Third Quarter 2021 Highlights
- Revenue of $73.3 million.
- GAAP net loss of $1.6 million. Adjusted for non-cash equity
compensation and mark-to-market costs on the warrant liability,
Adjusted Net Income was $9.2 million
- Adjusted EBITDA of $13.9 million, or 18.9% of revenues.
- Flight equipment sales included 3 aircraft and 1 engine in the
quarter.
- Continued opportunities in the freighter markets and seeing an
increase in aircraft reactivations or made available for sale.
- 2021 guidance updated; revenue of $320- $340 million and
adjusted EBITDA of $80 - $90 million1, which exceeds prior guidance
for adjusted EBITDA of $60 - $70 million.
- Debt free balance sheet drives ability to opportunistically
execute on asset acquisitions and Mergers & Acquisitions.
AerSale Corporation (Nasdaq: ASLE) (the “Company”) today
reported results for the third quarter ended September 30, 2021.
The Company’s revenue for the third quarter was $73.3 million
compared to $57.1 million in the third quarter of 2020. Revenue for
the third quarter of 2021 included $27.4 million of flight
equipment sales, and there were no flight equipment sales in the
prior-year period.
Lower leasing revenue, primarily related to an end of lease
payment recognized last year, partially offset the impact of flight
equipment sales. The increase in Asset Management Solutions (AMS)
revenue was somewhat moderated by a decline in TechOps revenue due
to lower aircraft storage and related maintenance activities.
Demand for passenger-to-freighter conversions remains strong and
plans to monetize the remaining Boeing 757 fleet are on track.
GAAP net loss for the third quarter of 2021 was $1.6 million
compared to GAAP net income of $14.7 million in the third quarter
of 2020. AerSale incurred $8.7 million of non-cash equity-based
compensation expenses within payroll expenses this quarter, as well
as $2.1 million in mark-to-market costs related to our Private
Warrants for which there were no corresponding expenses in the
third quarter of 2020. Adjusted Net Income excluding both of these
items was $9.2 million. Adjusted EBITDA for the third quarter of
2021 was $13.9 million, or 18.9% of revenues, compared to $25.6
million, or 44.8% of revenue in the third quarter of 2020. AerSale
recognized $6.3 million in Payroll Support Program proceeds during
the third quarter of 2020. There were no corresponding proceeds in
the current quarter. Please see the non-GAAP reconciliation table
at the end of this press release for additional details on these
amounts.
Looking forward, AerSale expects the ongoing recovery in
commercial markets to continue albeit at a mixed pace as the impact
of the COVID-19 delta variant makes the outlook less clear. The
Company is on track to monetize its B757 investment through the
remainder of 2021 and first half of 2022. AerSale expects to
benefit from a pickup in MRO volume due to the recommissioning of
commercial aircraft, greater demand for USM parts consumption for
overhaul activity, and contributions from its innovative AerAware
product launch.
Nicolas Finazzo, AerSale’s Chief Executive Officer, commented,
“We are satisfied with our progress and the performance of our
purpose built, integrated business model. We expect the burgeoning
recovery in the commercial markets to continue in the foreseeable
future, which will support strengthening demand for our products
and services. Our profitability is exceeding our forecast as we
recognize higher margins for our freighter aircraft due to strong
customer demand, which positions us to increase our full-year
profit guidance.”
Finazzo added, “In our high growth, high margin Engineered
Solutions platform, we are progressing well toward certification of
AerAware, a head-wearable enhanced flight vision product. We are
confident this technology will become the industry standard on
commercial aircraft in the long-term given its uniqueness, high
safety proposition, and attractive returns to operators. At the
same time, we expect demand for our AerSafe product to accelerate
as it satisfies an FAA airworthiness directive required by May of
2022. Innovations such as AerAware and AerSafe from our Engineered
Solutions platform have large addressable markets and we expect
these products to meaningfully drive the Company’s revenue and
margins over the long term.”
Third Quarter 2021 Results of Operations AerSale reported
revenue of $73.3 million for the third quarter of 2021, which
included $27.4 million of flight equipment sales. Revenue in the
third quarter of 2020 was $57.1 million and did not include any
flight equipment sales. As a reminder to investors, flight
equipment sales are volatile quarter-to-quarter, and the Company
believes full-year analysis, rather than year-over-year quarterly
comparisons is a more effective measurement of Company
progress.
Asset Management Solutions (AMS) revenue increased by $19.2
million or 64.8% in the third quarter of 2021 primarily on account
of the above-mentioned flight equipment sales. Consumption of used
serviceable material (USM) parts for maintenance was strong through
the quarter as airlines continued to return aircraft into operation
against the backdrop of an upswing in air travel. The increase was
partially offset by lower leasing due to a lease return payment
recognized in the prior year.
Revenue from TechOps was down 10.9% to $24.4 million in the
third quarter of 2021, largely due to lower aircraft storage and
related maintenance activities at the Company’s aircraft MRO
facilities as airlines returned aircraft into operation, as well as
a shift in resources to support the Company’s cargo conversion line
for its B757 aircraft. Looking forward, AerSale is well positioned
to benefit from additional reactivation work, heavy maintenance,
and cargo conversions.
Gross margin was 33.6% in the third quarter of 2021 compared to
46.4% in the third quarter of 2020. The decline was primarily due
to the lease return condition payment recognized in the prior
year.
Selling, general and administrative expenses net of Payroll
Support Program proceeds were $22.8 million in the third quarter of
2021 compared to $13.4 million in the third quarter of 2020.
AerSale received $6.3 million in Payroll Support Program proceeds
during the third quarter of 2020 and did not receive any Payroll
Support Program proceeds in the third quarter of 2021. In addition,
the Company incurred $8.7 million of equity-based compensation
within payroll expenses in the third quarter of 2021, with no
corresponding equity-based compensation in the third quarter of
2020.
Income from operations was $1.8 million in the third quarter of
2021 versus $19.3 million in the third quarter of 2020.
Income tax expense was $1.1 million in the third quarter of 2021
compared to an income tax expense of $4.5 million in the third
quarter of 2020.
GAAP net loss for the third quarter of 2021 was $1.6 million
compared to GAAP net income of $14.7 million in the third quarter
of 2020. Adjusted for non-cash equity compensation and
mark-to-market costs on the warrant liability, Adjusted Net Income
was $9.2 million.
Diluted earnings per share was a loss of $0.04 for the third
quarter of 2021. Diluted earnings per share for the third quarter
of 2021 is not comparable to the third quarter of 2020 due to the
public listing of AerSale on December 23, 2020. Excluding the
impacts of equity-based compensation and the mark-to-market costs
on the private warrants, adjusted diluted earnings per share was
$0.22 for the third quarter of 2021.
Adjusted EBITDA in the third quarter of 2021 was $13.9 million,
or 18.9% of revenues, compared to $25.6 million, or 44.8% of
revenue in the third quarter of 2020. Adjusted EBITDA benefitted
from $6.3 million in Payroll Support Program proceeds during the
third quarter of 2020, for which there was no corresponding benefit
in the third quarter of 2021. Adjusted EBITDA declined from the
year ago period largely because of the absence of corresponding
Payroll Support Program proceeds in third quarter of 2021, as well
as the contribution from the lease return condition payment
received last year.
2021 Guidance AerSale expects revenue of $320–$340
million and adjusted EBITDA of $80-$90 million in 2021. This
outlook is based on an improvement in the Company’s AMS segment,
ongoing demand for its on-airport MRO services, accelerating demand
in cargo and E-Commerce markets, increased requests for
passenger-to-freighter conversions and other TechOps products and
services. Decrease in revenue is related to the timing of flight
equipment sales, but is more than offset by higher EBITDA
margins.
The ongoing and continued monetization of the Boeing 757 fleet
acquisition is expected to be the main driver of the AMS segment.
AerSale expects to sell the majority of the available aircraft in
2021 and the first half of 2022 as a result of strong demand for
cargo converted aircraft. For TechOps, in addition to higher MRO
volume from the recommissioning of commercial aircraft, the Company
expects increased contribution from demand for its AerSafe
product.
Warrant Redemption AerSale has determined that a
redemption employing a cashless exchange of the warrants issued as
part of the business combination with Monocle Acquisition Corp., a
special purpose acquisition company, for AerSale common stock does
not violate the CARES Act. AerSale submitted its position to the
Treasury Department and received confirmation that “the cashless
warrant redemption does not appear to be a compliance issue under
the Acts.” As such, AerSale can exercise its right to redeem the
warrants at the appropriate time as prescribed in its warrant
agreements.
Conference Call Information The Company will host a
conference call today at 4:30 pm Eastern Time to discuss these
results. A live webcast will also be available at
https://ir.aersale.com/news-events/events. Participants may access
the call at 1-800-263-0877, international callers may use
1-646-828-8143, and request to join the AerSale Corporation
earnings call.
A telephonic replay will be available shortly after the
conclusion of the call and until November 23, 2021. Participants
may access the replay at 1-844-512-2921, international callers may
use 1-412-317-6671, and enter access code 9911425. An archived
replay of the call will also be available on the Investors portion
of the AerSale website at https://ir.aersale.com.
Non-GAAP Financial Measures This press release includes
non-GAAP financial measures, including adjusted EBITDA, adjusted
Net Income, and adjusted diluted Earnings per Share. AerSale
defines adjusted EBITDA as net income (loss) after giving effect to
interest expense, depreciation and amortization, income tax expense
(benefit), and other non-recurring or unusual items. Adjusted Net
Income is defined as net income (loss) after giving effect to
mark-to-market costs relating to our Private Warrants, non-cash
equity-based compensation expense and other non-recurring or
unusual items. Adjusted diluted earnings per share also exclude
these material non-recurring or unusual items.
AerSale believes these non-GAAP measures of financial results
provide useful information to management and investors regarding
certain financial and business trends relating to AerSale’s
financial condition and results of operations. AerSale’s management
uses certain of these non-GAAP measures to compare AerSale’s
performance to that of prior periods for trend analyses and for
budgeting and planning purposes. These non- GAAP measures should
not be construed as an alternative to net income or net income
margin as an indicator of operating performance or as an
alternative to cash flow provided by operating activities as a
measure of liquidity (each as determined in accordance with
GAAP).
You should review AerSale’s audited financial statements, and
not rely on any single financial measure to evaluate AerSale’s
business. Other companies may calculate adjusted EBITDA, adjusted
Net Income, or Adjusted diluted earnings per share differently, and
therefore AerSale’s adjusted EBITDA, adjusted Net Income, or
adjusted diluted earnings per share measures may not be directly
comparable to similarly titled measures of other companies.
Third Quarter 2021 Financial Results
AERSALE CORPORATION CONSOLIDATED
BALANCE SHEET (in thousands, except per share data)
September 30,
December 31,
2021
2020
(Unaudited)
Current assets:
Cash and cash equivalents
$
61,852
$
29,317
Accounts receivable, net of allowance for
doubtful accounts of $1,408 and $1,652 as of September 30, 2021 and
December 31, 2020
43,758
50,215
Inventory:
Aircraft, airframes, engines, and parts,
net
80,106
85,192
Advance vendor payments
9,407
6,205
Due from related party
-
474
Deposits, prepaid expenses, and other
current assets
4,571
7,560
Total current assets
199,694
178,963
Fixed assets:
Aircraft and engines held for lease,
net
94,776
86,844
Property and equipment, net
7,404
7,839
Inventory:
Aircraft, airframes, engines, and parts,
net
77,974
55,463
Deferred income taxes
6,696
5,708
Deferred financing costs, net
1,114
367
Deferred customer incentives and other
assets, net
277
271
Due from related party
5,421
5,450
Goodwill
19,860
19,860
Other intangible assets, net
26,773
28,364
Total assets
$
439,989
$
389,129
Current liabilities:
Accounts payable
$
16,307
$
16,364
Accrued expenses
7,465
8,576
Income tax payable
298
1,324
Lessee and customer purchase deposits
16,972
2,820
Deferred revenue
2,958
2,595
Total current liabilities
44,000
31,679
Long-term lease deposits
2,517
1,145
Maintenance deposit payments and other
liabilities
3,991
3,664
Warrant liability
3,921
1,186
Total liabilities
54,429
37,674
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.0001 par value.
Authorized 200,000,000 shares; issued and outstanding 42,949,261
and 41,046,216 shares
4
4
Additional paid-in capital
301,768
292,593
Retained earnings
83,788
58,858
Total equity
385,560
351,455
Total liabilities and stockholders’
equity
$
439,989
$
389,129
AERSALE CORPORATION CONSOLIDATED
STATEMENTS OF OPERATIONS (in thousands, except per share data)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Revenue:
Products
$
43,613
$
9,922
$
124,914
$
37,726
Leasing
8,002
20,627
20,624
47,637
Services
21,683
26,516
78,116
74,193
Total revenue
73,298
57,065
223,654
159,556
Cost of sales and operating expenses:
Cost of products
30,954
6,657
85,147
41,207
Cost of leasing
2,436
5,073
7,667
21,316
Cost of services
15,276
18,830
55,635
57,370
Total cost of sales
48,666
30,560
148,449
119,893
Gross profit
24,632
26,505
75,205
39,663
Selling, general, and administrative
expenses
22,803
13,377
53,079
40,614
Payroll support program proceeds
-
(6,347
)
(14,768
)
(12,693
)
Transaction costs incurred
-
219
-
434
Income from operations
1,829
19,256
36,894
11,308
Other income (expenses):
Interest expense, net
(241
)
(267
)
(750
)
(1,307
)
Other income, net
9
206
258
358
Change in fair value of warrant
liability
(2,104
)
-
(2,735
)
-
Total other expenses
(2,336
)
(61
)
(3,227
)
(949
)
(Loss) income before income tax
provision
(507
)
19,195
33,667
10,359
Income tax expense
(1,129
)
(4,476
)
(8,737
)
(2,519
)
Net (loss) income
$
(1,636
)
$
14,719
$
24,930
$
7,840
(Loss) earnings per share - basic
$
(0.04
)
$
397.70
$
0.59
$
211.83
(Loss) earnings per share - diluted
$
(0.04
)
$
397.70
$
0.59
$
211.83
AERSALE CORPORATION CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Nine Months Ended September
30,
2021
2020
Cash flows from operating activities:
Net income
$
24,930
$
7,840
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
9,868
20,513
Amortization of debt issuance costs
366
573
Inventory reserve
5,033
13,427
Impairment of aircraft held for lease
-
3,036
Provision for doubtful accounts
(122
)
262
Deferred income taxes
(988
)
1,340
Change in fair value of warrant
liability
2,735
-
Stock-based compensation
8,899
-
Changes in operating assets and
liabilities, net of acquisition:
Accounts receivable
5,279
8,977
Inventory
(44,104
)
(28,617
)
Deposits, prepaid expenses, and other
current assets
3,628
3,309
Deferred customer incentives and other
assets
-
56
Advance vendor payments
(3,201
)
(7,283
)
Accounts payable
(57
)
(1,413
)
Income tax payable
(987
)
-
Accrued expenses
(2,234
)
(869
)
Deferred revenue
363
(2,935
)
Lessee and customer purchase deposits
16,649
1,356
Other liabilities
327
414
Net cash provided by operating
activities
26,384
19,986
Cash flows from investing activities:
Business acquisition
-
(16,976
)
Proceeds from sale of assets
6,995
3,100
Acquisition of aircraft and engines held
for lease, including capitalized cost
(60
)
(1,227
)
Purchase of property and equipment
(1,060
)
(1,594
)
Net cash provided by (used in) investing
activities
5,875
(16,697
)
Cash flows from financing activities:
Repayments of 8% Senior Secured Notes
-
(3,424
)
Proceeds from Revolving Credit
Facility
-
104,634
Repayments of Revolving Credit
Facility
-
(104,634
)
Cash paid for employee taxes on
withholding shares
(269
)
-
Proceeds from exercise of warrants
545
-
Net cash provided by (used in) financing
activities
276
(3,424
)
Increase (decrease) in cash and cash
equivalents
32,535
(135
)
Cash and cash equivalents, beginning of
period
29,317
17,505
Cash and cash equivalents, end of
period
$
61,852
$
17,370
Supplemental disclosure of cash
activities
Income taxes
8,095
2,284
Interest
452
749
Supplemental disclosure of noncash
investing activities
Reclassification of aircraft and aircraft
engines inventory to (from) equipment held for lease, net
14,650
(6,779
)
Adjusted EBITDA, Net Income and
Diluted EPS Reconciliation Table (In ‘000s) (Unaudited)
Three months ended September
30,
Nine months ended September
30,
2021
% of Total Revenue
2020
% of Total Revenue
2021
% of Total Revenue
2020
% of Total Revenue
Reported Net Income/(Loss)
(1,636
)
(2.2
%)
14,719
25.8
%
24,930
11.1
%
7,840
4.9
%
Addbacks:
Inventory Write-Off
-
0.0
%
-
0.0
%
4,776
2.1
%
15,909
10.0
%
Change in FV of Warrant Liability
2,104
2.9
%
-
0.0
%
2,735
1.2
%
-
0.0
%
Stock Compensation
8,749
11.9
%
-
0.0
%
8,899
4.0
%
-
0.0
%
Transaction Costs
-
0.0
%
219
0.4
%
-
0.0
%
434
0.3
%
Adjusted Net Income
9,217
12.6
%
14,938
26.2
%
41,340
18.5
%
24,183
15.2
%
Interest Expense
241
0.3
%
267
0.5
%
750
0.3
%
1,307
0.8
%
Income Tax Expense (Benefit)
1,129
1.5
%
4,476
7.8
%
8,737
3.9
%
2,519
1.6
%
Depreciation and Amortization
3,291
4.5
%
5,878
10.3
%
9,868
4.4
%
20,513
12.9
%
Adjusted EBITDA
13,878
18.9
%
25,559
44.8
%
60,695
27.1
%
48,522
30.4
%
Reported Diluted EPS
(0.04
)
397.70
0.59
211.83
Addbacks:
Inventory Write-Off
-
-
0.12
429.85
Change in FV of warrant liability
0.05
-
0.06
-
Stock-based compensation
0.21
-
0.21
-
Transaction Costs
-
5.91
-
11.72
Adjusted Diluted EPS
0.22
403.61
0.98
653.40
Forward Looking Statements This press release includes
“forward-looking statements” within the meaning of the “safe
harbor” provisions of the Private Securities Litigation Reform Act
of 1995, including without limitation statements regarding our
anticipated financial performance; our growth trajectory; the
impact of investments in our Boeing 757 program on our financial
performance; our ability to sell our aircraft on the timelines we
anticipate; the expected operating capacity of our MRO facilities;
the expected commencement date of sales of our AerAware product;
and our anticipated revenue split between our two segments.
AerSale’s actual results may differ from their expectations,
estimates and projections and consequently, you should not rely on
these forward looking statements as predictions of future events.
Words such as “expect,” “estimate,” “project,” “budget,”
“forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,”
“should,” “believes,” “predicts,” “potential,” “continue,” and
similar expressions are intended to identify such forward-looking
statements. Many factors could cause actual future events to differ
materially from the forward-looking statements in this
presentation, including without limitation, the impact of the
COVID-19 pandemic; factors adversely impacting the commercial
aviation industry; the fluctuating market value of our products;
our ability to repossess mid-life commercial aircraft and engines;
our ability to comply with stringent government regulation; the
shortage of skilled personnel, including as a result of work
stoppages; the highly competitive nature of the markets in which we
operate; and risks associated with our international operations.
You should carefully consider the foregoing factors and the other
risks and uncertainties described in the “Risk Factors” section of
the Company's most recent Annual Report on Form 10-K filed with the
Securities and Exchange Commission ("SEC"), and its other filings
with the SEC, including its subsequent quarterly reports on Form
10-Q. These filings identify and address other important risks and
uncertainties that could cause actual events and results to differ
materially from those contained in the forward-looking statements.
Forward-looking statements speak only as of the date they are made.
Readers are cautioned not to put undue reliance on forward-looking
statements, and AerSale Corporation assumes no obligation and does
not intend to update or revise these forward-looking statements,
whether as a result of new information, future events, or
otherwise, except as required by law
About AerSale AerSale serves airlines operating large
jets manufactured by Boeing, Airbus and McDonnell Douglas and is
dedicated to providing integrated aftermarket services and products
designed to help aircraft owners and operators to realize
significant savings in the operation, maintenance and monetization
of their aircraft, engines, and components. AerSale’s offerings
include: Aircraft & Component MRO, Aircraft and Engine Sales
and Leasing, Used Serviceable Material sales, and internally
developed ‘Engineered Solutions’ to enhance aircraft performance
and operating economics (e.g. AerSafe™, AerTrak™, and now
AerAware™).
_____________________________________ 1 A reconciliation of
non-GAAP adjusted EBITDA guidance to net income, the most directly
comparable GAAP measure, has not been provided due to the lack of
predictability regarding the various reconciling items such as the
provision for income taxes and depreciation and amortization, which
are expected to have a material impact on these measures and are
out of AerSale’s control or cannot be reasonably predicted without
unreasonable efforts.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211109006536/en/
Media Contacts: For more information about AerSale,
please visit our website: www.AerSale.com. Follow us on: LinkedIn |
Twitter | Facebook | Instagram
AerSale: Craig Wright Telephone: (305) 764-3200 Email:
media.relations@aersale.com
Investor Contact: AerSale: AersaleIR@icrinc.com
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