Good afternoon, and welcome to the AerSale Corp. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Christine Padron, Vice President of Compliance. Please go ahead.

Good afternoon. I'd like to welcome everyone to AerSale's Third Quarter 2025 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 all that 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 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, 2024, filed with the Securities and Exchange Commission, SEC, on March 11, 2025, and its other filings with the SEC. These findings 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.

Thank you, Christine. Good afternoon, and thank you for joining our call today. I'll begin with a brief overview of the quarter, then provide operational updates before turning the call over to Martin to review the numbers in greater detail. We reported revenue of $71.2 million for the third quarter compared to $82.7 million in the prior year period. The year-over-year decline was entirely driven by the absence of engine or aircraft sales in the quarter compared to 5 engine sales in the prior year period. Excluding whole asset sales, which tend to be lumpy quarter-to-quarter, the balance of our business grew 18.5% to $71.2 million, driven by a strong inventory position supporting our USM business and higher leasing revenue. In TechOps, sales were down modestly versus last year as strength in component sales and higher AerSafe volume partially offset lower services revenue, particularly at our Roswell facility as we've repurposed that site for teardown and decommissioning work that yields higher margins. As we note every quarter, due to the nature of our business and the impact of whole asset sales, our revenue levels tend to be volatile quarter-to-quarter, and we believe our business should be evaluated based on aggregate performance over a longer period of time with a focus on feedstock acquisitions and the value our team is able to extract from those investments. Turning to profitability. We delivered solid margin performance despite the absence of whole asset sales in the quarter. Adjusted EBITDA was $9.5 million or 13.3% of sales compared to $8.2 million or 10.0% of sales in the prior year period. This improvement reflects stronger leasing contributions, higher USM activity and the ongoing benefits from our cost reduction efforts over the past year that have trimmed SG&A expenses and increased MRO profit margins. By segment and…

Thanks, Nick. Our third quarter revenue was $71.2 million compared to $82.7 million in the third quarter of 2024. As Nick mentioned, the prior year included $22.6 million of flight equipment sales consisting of 5 engines, while this quarter did not include any whole asset sales. As we've noted in past calls, flight equipment sales can vary significantly from quarter-to-quarter, and we believe our progress based on asset purchases and sales over the long term is a more appropriate measure of our progress. Third quarter gross margin was 30.2% compared to 28.6% in the third quarter of 2024. This year-over-year improvement reflects stronger execution across the business, including higher lease revenue, sales mix and cost control measures that we've implemented over the past year that have allowed us to improve MRO margins. Selling, general and administrative expenses totaled $18.6 million compared to $21.7 million in the third quarter of 2024. SG&A included approximately $1.3 million of noncash stock-based compensation, which is in line with recent quarters. The reduction in total SG&A stems from lower fixed and variable payroll-related expenses, which benefited from the cost reduction efforts taken over the last 12 months. Operating income for the quarter was $2.9 million compared to $2 million in the same period last year. Net loss for the quarter was $0.1 million compared to net income of $0.5 million for the prior year period. Adjusting for stock-based compensation, facility relocation costs, restructuring charges and other nonrecurring items, adjusted net income was $1.5 million compared to an adjusted net income of $1.8 million in the third quarter of 2024. Adjusted EBITDA was $9.5 million in the third quarter, up from $8.2 million in the prior year period. This improvement reflects higher leasing revenue, lower operating expenses across the business and increased monetization of our feedstock…

[Operator Instructions] Our first question comes from Steven Strackhouse of RBC Capital.

First question is that you guys have had some nice capacity expansion in your MRO business. And I can appreciate that you don't want to necessarily give a formal guide, but how should we be thinking about a baseline EBITDA for your MRO business into '26? Is there may be a revenue or margin range that we can kind of get a target from on the nice recurring piece of the business?

Yes. As we noted from the 3 expansion projects that we have, we gave a full year projection of $50 million at full overall capacity. Looking at 2026, we think those numbers will be approximately $25 million of revenue and generating pretty strong margins of $4 million to $5 million. So, we're excited that those facilities will be coming online. We're already seeing progress on our Millington facility and the 2 remaining facilities will start generating towards the end of this quarter.

So, the $50 million in '25, is that an incremental $25 million in '26?

The $50 million was total capacity, the $50 million, sorry, the $25 million would be our expectations for 2026.

Got it. Okay. And then are you may be able to just speak on your passenger to freighter conversions? It sounds like you guys got another aircraft on lease in the quarter. Has the market at all changed there? Or has the demand kind of shifted at all kind of in your favor?

And we think that due to the lack of availability of an aircraft really that provides the same operating performance as a 757 that the operating community has paid attention that there really is not a replacement aircraft for the 757. And 767s, which even though they have greater capacity, could fly routes that are 757 fly because it's a longer-range aircraft. They're not available. A330s are really yet to be converted to freighters and [ MAS ]. And so really -- and the A321 is not a true competitor to the 757 and neither is the 737-800 converted freighter. Those aircraft are much smaller with smaller range and smaller capacity. So there isn't a competitive product really, say, in existence for the 757. And we only have a few left. And although we didn't state it in this announcement, we do have another 2 under LOI at this point, which we expect to deliver this quarter and the next quarter, which will put us at 4 aircraft for the year or at least 4 aircraft under contract for the year, leaving only 3 left to place. And we're talking to enough operators to take those 3 and some others. So, we feel that things have definitely changed from a low point in 2023, where we saw a little demand. And just due to a variety of factors and really the quality of the aircraft, we're very optimistic about our ability to place the balance of these aircraft in the relatively near term.

That sounds great. And then maybe just last one for me. I was hoping you might be able to give us a quick update on your USM strategy. Are there any changes about how you're thinking of it kind of into '26? Are you seeing any better demand signals or maybe any relaxation of the supply at all?

Yes. So, I'm not sure I followed that question. Could you -- I apologize, could you state that again because I didn't really follow it. Neither Martin and I really follow your question.

Sorry about that. Just trying to understand your availability of USM, how you anticipate USM to maybe kind of grow as we kind of get into 2026?

Okay. Good. I understood that. Availability of USM, as we mentioned, we've got a substantial amount of USM that we've had in work and is becoming available for sale, and we're selling it. Even though the market is very tight for USM, we still buy USM. We're disciplined. We could buy a lot more if we weren't as disciplined, but we're not going to do that. So, we remain disciplined in making sure we hit our target margin and IRR profiles when we acquire inventory. We're still acquiring it. We've got ample inventory to carry us, I think, all the way through '26 without buying much more, but we expect to continue to buy more. So, we think that it's because of the way we can extract value out of feedstock that allows us to win deals. And so that even though it's tough to buy things in an overheated market where pricing has gone up, if you can extract greater value out of it than somebody else because you can do more than just sell parts, you can sell parts, you can sell engines, you could lease engines, you could put a whole airplane together, you can use pieces to put other airplanes together that you have. It's really the multidimensional integrated business model we have that I think is allowing us to win deals. So, we're optimistic that even in a really tough buying market that we'll be able to continue to acquire feedstock to grow the business in the future.

Our next question comes from Sam Struhsaker of Truist Securities.

Just trying to, I guess, clarify for my sake as much as anything. On the Roswell and Goodyear facilities, do you have any, I guess, line of sight to when those facilities would kind of be fully transitioned to the new scope of work and operating at the level that you guys would ideally like either in time line? Or just any thoughts there in terms of visibility?

In our Roswell facility, we have substantially transitioned that away from heavy maintenance work and to be more focused on storage and part out and tear down of aircraft. So, we're substantially there. Now there's still opportunity for significant growth even doing that work. And there are other opportunities that if we fill up at Goodyear and Millington, that we may have no choice but to put some heavy maintenance work back into Roswell. And there are some programs that are under consideration right now where we may do that. But at this time, we don't want to develop any additional overhead necessary to support heavy maintenance in Roswell until we fill up completely our Goodyear and Millington facilities. Now progress on those is outstanding. In Goodyear, although we've yet to conclude a substantial number of long-term contracts, we're almost full. I think we have 7 out of our 8 days operating right now with transition work from the 70 or so A320neos and ceos that have been parked there that are transitioning to new lessors. Those airplanes are requiring seat checks and paint jobs and other transitioning work, engine work because the A320neo, half the airplanes out there, I take it back, most of the airplanes that are parked there don't have engines. So, we have lots of activity going on surrounding the engine problem on the A320neo that problem is being resolved and those aircraft are being returned to service. So that's creating a fantastic opportunity for us. While we also -- while we have that work, we also have -- we also are generating repetitive work from some of the customers that we've historically dealt with. And we've got 757s in work, and we've had leasing company aircraft in work and 767s in work. So, we're in…

That's really great color. I appreciate it, and that sounds great. I guess you kind of touched sort of on this topically in terms of engines, you guys mentioned you have, I think, 9 available and I guess, 10 under repair. And I was just curious if you have any sort of line of sight or kind of how you're feeling about demand for that in general and maybe time line on converting those 10 engines that are undergoing repair before they're actually available for -- they're fully ready to go.

I don't know that I know specifically how long each of the 10 engines will take. But my guess is that, we've got engines that are coming available in the next month or so and probably not longer than several months after that. So I would guess that those 10 engines will all be out by the end of the first quarter of '26. But then there'll be more that will go in as we continue to acquire engines to repair. The -- what's going on with the engine shops today is it's taking a ridiculously long time to get anything through the shop. And so we're having to -- we're just having to bear through that. It doesn't change the fact that when we need an engine to get work, we're going to put it in the shop. If we feel we can get higher value out of it as a whole engine, we're going to put it through the shop. What was the other part of that?

Anticipation of the growth.

I think just general like kind of, I guess, demand trends you guys might be seeing within...

Okay. Yes, yes. Demand is insatiable at this point. The -- if -- whether we're talking about a narrow-body engine, whether it be on a 737NG, an A320, there is more demand that there are available engines at this point. So if you've got a good engine or and then even on the wide-body side, Pratt & Whitney PW 4000s that go on 767s and 747 and on some Airbus aircraft. And same thing with GE CF680s. We can't get them -- the issue we have is as we get them through the shop and we want to put them out on lease, we have customers that are coming up to us and they want to buy them for cash. And so we're having to wait, wait a minute, do we take -- do we sell this for cash or do we put it on a long-term lease? The preference would be to put it on a long-term lease. So the issue we face is not a lack of demand, but what do we do with that? So it's difficult to answer the question. So how do you view your engine situation on a go-forward basis? Are you going to have more trading opportunities, more leasing opportunities? And the answer is we have opportunities for both. The question is where are we going to put the asset and where will we get the highest margin on a risk-adjusted basis.

[Operator Instructions] This concludes the question-and-answer session. I would like to turn the conference back over to Nick Finazzo for any closing remarks.

All right. Thank you. As we've explained, even without any whole asset trades, AerAware sales or incremental revenue from our facilities expansion projects, 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 Steven and Sam for their 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. Thank you.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.