00:01 Good morning, and thank you for standing by. Welcome to the Fourth Quarter 2021 Fortress Transportation and Infrastructure Investors LLC Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. Please be advised that today's conference is being recorded. 00:25 I would now like to hand the conference over to your speaker today, Alan Andreini. Please go ahead.

00:32 Thank you, operator. I would like to welcome you all to the Fortress Transportation and Infrastructure fourth quarter and full year 2021 earnings call. Joining me here today are Joe Adams, our Chief Executive Officer; and Scott Christopher, our Chief Financial Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. 01:01 In addition, we will be discussing some non-GAAP financial measures during the call today, including FAD. The reconciliation of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. 01:14 Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. 01:43 Now I would like to turn the call over to Joe.

01:45 Thank you, Alan. To start today, I'm pleased to announce our 27th dividend as a public company and our 42nd consecutive dividend since inception. The dividend of $0.33 per share will be paid on March 23, based on a shareholder record date of March 11. 02:04 Now let's turn to the numbers. The key metrics for us are adjusted EBITDA and FAD or funds available for distribution. We ended the year strongly with adjusted EBITDA of $124.8 million in Q4 2021, which is up 29% compared to $96.4 million in Q3 2021, and up 170% compared to $46.2 million in Q4 2020. In a similar fashion FAD was $120.1 million in Q4 2021, up 205% compared to $39.4 million in Q3 2021 and up 122% compared to $54.2 million in Q4 2020. During the fourth quarter, the $120.1 million FAD number was comprised of $161.2 million from our aviation leasing portfolio, $11.0 million from our infrastructure business and negative $52.1 million from corporate and other. 03:11 Now let's look at all of 2021 versus all of 2020. Adjusted EBITDA was $336.3 million in 2021, up 38% versus $243.3 million in 2020. FAD was $242.2 million in 2021, up 2% versus $237.4 million in 2020. Both our aviation portfolio and infrastructure businesses contributed positive FAD for the year and overall 20% higher compared to 2020. Meanwhile, corporate expenses were higher compared to 2020, primarily due to higher interest expense resulting from higher average debt outstanding during the year. 03:56 Turning now to Aviation. Aviation had another up quarter with Q4 EBITDA of $103.7 million, while decreased flying due to Omicron dampened the recovery and leasing activity, we were able to grow our aerospace services EBITDA to $20.3 million for Q4, primarily due to an increasing number of sales and exchanges…

13:17 Thank you, Joe. Operator, you may now open the call to Q&A.

13:22 Thank you. Our first question comes from Justin Long with Stephens. Your line is open.

13:34 Thanks and good morning. Joe, maybe to start, I was just curious if anything has changed in terms of your EBITDA outlook by business for 2022. And then thinking about the longer term, I know you've spoken recently about the aviation business getting to a $1 billion of EBITDA by 2025, given the split is on the near-term horizon, is there anything you can share around some of your longer-term targets for the infrastructure business as well?

14:07 Yeah. So, yeah, on the EBITDA for 2022 what we've been saying is, it's our best guesstimate or estimate is about $550 million for Aviation. And then with each one of the Infrastructure business go down there, the Jefferson, we're looking at between $50 million and $90 million of EBITDA, approximately for Long Ridge, our share roughly the total EBITDA is probably around $90 million, given the first quarter is going to be short, so our share is roughly about $45 million of EBITDA. Then Repauno is probably about $10 million, and Transtar approximately $75 million maybe $80 million, but $75 million is probably a good number. Does that answer your --

15:06 That's great. And then I guess longer term for the infrastructure businesses.

15:11 Yeah. So, we still believe Jefferson, as I said was roughly a third utilized and if you count on the fact that Exxon is about to go next year to -- from $360 and 620,000 barrels a day and we'll achieve it is that today, it's a number one and two refiners and we have multiple discussions. We have a bigger list of new product offerings to each of them that we've ever had before, given the pipeline connectivity. So we very much believe will fill the terminal. And if you fill the terminal, you're looking at $150 million or more of EBITDA per annum. So that's something that we've always said, it's a question of when, not if, and we've had obviously a number of headwinds and things that -- the world seems it, throw obstacles regularly now but we seem to be able to jump higher each time. So we're managing them, but the terminal is very well positioned, it has a great product offering, great dialog and relationships to those two customers and now we have the benefit of a higher oil price, which should -- all of that should help so. So we're still, we still believe that will fill up. 16:26 In terms of Transtar, what I've sort of indicated the people is, if we got a business from U.S. Steel is generating roughly 80 million of EBITDA, which we can grow right-of-way and storage business and transload and add maybe 15 million to 20 million over a three to four years from that those types of activities. So you say, you get it $100 million, what we'd like to do is add 100 million from non-U.S. steel customers across a range of activities being -- could the industrial development at one of the…

21:55 That's great, I appreciate all that detail. And I'll keep my follow-up to a quick one. Earlier you mentioned $550 million from aviation this year is -- does that include the 50 million to 100 million that you've talked about from aerospace services?

22:11 Yes.

22:14 Okay. Great. I appreciate the time.

22:16 Thanks.

22:20 Thank you. Our next question comes from Devin Ryan with JMP Securities. Your line is open.

22:26 Hi. Thanks. This is Brian McKenna for Devin. So just looking at Aviation EBITDA returns. I know there were some timing dynamics in the fourth quarter, but returns declined sequentially to 16% from 20% in the third quarter, so could you talk about the outlook for returns in the business, is 16% the floor in the near term? And then what do you see in some of the bigger drivers of getting returns back to the mid 20% level over time?

22:53 We think that, as I mentioned Omicron slowed down a lot of expansion activity and we see it in particular like if an airline was flying in pre-COVID era of 350 to 400 hours a month on an airplane. In the fourth quarter, they might have flown 200, and so that affects our revenue from maintenance and maintenance reserves that we take in. So that's, that was an impact to the fourth quarter. So it was not -- to refer you is not a great quarter. I mean, given that we were hoping that people are going to, for the holidays add capacity and fly, unfortunately Omicron unchanged the trajectory of a lot of that. But as I mentioned, and then the first quarter is better we expect sequentially better, but it's not going to, it's never seasonally the greatest quarter because the winter months are not the busiest for air travel really starts to pick up scheduling in March and April. 23:41 So our expectation is that Q2 and Q3 will return to our targeted EBITDA margin of 25% or close to that. And we have a pretty good -- we have reasonable visibility on that, as I said, it's a function of the airlines are seeing right now, pretty strong forward bookings of flights and so we're getting request says our other people. I'm sure for additional assets and sort of that saying that you can have is when an airline calls off and say, I need more aircraft because they are the ones that have the best view on what's happening on the travel side and that's what's happening right now. So we see a -- and I have also monitored the other maintenance shops are talking that being sold out in Q2 and Q3. And one of the big engine manufacturers just said they're seeing return to pre-COVID levels by the end of this year. So there is a lot of other corroborating data that supports that. So that's our outlook, that's our expectation for to get to the levels that we just talked about.

25:09 Great. I appreciate that. And then you also sold a number of non-core aviation assets in the quarter. This can be lumpy, but how should we think about related asset sales moving forward at some level of sales necessary to fund the pipeline of LOI's or do you have ample liquidity and cash flow generation in the business to fund these investments throughout 2022?

25:32 Yeah. We have been talking about and we actually did take a step towards shifting the mix of the portfolio somewhat and that we expect -- I think we had like 100, Pratt 4000 and CF680 engines and over time -- in somewhat over this year we will probably reduce that number down maybe by half. So we had about 10 million of gains from those types of sales in the fourth quarter. We will see more of that this year I think as well. And at the same time, we are looking to increase the percentage of the portfolio in the CFM56 engine. So that, which obviously makes sense that's what we've been talking about for five years. So we're going to shift the mix and I think that those assets the Pratt 4000, CF680s have been great returns for us and we have very low basis. So, and there is a lot of demand given the freight market. So I think we'll continue to see some gains from those during the year. 26:30 And then, in terms of managing capital going forward, I think we're going to try to turn the portfolio more and have asset sales replenish new investments since. So one of the things you can do is that we're focused on right now as we, if we buy off-lease assets and then put them on-lease, you create a, quite a bit of value and could take a gain. And as part of that, we're also looking at the potential to sell some of those assets that are on longer-term leases and retain the engine management of that, of those assets, which really has a great, is a win-win and it opens the lessor market up to the whole ecosystem, if we can sell and long-term six to eight-year lease book of gain and then keep what we think is the best part of the deal, which is the engines and maintenance contract that's another value for us that no one else can recognize and it allows us to use that capital again to sort of do it all over again. So that's sort of a long way of saying that we have liquidity. We don't think we're going to be expanding the invested capital dramatically and we're not trying to do that. We're trying to grow the service component, so that in the someday in the future, we hope that service -- aerospace services revenue, EBITDA was equal the leasing activity EBITDA.

28:06 Great. Thanks, Joe.

28:07 Yeah.

28:11 Thank you. Our next question comes from Guiliano Bologna with Compass Point. Your line is open.

28:26 Good morning. Okay. So switching topics a little bit, you guys reported that you generated $20.3 million of aerospace services EBITDA in the quarter and I want to make sure I was thinking about this correctly that the components of that is mostly selling new serviceable materials and proceeds from the Module Factory. And if I look at, if I think back to kind of prior statements that you've made Joe, you referenced selling about or generating about $20 million of EBITDA we used serviceable materials, which would imply roughly $65 (ph) million a quarter. And if I back into that number that implies that the Module Factory is probably running $50 million plus, higher than that or larger contribution of the 20, which already put you at $60 million or so annualized run rate. Is that a good way of thinking of it and does kind of have a ballpark of where the Module Factory is running?

29:21 It's close, but it's a little bit different. In the fourth quarter, most of that $20 million was from the Module Factory, more than 80% of it was Module Factory. SO the USM was probably under $3 million, between $2 and $3 million of contribution in Q4. And we do expect $20 million from USM this year in 2022, but again USM, is driven primarily off of shop visits. So in the fourth quarter and first quarter there are still are a limited number of shop visits are occurring, but if you look at the day they're sold out now for Q2 and Q3 in the shop. So it's happening that the shop -- the engines green time has been burned off and people are going to need to put our energy to shops. So that will drive USM sales is activity in the shop visits side which will be more back-end loaded than what the number -- it's not 5 million a quarter, it will ramp up to something. But we still believe $20 million is a good estimate for the year.

30:37 That's great. And then thinking about little more accounting specific, but the Module Factory EBITDA and proceeds and also user material, is it -- am I correct in assuming that both of those flow through gain on sale, because obviously you had a large count on sale kind of profit quarter. So I just want to make sure that those are both going to gain on sale because it's pretty more recurring business from the Module Factory and potentially users of Ontario versus one-time?

31:05 Well, right now we have a bit of it. The Module Factory is flowing through gain on sale but USM is probably being BOPIS revenues and costs -- minus cost of good sale. So we have a different treatment, which is probably not great from long-term, we need to spend some time and see if we can get that right, but it's -- because it's so new the accountants want to have a classified differently right now. But, so that's not something I can totally understand, but that is, that's what we did in the fourth quarter.

31:44 Got it. That's great. That's very helpful. The only one for you guys -- we are serious if there is any update on the second PMA part or potential approval timeline there?

31:53 Yes. A lot of very good progress on the part that the they're very happy with it. It's performing well. There is a lot of back and forth on information and it's progressing and we're hopeful that that will be addressed soon, but it's, as you know, it's very hard to put a specific date on it. So, but good progress, that’s it.

32:21 And the only other thing is on Jefferson as isn't been here, overall pricing is moving around as most of us have seen, I'm curious if that has a potential dial-up crude by rail and how do you – anything about potential contribution there from crude by rail or how that contributes into your kind of 50 million or 90 million guide?

32:42 Yeah. It's one of the proud that we hope we will come through this year, which is there is several proposals out now and it does help with crude prices high because there is more spread and more volatility creates, what the refiners are always looking at is optionality to trying to source the lowest cost crude from wherever that comes from and volatility and high prices help. So we do see the likelihood of that activity. We've already seen it coming from the Utah market, which is, it's not a spread business because in Uttar there is no, there is no other way to move it. So it has to go by rail. But in Canada, it is a spread and supply business and so that market will should open up.

33:31 That's great. Thank you for answering my questions, and I'll come back in the queue.

33:36 Thanks.

33:38 Thank you. Our next question comes from Josh Sullivan with Benchmark Company. Your line is open.

33:45 Hey. Good morning.

33:46 Good morning.

33:49 Just given that the new Lufthansa relationship, how do we frame your overall module capacity at this point. And then one of the advantages of the Module Factory deal was pitched as the faster turnarounds for airline maintenance. Can you give us any metrics there, customers are seeing in the field on terms at this point?

34:08 Yes. So that's a great one. And so if you think about the lift side of the deal, we just -- we supply an overhauled LPG low pressure turbine to Lufthansa which gets installed in the WestJet engine when they're doing the shop visits. So Lufthansa doesn't have to do any of the maintenance on that and it's an immediate -- we are going to install that in 30 days rather than have to wait for any parts and have any delays. So there is a benefit to them on that and there is also a benefit, just purely for an airline. If you need LPT and it has to go into shop it could be anywhere from three to six months. And so we have a little chart that shows the total savings from using the Module Factory to be just time wise could be $0.5 million or more, and we don't charge for that. So that's just, that's added benefit that people get and I think that, those numbers are going to get bigger too as you see the shop start to build up to fill up and then you factor on top of that, what we haven't yet seen is supply chain issues in aviation components, but it's coming, it's happened in every other industry and the only reason it didn't happen in aviation is because there wasn't a lot of activity, but it's definitely coming. And so, as you see engine shop visits start to go back out to four to six to eight months, which is what happened pre-COVID then the Module Factory benefits become even greater, so we're very -- 35:43 And then on top of that I think you also have some inflation potential that hasn't, you see the OEMs raise prices…

37:38 Got it. And then when the split is complete, as far as reporting metrics between the two entities, are you still going to be reporting that or reoccurring FAD under the aviation assets? And then how are you looking at the dividend and capital allocation between the two?

37:54 Yeah. So FAD is probably on the list of things to think about and it’s probably lost some of its relevance in meaningfulness. So we will address that. I think at the spend that it's one of the things that we may not be doing going forward. So, and then in terms of capital allocation, as I mentioned, the plan is to -- is not necessarily every quarter try to grow the $2 billion invested capital on aviation, but to turn it more frequently and to shift more towards CFM56 engines. So given that there should be -- with the EBITDA contribution that we are looking at there should be available cash flow to either pay down debt or increase the dividend and if that comes to happen as we expect and we could do both of those.

38:50 Got it. And then just one last one on Jefferson. How does the EBITDA generation work relative to utilization 50% or 75% of utilization? How does that relate to the per annum EBITDA figure you provided?

39:04 Well, it's highly levered because, the first 25%, you don't -- you cover your fixed costs and then after that, it's highly levered and so -- and incrementally, it has to do with certain products have a higher contribution like crude by rail is probably our highest contributing asset because not only do you get the highest fee for unloading the railcars, but then typically you're blending it 2 to 1 or, 3 or 1 (ph) which some blend stock that you also bring in pipe and store and then charge a blending fee and then it goes out by pipe. So that's like number one product in terms of contribution, but if you're able to utilize types, the obvious benefit there is you can ramp up volume and there is almost no incremental expense. It's purely, it's already there. So, each have their own differences but it's -- so it's not a linear, I can't just give you one number, it will partly depend on the mix, but they are all positive contributions.

40:13 Got it. Thank you for the time.

40:14 Thanks.

40:19 Thank you. Our next question comes from Chris Wetherbee with Citi. Your line is open.

40:25 Hey. Thanks. Good morning, guys. Joe, I was hoping maybe you could help us with the Jefferson bridge on sitting here looking at the last half of the year, running around $2 million of quarterly adjusted EBITDA. I know we have a target for 50 to 90, were couple of months into the year. So can you give us either some near-term visibility on sort of what you're seeing in terms of the ramp up or how do we bridge this pretty substantial step-up?

40:54 Well, it's just -- it’s exactly as you're saying that it's higher utilization and higher volumes. So we have multiple projects underway via crude, fuel oil coming in by ship going out by pipe, additional crude by rail activity from both Motiva and from Exxon now, it is additional refined products activity. So it's really, it's just what I was talking about, it's additional volume that we've seen some of that increase in Q1, but we expect to see more of it during the year.

41:33 So can you give us some, maybe some near-term numbers, I mean what is Q1 sort of look like as it contributes to that full-year number.

41:41 Well, I did indicate the volumes in Q1 were up 25% roughly over Q4.

41:48 Okay. So we can use that as a benchmark. Okay. That's super helpful. Appreciate the time. Thank you.

41:52 Thanks.

41:56 Thank you. Our next question comes from Robert Dodd with Raymond James. Your line is open.

42:08 Hi, guys. A question on the dividend and the outlook, obviously, in the past you've said 2 times coverage you would review the dividend 2 time coverage by FAD. FAD sounds like it's becoming less useful. There is a lot of macro geopolitical uncertainty and obviously spin come in or separation come in April. So, is that how we should think about it still on a combined basis. So could you give us an outlook on what metrics or what expectation should be for potential combined all set for business dividend growth?

42:44 Yes. So we expected with the spin roughly 75% of the current dividend will be paid by Aviation and 25% by infrastructure. So that's how the new combined two shares would be treated from or will be split relative to the dividend -- the current dividend. In terms of increasing the dividend, as I mentioned with aviation, we expect probably to grow the asset base, probably less and grow the EBITDA more which means you'll have more free cash flow, which would allow us to potentially increase the dividend as one of the alternatives for that excess capital. So that's, that's something that we can do. We don't want to do it pre-spin because, there's so many other things going on, obviously, there's a lot of different the world is we've got a big project to get done with that and then we'll look at it. 43:43 In terms of infrastructure, it’s a little hard for me because it's going to be a capital allocation discussion around growing that dividend relative to the investment opportunities that we would see in front of us and so that would be something I would anticipate talking more about. After the spin once we get out and have visibility on the capital opportunities for new projects.

44:11 I appreciate that. Thank you. And if I, could one short, obviously, I mean, you said new serviceable material and all other things it driven more by shop visits may be more back-end loaded. Is that also true with the Module Factory or does that mean that its seasonal -- more seasonal this year, more back-end loaded and is that kind of a normal seasonality or is that just kind of a COVID recovery seasonality that produces that back end loading for certainly the USM puts up?

44:43 Well, for USM, it’s really COVID related because when COVID started, the number of shop visits dropped as we've talked about before. Airlines did not want to put engines through a major overhaul when they had excess engines in the fleet. So first thing they do is use of the excess hours and cycles, that's happened now and now that you have a recovery then people are going to, all sudden say, oh, my god I’m out of engines and I got to put them through the shops. So that's, that's what you're seeing with people saying that the shops are selling out for Q2 and Q3. So it's really that USM function is much more COVID related and seasonally related and it actually historically a lot of maintenance is done in Q1, because that's the slowest flying season it’s like the yellow flag in the car race and you go into the shop when you, when everybody else is slowing down. So it's not seasonal from that point of view. 45:44 And then Module Factory, I don't anticipate a lot of seasonality there, again it's, it's a year round activity. So I don't -- it's not specifically tied to flying and we did a strong Q4, we've got obviously we put the number out. We don't know exactly -- we don't have enough history and data to say exactly how it's going to roll out and it's a relatively new products. SO I can't guarantee that it's going to be like a steadily increasing number every quarter which everyone would want. And I would want, but I -- we don't have enough information yet to be able to say that, but obviously we put it out there. So we have some reasonable expectation in a number of customers that are, they're using it is going to is going to increase. So that's, that's good. And I don't think it's going to be highly seasonal.

46:35 Thank you.

46:38 Thank you.

46:40 Thank you. I'm showing no further questions at this time. I would like to turn the call back to Alan Andreini for closing comments.

46:49 Thank you all for participating in today's conference call. We look forward to updating you after Q1.

46:56 This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.