Good afternoon, everyone. My name is Sheila Kahyaoglu with the Jefferies Aerospace Defense and Airlines Equity Research team. Thanks for joining us for our second annual MRO Summit. We have AerSale here, CFO Martin Garmendia, who we were lucky enough to meet with at MRO Americas as well. Martin joined AerSale in 2015 as VP and controller, with his responsibilities including accounting and tax functions. He got promoted to CFO back in 2018. Martin, thanks so much for being here and providing insights on the market and AerSale, of course. We appreciate your time. Thanks very much. Maybe just a little bit of background on AerSale, if you don't mind, for viewers that might not be familiar with the company. If you could give us a background, that'd be helpful. Sure. The simplest way to describe AerSale is that we sit at the intersection of really three aftermarket businesses that most companies do as standalones. We trade and we lease mid-life aircraft and engines. We also tear those assets down for parts, used serviceable material, or USM, when that's the better economic outcome. We operate a network of MRO facilities that service the broader fleet. We do all that as one company, which gives us optionality that pure-play asset managers or pure-play MRO shops just don't have. We report using two reporting segments, Asset Management Solutions, which consists of the trading, leasing, and USM businesses. That's where we acquire mid-life aircraft and engines. Those are usually assets that are about 12 - 15 years old, have exited the OEM maintenance or warranty period overall. Then we decide asset by asset, whether the best outcome is to lease the asset, sell it as a whole asset, or part it out as USM. That segment is much more transactional-driven by nature, but we've been intentionally shifting the mix more towards USM and leasing to build more recurring revenue quarter-over-quarter. TechOps is our service platform. We operate 6 MRO facilities. Three are on-airport heavy maintenance and modification facilities. We have a location in Goodyear, Arizona, Roswell, New Mexico, and Millington, Tennessee. The remaining three are component MROs with two in Miami, covering accessories and systems and aerostructures, and a full landing gear overhaul facility in Rio Rancho, New Mexico. Importantly, we have meaningful unused capacity inside this existing footprint, which lets us grow without significant new capital. The opportunity overall for AerSale is supported by a strong market dynamic, an aging global fleet, high passenger demand, and supply chain constraints that are extending the life of in-service aircraft. What differentiates us is the ability to move across the value chain. Got it. Maybe if you could just talk a little bit about your three different business units. How do you think about just your competitive landscape as well? Yeah. Our competitive landscape really depends on the segment. In the Asset Management side, we're up against the mid-life to end-of-life lessors, asset traders, and parts providers. In TechOps, it's the independent MROs and the OEM-affiliated shops. Where we win is really in our integration. When a customer is making a decision about an aging asset, we're often the only party who can credibly bid on it and extract value it as a lease, as a whole asset, a tear down. We can even provide them with a maintenance solution that allows them to continue to operate that aircraft in an economic manner. That really gives us pricing flexibility, but more importantly, it lets us source assets at attractive economics because we have more than one way to monetize what we acquire, much more than a single-line competitor does. Maybe I should have added all these questions in. How do we think about pricing? You've mentioned it a few times, folks have before you as well today. How do you think about what pricing was in 2025? How do you think about it in 2026 and 2027? Overall, for assets overall and acquisitions, demand is still extremely strong overall. That's multiple factors from the engine side. It's OEM delays with the geared turbofan issue. The global fleet is getting older. Overall, I think it's at a historic 15-year high. We're still seeing a very competitive dynamic, especially when it comes to assets that you can easily operate. On the MRO side, we're seeing kind of similar from an aircraft or on-airport MRO perspective, limited overall capacity. As from an engine side, long lead times in getting those engines repaired. We really have an advantage in the inventory that we've bought and that we can monetize at these high overall prices, and in MRO, that we have that available capacity to really meet that demand. Can you talk a little bit about pricing, how you see that, even given the current demand environment, it's still solid? Yeah. Like I said, it's still overall solid overall. There's been obviously some constraints or some concerns, I should say, with the impact of fuel prices and how that's affecting passenger airlines overall. Obviously, very close to home here, the issue, what happened with Spirit Airlines and the wind down of that operation overall. We continue to monitor what the demand outcome will be of those operators. What we really see is that there continues to be very strong demand from a passenger side. I think even though we're starting to see some impacts from the recent global situations, the market is still at a historic high. That is allowing us to continue to keep pricing high. Customers are continuing to focus on really maintaining their aircraft. In times when things get rough, it's when you really look for value-added solutions such as USM, options that allow you to conserve cash, such as leasing an engine rather than repairing an engine. We still see that dynamic strong, pricing also remaining strong. Maybe if you could just talk about the jet fuel impact. No demand impact thus far, but I guess how would you see the impact within your asset business versus your TechO ps business? Timing-wise, historically, how has that been? Yeah, I think for right now, and we talked a little bit when we were at MRO, we're not really seeing an overall impact there. As I previously mentioned, passenger demand has dropped, it still remains at historic high levels. We're still seeing our customers really prioritizing keeping their aircraft in service. We haven't really seen a measurable change in maintenance activity or maintenance demand at this stage. Obviously, that's something that we continue to monitor. Fuel makes up one of the largest expense items of any operator. We continue to make sure that we understand what those overall impacts are. Really any impact to us would really mean that overall capacity would need to be reduced. Aircraft can go with a lower load factor. As long as those aircraft continue to operate, they're going to continue to require maintenance. They're going to continue to require engines. It really would have to be something that really goes through on a much longer term basis that you'll actually start seeing aircraft grounded, being put in maintenance storage programs, or ultimately retired, that you would really start to see an overall impact. No, that's super helpful. I guess just maybe digging into the asset business a little bit. I guess, what percentage of that is USM? Is it 100% USM? How do we think about that? Our USM business is probably a little over 50% of our Asset Management side. It's important to give you a factor. When we buy aircraft and engines, we analyze them for the highest use. What's my highest yield return on that investment overall? A lot of the material that we've been able to buy in the last few years has really been material that is not ready to fly. We've been tearing it down into USM parts. Compared to two years ago, we had very limited inventory, and we've been successful at buying inventory and increasing our inventory positions. That's allowing us to increase our USM sales overall. I think last year we were about over $120 million of revenue coming from the USM side. When it comes to USM, again, we look at that USM, some of that material, and we've had those opportunities in the first quarter of this year, is to actually use some of that USM material and repair engines overall because we're seeing very strong opportunities, especially in the CFM56 market, where we could potentially put engines and get those out into the market, either through leasing or selling them, and it's a higher overall use. Again, USM is one of the things we've always said is it has almost an indefinite or an infinite demand. There's not enough USM out there to meet the customer's needs. Because it has a value proposition for operators usually selling for 20%-30% less than new, it's always going to be something that's attractive to operators. As I mentioned earlier, especially in a situation where other costs such as fuel are going up. I guess, how do you measure the health of the USM market? You said USM sales are up to $120 million. You have more inventory. What's a healthy level, like an inventory turn? As you see airlines maybe cut capacity or exit the market, how do you think that impacts USM and pricing? Obviously, if actually there's a retirement of aircraft and aircraft are sitting on the ground, there's potentially less overall demand. Funny part of USM is that that actually creates opportunities for availability to buy USM opportunities. As I mentioned earlier, there's not enough USM today to really meet customers' needs. In that scenario, you'd have aircraft on the ground. You'd have increased retirements. Obviously, prices would adjust, so you would be paying less for those overall assets, but we would still then be able to provide that USM into the overall market, and we would make overall returns. We've actually been waiting for an opportunity for the market for retirements to increase, and that hasn't happened. We thought it would happen with COVID. We thought it would happen with different events, but really overall dynamics, and a lot of it has been the OEM issues that have occurred, whether it's on the MAX or more recently on the engines that really has not forced or had those aircraft retire. As I mentioned, historically, I think the average fleet life is 15 years. Definitely a lot older aircraft going along. If there were to be an event that would force more retirements, that would be a positive and that we would be able to buy more USM inventory. I don't know if you have a retirement forecast out there that you run your business by, or I guess we're not really seeing increases in retirements, but how do you think about that quantitatively, like the percentage of the fleet that's retired and if you have any views on different aircraft or engine types? Yeah. We've seen a lot of different other folks kind of forecasts on retirement forecasts. As I said, we've been waiting for years for really a retirement wave to come in overall. What we do know is the fleet is older, so once the OEMs start producing or going through their backlog, which more than likely will go beyond 2027 or even 2028, we'll start seeing some of those assets retire overall. Platforms like the 737, the NG, the A320 ceo. Again, because of the reliability of those platforms, specifically on their engines on the CFM56 and V2500, we see operators are going to continue to hold on to those aircraft. They provide them really cheap lift. The reliability of those aircraft, especially compared to some of the newer generation, are going to continue to make it attractive to keep on those overall aircraft. Again, we welcome an opportunity where there are some overall retirements because, again, we'll be in a great position to buy some of those assets and serve our customers' USM needs. Maybe switching gears a little bit, if we could talk about lease rates. What are you seeing in lease rates for aircraft and engines? For lease rates overall, we definitely have seen an improvement pretty much across the board, particularly on the engine side. Engine availability remains tight across most mid-life to mature platforms, that's being driven really by the three reinforcing factors: limited shop visit capacity, longer material lead times, and the ongoing issues with newer engines that are really pulling spare capacity out of the market. The result is that operators are leaning harder on the in-service fleet, which keeps demand strong for both replacement engines and spares. That aligns very well with our portfolio. In fact, we're seeing our monthly lease rate factors have been improving quarter-over-quarter. The amount of assets we've been able to deploy and how long they've been deployed has also improved. We're in a good position because we have several engines that are in repair, a little over 10 engines, so we feel good on being able to place those assets in the market. Got it. No, that's super helpful. Any quantifications you could give on narrow body versus wide body, what you're seeing the year-over-year increase? Well, we are definitely seeing from an overall platform perspective, really strong demand on the CFM56 and the V2500 platforms. Again, the overall aircraft platforms on the 737 and A320. Now, again, we look at all overall mid-life assets. We're looking at 757s, 767s, if you can get them, kind of overall opportunities. Definitely a lot of demand that we're seeing on the narrow body side. Got it. Maybe if we could talk about GTF. I know you mentioned that at MRO. How are you seeing that process or program improve itself? I know Volaris made some not-so-polite comments just last month. What are you seeing on that program? Sure. Just to be clear, we're not directly in the GTF leasing business. That's a new technology platform, and we haven't entered that yet. Having said that, the GTF situation is definitely having a knock-on effect on the platforms that we serve. Operators are dealing with AOG aircraft. Back in Goodyear, we have a series of aircraft that are awaiting engines. Operators, in fact, some of those being Spirit, have really not been able to access that fleet. They're trying to source replacement wherever they can find it, and that's really driven that incremental demand for the platforms that I mentioned before, the V2500 and the CFM56 in particular. Got it. I guess, can we just talk about TechOps for a minute, too? I want to give that segment love. How do we think about your MRO solutions and what you're seeing quarter to date or year to date in that business? Sure. In TechOps, let's break it off into our airframe and component MRO. Heavy maintenance and modifications airframe side, demand has been strong across the board. Definitely supported by what I mentioned earlier, higher utilization or higher passenger demand and the overall age of the fleet. When it comes to our Goodyear facility, we're definitely seeing an increase in demand. Spirit, as I mentioned earlier, in their wind down, we have a lot of yellow aircraft sitting in our backyard waiting for those aircraft to be redeployed out. A lot of those are A320s, NEOs, and CEOs overall. We're working with those leasing companies to be able to put those on storage maintenance programs. Once the either engines are available or they have new lessors, getting those back into the overall market. We're happy to note in our brand new Millington facility that came online last year, we actually won an agreement with a domestic regional carrier. We're doing a full line maintenance program for them. We'll be having about three of those aircraft running through that facility. Right there, we've brought now that facility into full capacity. Again, very strong overall. We've also noted on our component side, our landing gear facility has been awarded several contracts that we're working on this year. We feel very bullish on that overall business and the overall demand curve there. We expect a lot of growth from that side of the business. Our aerostructures facility just recently opened, so we're excited about that. We've expanded our capacity almost threefold. We're starting to work with customers to get all the approvals and certifications, so we expect a quick ramp-up on that overall business. That's a really important point when I talk about any of our MROs. We have available capacity, so as the market continues to be strong, we can continue to monetize that without having to spend any additional capital. Got it. No, that's super helpful. Next one I have to ask you, and it kind of works with your Engineered Solutions too, AI. What are you guys doing when it comes to AI across AerSale? AI has definitely been a very popular subject. In fact, one of our public peers notes it as part of their overall name. Look, the AI opportunities are definitely strong and we're really seeing it overall. Aviation is a very data-driven business when it comes to assets back-t o- birth trace and all documentation is really what makes a part valuable. If you don't have any of that documentation, you really just have a piece of metal. Really that's where we've been using our AI technologies to really help us on looking at that data, and really that's where we're going to move the economics. That's in determining asset valuation, pricing, doing operational planning. That's where we have the largest internal data set, and that's where better decisions would really translate into a return on capital. And currently we're also evaluating an asset acquisition. We're combining our own inventory positions, real-time market availability, platform-level demand signals to really price more precisely than we could years ago. We've mentioned this in the past. We have over 15 years of data, and we really use that data whenever we go out and we deploy capital. Using AI allows us to more efficiently go through that data, put more current live factors into that information, and not only be able to execute an even more disciplined approach, but also better performance and better tracking of performance after we've deployed that capital. Great. That's super helpful. I guess, do you see it more as a revenue driver for you guys, or do you see more of it as a profit driver? Where do you think it would be more useful, in your Asset business or your MRO business? I think right now our focus, as I mentioned, has really been on the asset side, and because, again, it's so data-driven and flowing through that. Definitely for predictive maintenance, efficiencies of scheduling, there's a lot of opportunities that we're exploring also on the MRO side to really make that a competitive advantage. Would we use that to sell an AI product to others? Probably not directly, but customers will get the benefit from a much more efficient process when they're dealing with either our Asset Management Solutions side or our TechOps side. Right now it's probably not transformative overall, but definitely the opportunities are real. We're already taking advantage of that technology. Super helpful. Maybe last one just to wrap it up, three takeaways you want investors to walk away with when it comes to AerSale and how to think about the business. Sure. I would say, first, the aftermarket fundamentals remain strong. Aging fleets, continued strong passenger demand, and supply chain constraints are extending the life of the existing fleet, and we'd expect those dynamics to really support the industry well past 2027. Second, our integrated model is really our differentiator. The ability to move the same asset across leasing whole assets, USM, or, as I mentioned, supported through MRO, depending on the market, really gives us a flexibility that single-line competitors just don't have. That flexibility really does compound. Third, we're deliberately shifting the mix towards leasing service and USM and away from opportunistic whole asset sales as we've done in the past. That improves the consistency, quality, and visibility of our earnings over time, which I know is one of the most important things we can do for shareholders at this time. No, that's super helpful, and I feel like more and more shareholders are getting familiar with AerSale, so we really appreciate these, Martin Garmendia, and thank you everyone for joining. They're super helpful. Thanks a lot.