First Quarter 2023 Highlights
- Revenue and earnings reflect the pacing of flight equipment
sales.
- Revenue of $78.3 million versus $122.8 million in the prior
year period.
- GAAP net income of $5 thousand versus $17.2 million in the
prior year period.
- Adjusted Net Income1 of $3.3 million versus $22.2 million in
the prior year period.
- Adjusted EBITDA1 of $5.0 million versus $29.9 million in the
prior year period.
- Flight equipment sales consisted of two aircraft, one airframe,
and one engine.
- On track to convert 11 additional 757 aircraft to freighters by
third parties.
- Eight converted aircraft are anticipated to become available
for sale or lease in 2023.
- Reaffirms 2023 guidance: expects revenue in the range of $460 -
$490 million and adjusted EBITDA in the range of $70 - $80 million,
which excludes any potential AerAware sales2.
AerSale Corporation (Nasdaq: ASLE) (the “Company”) today
reported results for the first quarter ended March 31, 2023. The
Company’s revenue for the first quarter of 2023 was $78.3 million
compared to $122.8 million in the first quarter of 2022. Revenue
for the first quarter of 2023 included $27.7 million of flight
equipment sales compared to $75.9 million of flight equipment sales
in the prior-year period. Flight equipment sales in the first
quarter of 2023 consisted of two cargo aircraft (a 737 and 757),
one airframe, and one engine compared to six aircraft and four
engines, which included five Boeing 757s, in the first quarter of
2022. Lower sales were mainly on account of the pacing of flight
equipment sales, which tend to occur at irregular intervals
throughout the year. As a reminder to investors, the Company’s
revenues are likely to fluctuate from quarter-to-quarter and
year-to-year based on flight equipment sales and therefore,
progress should be monitored based on asset purchases and related
sales.
Nicolas Finazzo, AerSale’s Chief Executive Officer, commented,
“Our first quarter results were in-line with our internal forecast
and expectations for the year. As we have noted in the past, the
timing of flight equipment sales can cause substantial fluctuations
in year-over-year comparisons, which was pronounced in the first
quarter of 2023. Our whole asset program is a critical and
important component of our end-to-end solution, which we believe
offers an attractive ROI. I am pleased to note that our feedstock
acquisitions have been strong year-to-date, which positions us well
to deliver on our full-year commitments as we convert this
equipment in the second half of 2023.”
Asset Management Solutions (“Asset Management") revenue declined
to $48.4 million during the first quarter of 2023 compared to $74.5
million in the first quarter of 2022, as a consequence of the
pacing of flight equipment sales mentioned above. Used Serviceable
Material (“USM”) revenue was roughly the same level as the prior
year quarter, while expected reductions in the number of aircraft
in the lease portfolio drove lower lease revenue. Excluding flight
equipment sales, Asset Management revenue would have been $20.7
million in the first quarter of 2023 compared to $22.6 million in
the prior year period.
TechOps revenue decreased 38.3% to $29.8 million in the first
quarter of 2023 from $48.3 million in the prior year period. The
decline is primarily from a non-recurring sale of a Boeing 737NG in
the first quarter of 2022, which was highly modified for a US
governmental agency and previously used for AerAware flight
testing, partially offset by better performance from AerSale’s
Goodyear on-airport maintenance, repair and overhaul (MRO) facility
as a result of additional capacity dedicated to customer
aircraft.
GAAP net income was $5 thousand in the first quarter of 2023,
compared to $17.2 million in the first quarter of 2022. AerSale
recognized a mark-to-market adjustment expense of $0.3 million
related to the private warrant liability, $2.7 million of
stock-based compensation expenses within payroll expenses, and $0.4
million in facility relocation costs during the first quarter of
2023. In the first quarter of 2022, the mark-to-market adjustment
expense related to the private warrant liability was $1.2 million
and stock-based compensation expenses were $3.8 million. Excluding
these non-cash and unusual items adjusted for tax, Adjusted Net
Income was $3.3 million in the first quarter of 2023 compared to
Adjusted Net Income of $22.2 million in the first quarter of
2022.
Diluted earnings per share was $0.00 for the first quarter of
2023 and $0.32 in the first quarter of 2022. Adjusted for the
non-cash and unusual items noted above, adjusted diluted earnings
per share was $0.07 for the first quarter of 2023 compared to
adjusted diluted earnings per share of $0.41 in the first quarter
of 2022.
Adjusted EBITDA in the first quarter of 2023 was $5.0 million
versus $29.9 million in the first quarter of 2022. Lower adjusted
EBITDA was primarily due to the decrease in flight equipment sales,
which generally have higher margins.
Cash used in operating activities was $62.4 million, mainly due
to continued investment in the 757 passenger to freighter (P2F)
conversion program, and cash invested to increase inventory
available for sale. AerSale ended the quarter with $87.7 million in
cash and has an undrawn $150 million credit facility.
Update on AerAware
The Company has been testing its Enhanced Flight Vision System
“AerAware” on two aircraft since August 2020 in order to obtain FAA
approval to commercialize this product and be issued a Supplemental
Type Certificate (“STC”). The FAA required, among other things,
that AerSale prove this system through FAA-observed flight tests,
with the FAA scheduling five sets of flight tests beginning in
February 2023. The Company successfully completed the first four
sets of flight tests from February through the end of April, the
most important of which proved that the enhanced flight vision
capability met the criteria set out by both the Company and the FAA
for certification. AerSale is currently working diligently to
schedule the fifth test flight, which, once executed will complete
the flight testing aspect of the certification process.
Regarding AerAware, Finazzo added: “The FAA approval process is
lengthy and exhaustive to ensure public safety, which is
underscored by the excellent safety record of US commercial
aviation. Through this process we have continually improved the
system, resulting in safety and quality advancements that lead us
to believe we have a system superior to anything available on the
commercial market today. Further, given the advanced technology we
are bringing to the market, combined with the substantial
investment of time and resources to obtain an STC, we believe we
will be in an excellent position to become the leader in the
category. To that end, after demonstrating to the FAA how the
system worked in low visibility conditions, we received positive
feedback on the low visibility function of our enhanced flight
vision system. We are excited to be near completion considering all
the progress we have made with the FAA and the interest we have
received from multiple potential customers.”
First Quarter 2023 Results of Operations
AerSale reported revenue of $78.3 million in the first quarter
of 2023, which included $27.7 million of flight equipment sales
comprising two cargo aircraft, one airframe, and one engine. The
Company’s revenue for the first quarter of 2022 was $122.8 million
and included $75.9 million of flight equipment sales consisting of
six aircraft and four engines. Excluding Flight Equipment sales,
revenue in the first quarter of 2023 increased to $50.6 million,
from $46.9 million in 2022. Investors should note that the first
and second quarters of 2022 experienced record flight equipment
sales of $75.9 million and $92.5 million, respectively. Flight
equipment sales may significantly vary quarter-to-quarter and
AerSale believes full-year analysis, rather than year-over-year
quarterly comparisons is a better measure of the Company’s
progress.
Asset Management revenue declined 35.0% to $48.4 million in the
first quarter of 2023 on account of lower flight equipment sales.
USM parts sales were close to the year-ago quarter levels, but are
expected to pick up due to improved demand and increased
availability of feedstock. Aircraft leasing revenue declined to
zero by the end of the first quarter as the Company’s last leased
aircraft, a 737-400 cargo aircraft, was sold during the quarter,
eliminating any risk from aircraft leasing at this time. Excluding
flight equipment sales, Asset Management revenue would have been
$20.7 million in the first quarter of 2023 versus $22.6 million in
the prior year period.
TechOps revenue declined 38.3% to $29.8 million in the first
quarter of 2023 from $48.3 million in the year-ago period. This is
driven by the prior year sale of a Boeing 737NG, which was highly
modified for a US governmental agency and previously used for
AerAware flight testing, partially offset by additional capacity
dedicated to customer aircraft at the Company’s Goodyear on-airport
MRO facility. As previously mentioned, AerSale sub-contracted
third-party providers at the beginning of the fourth quarter of
2022 to perform 12 757 P2F conversions initially planned to be
completed at its Goodyear facility, enabling the Company to
increase capacity for third-party services in order to meet
increased customer demand.
Gross margin was 31.2% in the first quarter of 2023 versus 38.0%
in the year ago period mostly on account of the sales mix that
comprised fewer higher margin flight equipment sales.
Selling, general and administrative expenses were $25.2 million
in the first quarter of 2023 compared to $23.8 million in the first
quarter of 2022. AerSale incurred $2.7 million of stock-based
compensation expenses in the first quarter of 2023 versus $3.8
million in the first quarter of 2022.
Loss from operations was $0.8 million in the first quarter of
2023 and income from operations was $22.9 million in the first
quarter of 2022.
Income tax expense was $0.1 million in the first quarter of 2023
and $4.6 million in the first quarter of 2022.
GAAP net income for the first quarter of 2023 was $5 thousand,
compared to $17.2 million in the first quarter of 2022. Adjusted
for stock-based compensation, mark-to-market adjustment to the
private warrant liability, and facility relocation costs, Adjusted
Net Income was $3.3 million in the first quarter of 2023 and $22.2
million in the first quarter of 2022. Diluted earnings per share
was $0.00 for the first quarter of 2023 and $0.32 in the first
quarter of 2022. Adjusted for the above-mentioned non-cash and
unusual items, adjusted diluted earnings per share was $0.07 for
the first quarter of 2023 and $0.41 in the first quarter of
2022.
Adjusted EBITDA in the first quarter of 2023 was $5.0 million,
compared to $29.9 million in the first quarter of 2022. The
reduction in adjusted EBITDA was largely a consequence of lower
flight equipment sales, which usually carry higher margins.
Martin Garmendia, AerSale’s Chief Financial Officer, said: “As
anticipated, our results for the first quarter of 2023 included
significantly lower flight equipment sales compared to the prior
year, which adversely impacted our margins. We expect this trend to
continue through the second quarter of this year given that the
second quarter of 2022 included $92.5 million of higher margin
flight equipment sales. The underlying momentum of our other
businesses remains strong, and we are confident that they will
continue to perform well. We expect a stronger contribution from
the 757 P2F program in the second half of 2023 as we execute on our
planned flight equipment sales.”
2023 Guidance
AerSale still expects to generate revenue of $460 - $490 million
and adjusted EBITDA of $70 - $80 million in 2023. This guidance
reflects the Company’s expected flight equipment sales during the
year and anticipated volume in its ongoing operations. Guidance for
2023 does not reflect potential sales of AerAware as the product is
in its final stages of approval and will be updated once the STC is
issued and the Company can assess initial order and delivery
schedules.
Conference Call Information
The Company will host a conference call today, May 9, 2023, 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 1-888-886-7786, international
callers may use 1-416-764-8658, and request to join the AerSale
Corporation earnings call.
A telephonic replay will be available shortly after the
conclusion of the call and until May 23, 2023. Participants may
access the replay at 1-844-512-2921, international callers may use
1-412-317-6671, and enter access code 07342899. 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 adjustments
relating to our Private Warrants, stock-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 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 from operating
activities as a measure of liquidity (each as determined in
accordance with GAAP).
You should review AerSale’s 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.
Reconciliations of Net Income, the Company’s closest GAAP
measure, to adjusted EBITDA, Adjusted Net Income, and adjusted
diluted earnings per share, are outlined in the tables below
following the Company’s condensed consolidated financial
statements.
First Quarter 2023 Financial Results
AERSALE CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEET
(in thousands, except share
data)
(Unaudited)
March 31,
December 31,
2023
2022
(Unaudited)
Current assets:
Cash and cash equivalents
$
87,695
$
147,188
Accounts receivable, net of allowance for
credit losses of $1,074 as of March 31, 2023 and December 31,
2022
36,269
28,273
Inventory:
Aircraft, airframes, engines, and parts,
net
146,408
117,488
Advance vendor payments
29,008
27,585
Deposits, prepaid expenses, and other
current assets
27,040
13,022
Total current assets
326,420
333,556
Fixed assets:
Aircraft and engines held for lease,
net
33,555
31,288
Property and equipment, net
13,481
12,638
Inventory:
Aircraft, airframes, engines, and parts,
net
77,259
66,042
Operating lease right-of-use assets
30,952
31,624
Deferred income taxes
11,215
11,287
Deferred financing costs, net
432
544
Deferred customer incentives and other
assets, net
560
628
Goodwill
19,860
19,860
Other intangible assets, net
23,587
24,112
Total assets
$
537,321
$
531,579
Current liabilities:
Accounts payable
$
35,148
$
21,131
Accrued expenses
5,373
8,843
Lessee and customer purchase deposits
9,100
17,085
Current operating lease liabilities
4,600
4,426
Deferred revenue
2,698
1,355
Total current liabilities
56,919
52,840
Long-term lease deposits
152
152
Long-term operating lease liabilities
27,539
28,283
Maintenance deposit payments and other
liabilities
75
668
Warrant liability
4,990
4,656
Total liabilities
89,675
86,599
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.0001 par value.
Authorized 200,000,000 shares; issued and outstanding 51,221,386
and 51,189,461 shares as of March 31, 2023 and December 31, 2022,
respectively
5
5
Additional paid-in capital
308,802
306,141
Retained earnings
138,839
138,834
Total stockholders' equity
447,646
444,980
Total liabilities and stockholders’
equity
$
537,321
$
531,579
AERSALE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(in thousands, except per share
data)
(Unaudited)
Three Months Ended March
31,
2023
2022
Revenue:
Products
$
45,495
$
92,368
Leasing
5,622
8,201
Services
27,154
22,237
Total revenue
78,271
122,806
Cost of sales and operating expenses:
Cost of products
31,548
57,928
Cost of leasing
1,123
2,189
Cost of services
21,209
15,986
Total cost of sales
53,880
76,103
Gross profit
24,391
46,703
Selling, general, and administrative
expenses
25,224
23,766
(Loss) income from operations
(833
)
22,937
Other income (expenses):
Interest income (expense), net
1,047
(195
)
Other income, net
233
365
Change in fair value of warrant
liability
(334
)
(1,234
)
Total other income (expenses)
946
(1,064
)
Income before income tax provision
113
21,873
Income tax expense
(108
)
(4,647
)
Net income
$
5
$
17,226
Earnings per share - basic
$
0.00
$
0.33
Earnings per share - diluted
$
0.00
$
0.32
AERSALE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended March
31,
2023
2022
Cash flows from operating activities:
Net income
$
5
$
17,226
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization
2,469
2,865
Amortization of debt issuance costs
39
112
Amortization of operating lease assets
101
-
Inventory reserve
773
(50
)
Provision for credit losses
-
(424
)
Deferred income taxes
72
(775
)
Change in fair value of warrant
liability
334
1,234
Share-based compensation
2,731
3,755
Changes in operating assets and
liabilities:
Accounts receivable
(7,996
)
(5,527
)
Inventory
(48,983
)
28,174
Deposits, prepaid expenses, and other
current assets
(14,019
)
(484
)
Deferred customer incentives and other
assets
68
123
Advance vendor payments
(1,423
)
(1,941
)
Accounts payable
14,018
201
Income tax payable
-
4,975
Accrued expenses
(3,396
)
(1,611
)
Deferred revenue
1,343
(538
)
Lessee and customer purchase deposits
(7,985
)
(3,184
)
Other liabilities
(593
)
(1,083
)
Net cash (used in) provided by operating
activities
(62,442
)
43,048
Cash flows from investing activities:
Proceeds from sale of assets
4,500
-
Purchase of property and equipment
(1,481
)
(1,637
)
Net cash provided by (used in) investing
activities
3,019
(1,637
)
Cash flows from financing activities:
Taxes paid related to net share settlement
of equity awards
(70
)
-
Proceeds from the issuance of Employee
Stock Purchase Plan shares
-
125
Net cash (used in) provided by financing
activities
(70
)
125
(Decrease) increase in cash and cash
equivalents
(59,493
)
41,536
Cash and cash equivalents, beginning of
period
147,188
130,188
Cash and cash equivalents, end of
period
$
87,695
$
171,724
Supplemental disclosure of cash
activities
Income tax (refund) payment
(100
)
277
Interest paid
141
141
Supplemental disclosure of noncash
investing activities
Reclassification of aircraft and aircraft
engines inventory to (from) aircraft and engine held for lease,
net
3,573
(17,942
)
AERSALE CORPORATION
Adjusted EBITDA, Net Income and
Diluted EPS Reconciliation Table (In ‘000s, except per share
data)
(Unaudited)
Three months ended March
31,
2023
% of Total
Revenue
2022
% of Total
Revenue
Reported Net (Loss)/Income
5
0.0%
17,226
14.0%
Addbacks:
Change in FV of Warrant Liability
334
0.4%
1,234
1.0%
Stock Compensation
2,731
3.5%
3,755
3.1%
Facility Relocation Costs
380
0.5%
-
0.0%
Income Tax Effect of Adjusting Items
(1)
(109)
(0.1%)
-
0.0%
Adjusted Net (Loss)/Income
3,342
4.2%
22,215
18.1%
Interest Expense
(1,047)
(1.3%)
195
0.2%
Income Tax Expense (Benefit)
108
0.1%
4,647
3.8%
Depreciation and Amortization
2,469
3.2%
2,865
2.3%
Reversal of Income Tax Effect of Adjusting
Items (1)
109
0.1%
-
0.0%
Adjusted EBITDA
4,980
6.4%
29,922
24.4%
Reported Basic (loss) earnings per
share
0.00
0.33
Addbacks:
Change in fair value of warrant
liability
0.01
0.02
Stock-based compensation
0.05
0.07
Facility Relocation Costs
0.01
-
Income Tax Effect of Adjusting Items
(0.00)
-
Adjusted Basic (loss) earnings per
share
0.07
0.43
Reported Diluted (loss) earnings per
share
0.00
0.32
Addbacks:
Change in FV of warrant liability
0.01
0.02
Stock-based compensation
0.05
0.07
Facility Relocation Costs
0.01
-
Income Tax Effect of Adjusting Items
(0.00)
-
Adjusted Diluted (loss) earnings per
share
0.07
0.41
Forward Looking Statements
This press release includes “forward-looking statements”. We
intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in
Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). All statements other than
statements of historical facts contained in this press release may
constitute forward-looking statements, and include, but are not
limited to, statements regarding our anticipated financial
performance, including all statements set forth in the “2023
Guidance” section above such as expectations of revenue in the
range of $460 - $490 million and adjusted EBITDA in the range of
$70 - $80 million; our expectations that up to twelve aircraft will
be converted to freighters by third parties; the anticipation that
the 757 P2F conversion program is expected to be a strong
contributor to the Company; expectations regarding feedstock, the
expected operating capacity of our MRO facilities and demand for
such services; potential ROI for the flight equipment program; the
anticipated receipt and typical timeline of receipt from the FAA of
an STC for our AerAware product; and general expectations regarding
the AerAware product including customer interest and anticipated
sales. 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,” or the
negative of these or other similar expressions are intended to
identify such forward-looking statements. The forward-looking
statements in this press release are only predictions. We have
based these forward-looking statements largely on our current
expectations and projections about future events and financial
trends that we believe may affect our business, financial condition
and results of operations. You should carefully consider the
foregoing factors and the other risks and uncertainties described
in the Risk Factors, and Management’s Discussion and Analysis of
Financial Condition and Results of Operations sections 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.
Moreover, we operate in an evolving environment. New risk factors
and uncertainties may emerge from time to time, and it is not
possible for management to predict all risk factors and
uncertainties.
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 we qualify all of our
forward-looking statements by these cautionary statements. Except
as required by applicable law, we do not plan to publicly update or
revise any forward-looking statements contained herein, whether as
a result of any new information, future events, changed
circumstances or otherwise.
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™).
For more information about AerSale, please visit our website:
www.AerSale.com.
Follow us on: LinkedIn | Twitter | Facebook | Instagram
____________________________ 1 Adjusted Net Income and adjusted
EBITDA are non-GAAP financial measures. See “Non-GAAP Financial
Measures” and “First Quarter 2023 Financial Results – Adjusted
EBITDA, Net Income and Diluted EPS Reconciliation Table” for a
discussion of why we believe these non-GAAP measures are useful and
a detailed reconciliation of these non-GAAP measures to the most
directly comparable GAAP (Generally Accepted Accounting Principles)
measure.
2 A reconciliation of non-GAAP adjusted EBITDA guidance to
forecasted net (loss) 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 cannot be
reasonably predicted without unreasonable efforts.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230509006086/en/
Media: AerSale: Jackie Carlon (305) 764-200
media.relations@aersale.com
Investors: AerSale: AersaleIR@icrinc.com
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