority of them being monetized in 2022. Fourth quarter revenue from TechOps was $23.2 million, compared to $32 million in the fourth quarter of 2020. 16:00 During our third quarter earnings call, we mentioned that we were reallocating resources away from third-party work to support our cargo conversion line for our 757 aircraft at our Goodyear facility. This process continued through the fourth quarter leading to lower revenue. However, this reallocation allowed us to realize higher margins from the sale of three 757 cargo conversions in 2021. 16:27 Going forward, we expect to benefit from a pickup in MRO volume due to the ongoing recommissioning of commercial aircraft and greater demand for USM parts consumption for overhaul activity. Fourth quarter gross margin was 37.8% compared to 26.6% in the fourth quarter of 2020. The improvement was largely…

21:55 At this time we'll be conducting a question-and-answer session. [Operator Instructions]. Our first question comes to line of Gautam Khanna with Cowen. You may proceed with your question.

22:30 Thank you very much, guys. Hey, I was wondering if you could elaborate on the Russian exposure. So that 5% or less, is that in the sales guide? Is that already reflected? Or is that potentially incrementally negative to it?

22:49 No. We have already removed anything that was specific that we knew. So we removed the impact of the leases and some AerSale kits that has been removed out of our guidance. Well, we have not removed as any impacts to the microenvironment that could happen from continuing escalation of the Russia event.

23:08 Okay, got it. And then on AerAware if you could just kind of elaborate on what the timeline is, you mentioned Q2, sort of what the remaining items are, in terms of getting the product certified, and then what you'd expect thereafter with respect to orders, and the like?

23:27 So we continue -- Hi, Gautam, it's Nick. So we continue to wait for software validation by our partner on this. That is proceeding in the ordinary course of business, it's taking long because it's complicated, but it is moving steadily. We believe that all identified issues with the software have been rectified, and we're completing validation the expectation as we've received from our partner is that that will be completed by early May. We will then do our reporting to the FAA. Hopefully, in the interim, we will have done our test line because in order to get the STC -- you've got to test fly the aircraft finally before the FAA will issue the supplemental type certificate. We believe that the test flying in a validation can be done concurrently. So we're not having to wait until we complete the validation before we do the test flying. And once the test flying is complete, we then submit our final report, including the test data to the FAA. I would guess if we -- if our validation is completed by early May, we do -- we've done our test flying. We do our reporting sometime in May, hopefully, earlier than later. But if it's done in May, we submit everything to the FAA and then we're just in a wait mode, we will have completed and done everything that we have to do to get this system certified by the FAA. It'll just be a wait until we can get the FAA to give us the resources to complete the certification process. 25:02 I -- we have no way to assess at this point how long that will take typically something like that would take 30 to 60 days. That would be our expectation barring -- barring something else that would distract the FAA from putting resources on it. Things have taken longer with the FAA over the past several years, because predominantly the FAA has been working out of their houses. So there's been limited availability to interact with other members of the FAA face-to-face that's definitely slowed things down. Hopefully that is resolving itself as more and more people are going back into the office and so our -- we remain optimistic that the FAA will put energy and focus on this and that we can get this completed by the FAA within a few months after we submit our final documentation.

25:54 Okay, and you did make a comment about aerospace and sort of the May timeline I'm just curious what happens after May, so once that – does that open up a new markets potentially or I'm just curious how the May date matters on aerospace?

26:16 On the -- on the May date for let's say 757, the compliance required date is May so by May, all 757 passenger aircraft have to have a compliance method for this fuel quantity indication system separation. AerSafe obviously complies with that, and we now have certification of that. So by May, all aircraft that are active and operating in passenger service have to have that system in it. Now, that's not in every jurisdiction. As aircraft move from jurisdictions that don't have their requirements into jurisdictions that have the requirements that will also spur sales of our AerSafe product. 26:53 We had a number of sales of AerSafe product for airlines that fly into Russia. Current Russian sanctions prohibit us from selling those aircraft -- sorry those kits today. We are seeking approval from OFAC to sell those kits to airlines that even if -- even though those airplanes may fly into Russia on the basis that their safety item, we don't know whether OFAC would grant that approval. If they don't grant that approval, those sales will be delayed. And by the way, they're not in our forecast. Those sales will be delayed until such time as those aircraft come out of Russia. Aircraft are coming out of Russia despite what may happen to leave a lot of airplanes in there. And as those aircraft come out of Russia, they don't have the kit installed in them, the next operator that takes them is likely going to need the kit, and we'll have the opportunity to do those sales. 27:52 As Martin mentioned a few minutes ago, we don't have sales -- the sales that we pulled out of our budget that we intended to sell into airlines that we're operating into Russia. We've pulled out and they don't appear in our forecast for the balance of the year. It doesn't mean we won't have sales. It just means that we took them out. So we have no -- we don't have visibility of that yet.

28:13 Got it. And just one last one on the 757 monetization. You mentioned the bulk of them will be done this year, that main 15 of the 15. Any sense for kind of how those phase through the year? And how much are you thinking the 12, 13 of them get monetized this year? Or is it 8%, just over half. I know you said the majority of the bulk of it. I'm just curious, timing and magnitude this year, just so we can…

28:45 Okay. So we have three aircraft that we are -- that are undergoing conversion right now. One is almost complete, expected that we'll deliver it to a lessee and sell it to a leasing company within the next 30 days. We have two other ones that we're doing conversions on that will follow on in the second and third quarter. And we have to airplanes that we have committed to a Chinese operator that will get them converted in China themselves. This would be the existing Chinese operator that we've already sold airplanes to. These would be the last two aircraft we would deliver to them. That would leave that would take 10 airplanes that we will have delivered this year, we'll leave five left. We have placed a commitment, or we've made a commitment with precision to have precision do, not us, precision to do six more cargo conversions whether they be in China or if they find another domestic facility. Because of the gap between the availability of kits, we basically have committed all of the available kits -- all the available cargo conversion kits available for precision through 2023. And as I said, we've got a commitment for six. We have five airplanes. We're counting on at least acquiring one more with an option to go to 10. So our expectation is we'll sell the balance of our airplanes when as converted freighters in 2023 as those airplanes start the conversion process by a third party in the last quarter of this year and will carry into all through 2023. And if we go to 10, they'll probably carry again into 2024.

30:27 Great. Thank you very much.

30:31 You are welcome, Gautam.

30:33 Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr. Nicholas Finazzo for closing remarks.

30:43 Okay. As always, thank you for listening to this call today and for your interest in AerSale. We're very pleased with our progress to date and excited about the future. Have a good evening, everyone.

30:57 This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and do the rest of your day.