Thank you for standing by. This is the conference operator. Welcome to the AerSale Corporation First Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Kristen Gallagher, the HR Director. Please go ahead.

Good afternoon. I'd like to welcome everyone to AerSale's First Quarter 2022 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 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 December 31, 2021, and filed with the Securities and Exchange Commission on March 15, 2022, 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 metric can be found in the earnings presentation materials made available on the Investors section on the AerSale website at ir.aersale.com. With that, I'll turn the call over to Nick Finazzo.

Thank you, Kristen. Good afternoon, everyone, and thank you for listening in today. I'll begin with a brief overview of the quarter, followed by operational updates and progress we're making on our key objectives. I'll then turn the call over to Martin for a detailed review of our first quarter financial results. In the first quarter of 2022, we built on the strong momentum we had exiting 2021. Revenue in the quarter was $122.8 million, up 110% compared to the prior year. Higher revenue was driven by the success of our 757 passenger-to-freighter conversion program, the sale of a 737 that was utilized for AerAware testing and the recovery in commercial aerospace. These gains versus the prior year were partially offset by reduced sales in our MRO business as we reallocated resources in our Goodyear facility to support the 757 freighter conversion program as we have detailed in past quarters. Turning to profitability. We reported strong revenue of $22.9 million of operating profit during the period, which compares to $12.7 million in the prior year. Adjusted EBITDA during the quarter was $29.9 million or 24.4% of total sales, setting another single-quarter record compared to $16.5 million or 28.3% of sales in the prior year. Higher adjusted EBITDA resulted from the strength of our 757 program coupled with an improving commercial aviation environment. Turning to segment specifics and beginning with asset management. In the first quarter, we sold $51.9 million of flight equipment that included 6 aircraft and 4 engines in the quarter. I do want to take a moment to reiterate to investors that flight equipment sales like the 757 program are a very important part of our business and overall strategy. It is critical to our competitive advantage to fully use our end-to-end solution to acquire and ultimately direct…

Thanks, Nick. I will start with an overview of our first quarter financial performance and end with our guidance for 2022. Our first quarter revenue was $122.8 million, which included $75.9 million of flight equipment sales. Revenue in the first quarter of 2021 was $58.4 million and included $13.8 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. First quarter Asset Management Solutions, or AMS, revenue, increased to $74.5 million from $29.3 million in the first quarter of 2022, primarily on account of the flight equipment sales mentioned before. Consumption of Used Serviceable Material, or USM parts, for maintenance was higher as airlines accelerated the pace of returning aircraft into operation. In addition, leasing revenue was higher on the back of stronger volume and utilization from our leased assets. Within our USM business, we anticipate an increasingly favorable market for feedstock availability against the backdrop of growing demand for airframe and engine part sales as airline demand expands. In addition, demand for passenger-to-freighter conversions is expected to increase and we are well on our way to monetize the remaining Boeing 757 aircraft in 2022 and 2023. First quarter revenue from TechOps was $48.3 million compared to $29.2 million in the first quarter of 2021 as a result of the monetization from the flight equipment sale of an AerAware-dedicated Boeing 737. This increase was offset in part by lower revenue from MRO activities within TechOps. During our third and fourth quarter earnings calls, we mentioned that we are reallocating resources away from third-party work to support the cargo conversion line for our 757 aircraft at our Goodyear facility. This process continued…

[Operator Instructions]. The first question comes from Gautam Khanna with Cowen.

Yes. Just two questions. First, I was wondering if you could talk a little bit more about the USM availability improving. And maybe you could talk about what you have bids out on, or at least the aggregate value that you're pursuing? And then secondly, if you could talk a little more about AerAware timing given all the changes at the FAA. Is that -- if the personnel changes impact the timing of it, in your view.

Okay. Just writing your questions down so I get them in order. Okay. USM availability improving. So last year, as we looked at acquisitions, even though the acquisitions were for USM parts that we believe would not -- that we couldn't necessarily sell in the next 90 days, we made acquisitions of feedstock knowing that, a, it was going to be a while before the USM business recovered; and b, that the lead times to have the USM parts repaired by third parties was prolonged. So the acquisitions we made in the last 2 quarters of last year are starting to show results now in the second quarter of this year. And we've been continually buying feedstock at prices that make sense. On the assumption that we are going to have prolonged intervals for repair and overhaul of that material, and that the -- as the market recovers, that those assets will become available for us, that USM parts will become available for us to sell in the coming quarters. So what we're benefiting from now is the acquisitions we made in the last 2 quarters of last year, and that continues. The size of the acquisition of USM or feedstock to feed the USM business, we feel we're on track to purchase in excess of $100 million of feedstock this year. And we expect that, that will continue to rise. Previously, I've described this as an incoming tide, and it's definitely an incoming tide at this point. Water is getting deeper, more stuff is coming in. AerSale is well positioned to monetize feedstock, whether it be as whole aircraft, whole engines or at the piece part level and make a decision whether to return aircraft to service as whole aircraft, put them on lease, put them into a cargo…

And do you know how many hours you need to accrue for the flight testing to be adequate?

No. That will be up to the FAA. Our expectation from feedback that we've gotten from the FAA is that based on approximately 200 hours of flying that we've already done with our own FAA designated engineers, that, that will not be a typical 50 to 100 hours of flight testing, that, that will be reduced to something less than 25 hours. So it's something we can do in a couple of days. Remember, we're coming into summer. We got to chase -- we have to chase the weather. So it could be weather dependent because the FAA is to want to see how the system works in bad weather.

[Operator Instructions]. The next question comes from Ken Herbert with RBC.

Nick, just a quick question on the MRO business. I know obviously, you're diverting resources to support your own 757 work. But as you think about your third-party MRO work, are you getting any sense that your customers are looking to defer or even push out any expected work coming out of the summer? I guess I'm just trying to get a sense as to concern about demand in the back half of the year and the guidance assumptions considering a lot of -- obviously, a lot of the concerns we've heard about recently on the pace of the recovery.

Well, from what I recall with our -- based on our last conversation with the President of our heavy MRO group, that were booked up all the way through the end of the year. And so -- and that's going to help by -- when we finish our conversion #6, that capacity will be freed up. I think we're going to be finished by July. Be finished by July on our conversion #6. And then the next 6 to 10 conversions will be done by third-party MROs, that's going to free up, again, capacity for us to service our existing airline customers. I don't think -- we have no problem filling up that capacity, and we expect to be booked all the way through the end of the year. At the rate things are going, as time progresses, we'll continue to stay booked up. I don't think -- we don't see any change in MRO demand for the foreseeable future. We think we're going to be at capacity even with the freed up labor and facilities that we've had by doing the 757 conversion work at a third party.

Okay. That's helpful. And if I could, on the 757 work and more broadly, the passenger-to-freighter, the conversion outlook. You sound very confident in this market sustaining what -- to what extent would risk -- would we see any maybe softening of the passenger-to-freighter demand as international belly capacity, on pass-through aircraft, continues to come back? And are -- you sound very optimistic near term on the cargo markets. But are there anything, if we go out a couple of years, that are maybe causing concern? Or you could see the potential headwinds to the growth on the cargo side?

Well, I mean, I think that, that's going to happen when there is a substantial recovery on the international wide-body market. However, if you look at the 757 in particular, that's a long-range airplane, but it's not a long-range international airplane. It's serving longer routes within a continent or between countries that are maybe not more than 5 hours apart, whereas the long-range wide-body aircraft can serve markets that are of duration 10, 12 hours of flight time. So even with the international market substantially recovering, which in our opinion, that's not going to happen. We don't see that happening until late '23 at best and probably into '24, potentially not even fully recovering to pre-COVID levels until '25. Again, that's our view of the market. All that's going to do is going to minimize demand for wide-body freighters such as the 767, but we don't think it will affect the 757 because that serves a different market. That's why we're optimistic on the demand for the 757 program that we're working on. We see a similar demand on the narrowbody side for the 737 NG cargo conversions. That demand will stay strong, and the recovery of the wide-body international market won't affect that either. So it's the booming e-commerce market that's -- and the complete change in consumer habits. By buying things online as a result of the pandemic and just as a smart way to buy. I think that all those consumer habits are really going to keep the freight market strong, in our opinion. That's why we're making a bet on this freighter conversion program, and we have the confidence that we do that it will continue to be strong.

As there are no further questions, this does conclude the question-and-answer session. I would like to turn the conference back over to Nick Finazzo for any closing remarks.

Okay. Everyone, again, thank you for listening to our call today and for your interest in AerSale. We just completed another record quarter. We're off to a great start in 2022, and we expect that to continue through the balance of the year. So we're feeling good. Again, thank you for listening today, and I hope everyone has a good day.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.