AerSale Corporation (ASLE)

[Enterprising Investor]

AerSale Reports Second Quarter 2021 Results (8/06/21)

Second Quarter 2021 Highlights

-Revenue of $91.9 million.

-GAAP net income of $16.5 million, or 18.0% of revenues.

-Adjusted EBITDA of $30.4 million, or 33.1% of revenues.

-Flight equipment sales included three aircraft, one airframe, and two engines in the quarter.

-Commercial activity continues to improve as expected.
2021 guidance unchanged; revenue of $340- $360 million and adjusted EBITDA of $60 - $70 million1.

-Poised to capitalize on asset acquisition opportunities with debt free balance sheet.

MIAMI--(BUSINESS WIRE)--AerSale Corporation (Nasdaq: ASLE) (the “Company”) today reported results for the second quarter ended June 30, 2021. The Company posted second quarter 2021 revenue of $91.9 million compared to $45.4 million in the second quarter of 2020. Revenue for the second quarter of 2021 included $42.7 million of flight equipment sales.

In addition to flight equipment sales, revenue improved during the period as maintenance work continued at an elevated pace as airlines recommissioned parked aircraft. The impact of asset sales was partially offset by lower leasing volume as three passenger B747 leases ended last year as scheduled, as disclosed previously.

GAAP net income for the second quarter of 2021 was $16.5 million, or 18.0% of revenue, compared to a GAAP net loss of $7.9 million in the second quarter of 2020. Adjusted EBITDA in the second quarter of 2021 was $30.4 million, or 33.1% of revenue, compared to $12.9 million, or 28.4% of revenue in the second quarter of 2020.

The increase in adjusted EBITDA and margins was driven by higher revenues and a favorable sales mix that resulted in higher margins. The Company recognized $8.4 million in Payroll Support Program proceeds during the quarter compared to $6.3 million in the second quarter of 2020. As a reminder, the Company incurs certain offsetting costs to the Payroll Support Program to retain its program eligibility.

AerSale expects the strong momentum to continue into the second half of 2021 as the ongoing recovery of the commercial markets continues and higher MRO volume from the recommissioning of commercial aircraft, greater demand for USM parts consumption for overhaul activity, and sales from its Boeing 757 procurement program drive growth.

Nicolas Finazzo, AerSale’s Chief Executive Officer, commented, “We are executing well and are poised to benefit from the ongoing recovery of the commercial markets during the second half of the year. Our purpose built, integrated business model is designed to perform across cycles and end markets, which has been demonstrated since the start of the pandemic. During the period, our MRO facilities drove incremental volume as aircraft were recommissioned, and the strategic investments we made in the freighter market bolstered returns to our shareholders as we delivered on our 757-freighter conversion program.”

Finazzo added, “Alongside our core aircraft supply chain business, we continue to make meaningful progress in our high growth, high margin engineered solutions platform. Together with our potential launch customers, suppliers and federal regulators, we continued to demonstrate and refine AerAware, a wearable heads up display product, which holds the potential to transform the company given the multi-billion dollar addressable market for the product. In addition, during the quarter we also saw an acceleration in demand of our AerSafe product, which satisfies an FAA airworthiness directive requiring wire separation of the fuel quantity indication system by May 2022. These highly engineered, regulated products present a differentiated product suite for AerSale, and are an important contributor to our long-term growth plans.”

Second Quarter 2021 Results of Operations
For the second quarter of 2021, AerSale reported revenue of $91.9 million, which included $42.7 million of flight equipment sales consisting of three aircraft, one airframe, and two engines. Revenue in the second quarter of 2020 was $45.4 million, including $3.1 million of 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 $39.4 million or 189% in the second quarter of 2021 largely due to flight equipment sales mentioned above. The consumption of used serviceable material (USM) parts for maintenance and overhaul activity rose as air travel picked up and airlines returned aircraft into operation. The increase was partially offset by lower leasing volume as three passenger B747 leases ended as scheduled at the end of 2020.

Revenue from TechOps was up 29.0% to $31.6 million in the second quarter of 2021, primarily driven by storage, maintenance, rehabilitation, and recommissioning of aircraft at the Company’s aircraft MRO facilities. Looking forward, AerSale expects the substantial quantity of aircraft at its on-airport MRO facilities to provide the Company with upside opportunities for reactivation work, heavy maintenance, and cargo conversion; and a strategic advantage in identifying feedstock for its Asset Management Solutions segment.

Gross margin expanded to 33.4% in the second quarter of 2021 compared to (4.7%) in the second quarter of 2020. The improvement was due to the high-margin sale of flight equipment after channeling these assets through AerSale’s unique multi-dimensional redistribution machinery and lower inventory impairments during the quarter.

Selling, general and administrative expenses, net of the payroll support program proceeds, were $8.6 million in the second quarter of 2021 compared to $7.7 million in the second quarter of 2020. The uptick in payroll and public company expenses fully offset the contribution from the Payroll Support Program. The Payroll Support Program proceeds were $8.4 million versus $6.3 million in the second quarter of 2020.

Income from operations was $22.2 million in the second quarter of 2021 versus a loss from operations of $9.8 million in the second quarter of 2020.

The provision for income tax was $5.1 million in the second quarter of 2021 compared to a benefit of $2.3 million in the second quarter of 2020.

GAAP net income for the second quarter of 2021 was $16.5 million or 18.0% of sales versus a net loss of $7.9 million in the second quarter of 2020.

Diluted earnings per share was $0.38 for the second quarter of 2021. Diluted earnings per share for the second quarter of 2021 is not comparable to the second quarter of 2020 due to the public listing of AerSale on December 23, 2020.

Adjusted EBITDA for the second quarter of 2021 was $30.4 million, or 33.1% of revenue, compared to adjusted EBITDA of $12.9 million, or 28.4% of revenue, in the second quarter of 2020. The improvement in adjusted EBITDA was due to the high-margin sale of flight equipment and aircraft storage and related maintenance activities and lower inventory impairments, which was partially offset by lower leasing revenues during the period.

2021 Guidance
AerSale anticipates revenue of $340–$360 million and adjusted EBITDA of $60-$70 million in 2021. This outlook is based on an improvement in activity in the Company’s AMS segment, strong demand for its on-airport MRO services accelerating demand in cargo and E-Commerce markets, and increased requests for passenger-to-freighter conversions and other TechOps products and services.

The main growth driver of the Asset Management segment is expected to be the ongoing and continued monetization of the 24 aircraft Boeing 757 fleet acquisition. Because of the strong demand for cargo conversion aircraft, AerSale continues to expect to sell the majority of the available aircraft in 2021. For TechOps, in addition to the continued contributions from storage activities, the Company also expects increased contribution from its component MRO businesses driven by the aviation recovery.

Conference Call Information
The Company will host a conference call today at 8:30 am 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- 877-407-3982, international callers may use 1-201-493-6780, and request to join the AerSale Corporation earnings call.

A telephonic replay will be available shortly after the conclusion of the call and until August 20, 2021. Participants may access the replay at 1-844-512-2921, international callers may use 1-412-317-6671, and enter access code 13721934. An archived replay of the call will also be available on the Investors portion of the AerSale website at https://ir.aersale.com until August 20, 2021.

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