AerSale Corporation (ASLE)

[Enterprising Investor]

AerSale Reports Fourth Quarter and Full Year 2021 Results
2021 Highlights (3/14/22)

- Full year 2021 revenue of $340.4 million, up 62.9% year-over-year.

- Full year 2021 GAAP net income of $36.1 million, or 10.6% of sales.

- Full Year 2021 Adjusted Net Income of $63.6 million, or 18.7% of sales.

- Adjusted EBITDA of $89.3 million or 26.2% of sales for full year 2021, up 73.2% year-over-year.

- Flight equipment sales included nine aircraft, two airframes, and ten engines during 2021.

- Expect opportunities to monetize 15 Boeing 757s in 2022 and 2023 as freighter markets continue to grow with the majority expected to be monetized in 2022.

- Provides 2022 guidance: expects revenue in the range of $420 - $450 million and adjusted EBITDA in the range of $80 - $90 million.

MIAMI--(BUSINESS WIRE)--AerSale Corporation (Nasdaq: ASLE) (the “Company”) today reported results for the fourth quarter and full year ended December 31, 2021.

The Company reported fourth quarter 2021 revenue of $116.8 million compared to $49.4 million in the year ago period. Revenue for the fourth quarter of 2021 included flight equipment sales of $73.1 million, while the prior year period did not include any flight equipment sales. As a reminder to investors, the Company’s revenues may 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.

The improvement in Asset Management Solutions (AMS) revenue during the fourth quarter of 2021 was partially offset by lower revenue from maintenance, repair and overhaul (MRO) activities at AerSale’s Goodyear facility within TechOps, following a reallocation of resources to the Company’s cargo conversion line for its Boeing 757 aircraft. The impact from the reallocation of resources was partially offset by strong maintenance related activities, which benefitted from the overall recovery in the commercial aerospace end markets.

Fourth quarter 2021 GAAP net income was $11.2 million versus $0.3 million in the prior year period. Improved net income performance was driven by the strong AMS contributions noted above. In the fourth quarter of 2021, AerSale recognized an unrealized loss on investment of $5.4 million, a mark-to-market adjustment to the warrant liability of $0.2 million, $3.8 million non-cash stock-based compensation expense within payroll expenses, and $1.6 million in non-cash inventory write-offs recorded in the cost of products line. This is compared to $1.0 million of non-cash stock-based compensation in the fourth quarter of 2020. Adjusted Net Income excluding these non-cash items was $22.3 million for the fourth quarter of 2021, compared to $0.2 million in the prior-year period. Please see the non-GAAP reconciliation table at the end of this press release for additional details on these amounts.

Diluted earnings per share was $0.21 for the fourth quarter of 2021. Adjusted for the non-cash mark-to-market adjustments to warrant liability, unrealized loss on investment, stock-based compensation, and inventory write-offs, diluted earnings per share was $0.32 for the fourth quarter of 2021. Diluted earnings per share is not comparable to the prior year quarter and prior year due to the public listing of AerSale on December 23, 2020.

Fourth quarter 2021 adjusted EBITDA was $28.6 million, compared to $3.0 million in the prior-year period. The increase in adjusted EBITDA and margins was driven by higher revenues and a favorable sales mix that resulted in higher margins. Please see the non-GAAP reconciliation table at the end of this press release for additional details on these amounts.

With the impact of the Omicron variant receding and major economies removing restrictions related to COVID-19, AerSale expects the commercial market recovery to continue on a stronger footing going forward. As consumer air travel rises and airlines add to their services, AerSale anticipates higher MRO volume from the recommissioning of commercial aircraft and greater demand for used serviceable material (USM) parts for maintenance and overhaul activity. In addition, the Company is on track to monetize its remaining 15 Boeing 757s in 2022 and 2023 as the freighter markets continue to grow. The bulk of the monetization is expected to occur in 2022.

Cash flows from operating activities were $79.1 million primarily due to strong GAAP net income results and increased deposits related to 2022 contracted sales. The Company ended the year with $130.2 million of cash and has an undrawn $150 million credit facility.

Nicolas Finazzo, AerSale’s Chief Executive Officer, commented, “We have executed well and made considerable progress during our first year as a public company. This result is a solid testament to the strong performance of our purpose-built, integrated, multi-dimensional adaptive business model and the resilience of our workforce. Our strategic acquisition of the 757 fleet in 2020 has proven to be a strong contributor to our consolidated results, which we expect to continue through 2022 and into 2023. This is supported by an improving commercial backdrop, and continued business development progress across the Company.”

Finazzo concluded, “We also redeemed all of our outstanding public warrants at the end of the year in a cashless redemption, further strengthening our financial profile and positioning us to take advantage of upcoming organic and inorganic opportunities.”

Fourth Quarter 2021 Results of Operations

AerSale reported revenue of $116.8 million for the fourth quarter of 2021, which included $73.1 million of flight equipment sales. Revenue in the fourth quarter of 2020 was $49.4 million and did not include any flight equipment sales.

AMS revenue increased by $76.2 million to $93.6 million in the fourth quarter of 2021 primarily on account of the above-mentioned flight equipment sales. Consumption of USM parts for maintenance strengthened through the quarter as airlines returned aircraft into operation against the backdrop of an upswing in air travel, especially prior to the spread of the Omicron variant.

Revenue from our Technical Operations (“TechOps”) segment was down 27.5% to $23.2 million in the fourth quarter of 2021, largely due to the reallocation of resources at the Company’s Goodyear MRO facility dedicated to the Company’s Boeing 757 passenger-to-cargo conversions.

Gross margin was 37.8% in the fourth quarter of 2021 compared to 26.6% in the fourth quarter of 2020. The increase was a result of a greater mix of high-margin flight equipment sales.

Selling, general and administrative expenses were $24.4 million in the fourth quarter of 2021 compared to $15.0 million in the fourth quarter of 2020, mainly on account of higher payroll expenses, which included non-cash stock-based compensation of $3.8 million and $1.0 million in the fourth quarter of 2021 and 2020, respectively. In addition, the fourth quarter of 2020 included a $1.9 million credit related to merger costs previously expensed. The Company did not receive any Payroll Support Program proceeds during the fourth quarters of 2021 and 2020.

Income from operations was $19.8 million in the fourth quarter of 2021 versus a loss from operations of $27 thousand in the fourth quarter of 2020.

Income tax expense was $2.9 million in the fourth quarter of 2021 compared to a benefit of $0.9 million in the fourth quarter of 2020.

GAAP net income was $11.2 million for the fourth quarter of 2021 compared to $0.3 million in the fourth quarter of 2020. Adjusted for non-cash stock-based compensation, inventory write-offs, unrealized loss on investment, and mark-to-market adjustments to the warrant liability, Adjusted Net Income was $22.3 million.

Diluted earnings per share was $0.21 for the fourth quarter of 2021. Adjusted for the impact of the change in FV of the warrant liability, stock-based compensation, unrealized loss on investment, and inventory write-offs, diluted earnings per share was $0.32 for the fourth quarter of 2021. Diluted earnings per share for the fourth quarter of 2021 is not comparable to the fourth quarter of 2020 due to the public listing of AerSale on December 23, 2020.

Adjusted EBITDA in the fourth quarter of 2021 was $28.6 million, or 24.5% of revenue, versus $3.0 million, or 6.1% of revenue in the fourth quarter of 2020. Higher revenue as well as a favorable sales mix comprising a larger portion of higher margin flight equipment sales benefitted adjusted EBITDA during the fourth quarter of 2021.

Full Year 2021 Results of Operations

For the full year 2021, AerSale reported consolidated revenue of $340.4 million, which included flight equipment sales of $156.9 million, compared to $208.9 million in full year 2020, which included $3.1 million of flight equipment sales.

AMS revenue was $232.0 million in full year 2021 compared to $98.8 million in full year 2020. The increase was primarily the result of higher flight equipment sales, partially offset by lower leasing revenues due to a lease return payment recognized in the prior year and lower leasing volume as three passenger Boeing 747 leases ended as scheduled at the end of 2020. Sales of engine parts also increased during the year.

Revenue from TechOps was 1.6% lower at $108.4 million in 2021. Full year segment revenue was unfavorably impacted by the reallocation of resources to the Company’s cargo conversion program, partially offset by higher revenue from rehabilitation and recommissioning of aircraft at the Company’s aircraft MRO facilities in Roswell and increased volume at the Company’s component MROs.

AerSale is on track to monetize the rest of its Boeing 757 investment through 2022 and 2023. The Company expects to benefit from a pickup in MRO volume due to the ongoing recommissioning of commercial aircraft and greater demand for USM parts consumption for overhaul activity.

Gross margin was 35.1% in 2021 compared to 25.3% in 2020, which was primarily driven by the change in sales mix during the year as noted previously.

Selling, general and administrative expenses, net of the Payroll Support Program proceeds, were $77.5 million in 2021 compared to $55.6 million in 2020. An uptick in payroll, public company costs, and increased support costs related to the Boeing 757 package drove the increase in selling, general and administrative expenses. AerSale received $14.8 million and $12.7 million in Payroll Support Program proceeds during 2021 and 2020, respectively. In addition, the Company incurred $12.7 million of non-cash stock-based compensation within payroll expenses in 2021, compared to $1.0 million recognized in 2020.

Income from operations was $56.7 million in 2021 versus $11.3 million in 2020.

Income tax expense was $11.7 million in 2021 compared to $1.7 million in 2020.

GAAP net income was $36.1 million in 2021 compared to $8.1 million in 2020. Adjusted for non-cash loss on investment, stock-based compensation, inventory write-offs, unrealized loss on investment, and mark-to-market adjustments to the warrant liability, Adjusted Net Income was $63.6 million.

Adjusted EBITDA for 2021 was $89.3 million, or 26.2% of sales, compared to adjusted EBITDA of $51.5 million, or 24.7% of sales, in 2020. The margin expansion was largely attributable to high-margin flight equipment sales, the impact of which was partially offset by lower leasing revenues as a lease return payment was recognized in the prior year. The Company’s margin profile also continued to benefit from the ongoing higher margin aircraft storage and related maintenance activities. Adjusted EBITDA benefitted from $14.8 million in Payroll Support Program proceeds during 2021, while the corresponding benefit in 2020 was $12.7 million.

Martin Garmendia, AerSale’s Chief Financial Officer, said: “Our internal adjustments and superior execution in 2021 against the backdrop of the pandemic have yielded success. In addition to being more resilient, we are also on a stronger operational and financial footing now. We have thrived in this challenging commercial aviation market with the diversity of our revenue sources creating a counter-cyclical hedge. We look forward to generating internal and external stakeholder value as we seek to achieve our goals over the next few years.”

2022 Guidance

AerSale expects revenue of $420 - $450 million and adjusted EBITDA of $80 - $90 million in 2022. In providing this guidance, the Company is mindful that recent geopolitical events related to the Russian invasion of Ukraine may impact the global commercial aerospace industry and related macro environment, including, and not limited to, supply chain disruptions, escalating sanctions, and an impact on flight activity due to higher fuel prices. Given the recency of these events and the unpredictability of how their impact may ultimately unfold, AerSale has not specifically taken these factors in providing this guidance beyond taking into consideration known impacts that the Company has already identified and adjusted for.

Further, 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, and continued requests for passenger-to-freighter conversions and other TechOps products and services. AerSale continues to make progress on the FAA certification of its innovative AerAware product. The Company is progressing toward certification, but labor constraints have impacted the timely completion of software validation needed for certification until the second quarter of 2022. While AerSale remains confident that certification will be completed in 2022, it has only included modest AerAware sales in its guidance for 2022 to account for the ramp-up phase to commercialize this product once the Supplemental Type Certificate for AerAware is issued to AerSale by the FAA.

The ongoing and continued monetization of the Boeing 757 fleet acquisition is expected to be the predominant driver of the AMS segment. AerSale expects to sell the remaining Boeing 757s as converted freighters in 2022 and 2023 as a result of strong demand for cargo converted aircraft.

Conference Call Information

The Company will host a conference call today, March 14, 2022 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 1-877-407-3982, 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 March 28, 2022. Participants may access the replay at 1-844-512-2921, international callers may use 1-412-317-6671, and enter access code 13727622. An archived replay of the call will also be available on the Investors portion of the AerSale website at https://ir.aersale.com/.

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™).

https://www.businesswire.com/news/home/20220314005640/en/AerSale-Reports-Fourth-Quarter-and-Full-Year-2021-Results