Good afternoon, everyone. My name is Sheila Kahyaoglu with the Jefferies Aerospace, Defense, and Airlines Equity Research Team. Thanks so much for being here for our last fireside chat of the day. We have Joe Adams from FTAI Aviation. Joe's going to start with a few minutes of prepared remarks, and then we'll get to Q&A. Thanks very much, Sheila. Appreciate being here once again. It's a great conference, and it's a great way to kick off the fall season with a lot of energy. Just as a recap, FTAI Aviation is our company's mission is to be the largest aftermarket engine power provider in the industry, commercial aviation for today, two of the most popular and widely used engines in the industry, which is the V2500 and the CFM56 engine. We've designed our business to be a full service provider to owners and airlines in that we pre-build engines and do the maintenance work on engines that we own so that the airline or the lessor doesn't have to do engine maintenance, which is an increasingly complex and difficult part of the engine once that engine is off of its original power by the hour program from the OEM or in the quote, "aftermarket." What we do is that our business is we go acquire run-out engines. We rebuild them in three maintenance shops that we own, and then we go to market to offer those as finished products to the owner, and we offer them either for sale, for exchange, or for lease. So when we go to the customer and say, "We can save you time and money because you never have to do the engine maintenance work yourself. You don't have to have a team of engineers. You don't have to have spare engines. You don't have to ship it around the world or send your team to live out of a hotel in Germany while that's being done. All those costs go away. You have no risk of negative surprise on that engine event, costing you a lot more than you expected, and we'll provide you a great deal of flexibility. If you want an engine for six months or six years, on a lease, we'll provide that, too, and we'll always have a spare engine available for you." Our whole business model is built around us being the biggest, the best, and most efficient provider of that power to the industry, so they can outsource that activity to us. And so today we, you know, we have wide acceptance from the customer base. It was originally, you know, a challenge to get people to accept a different way of doing business, but once people try it and, and get used to not having, you know, a lot of those headaches or downside risks, we found that people love the product, and we have over 100 customers who've used our Aerospace Products, products and, and growing out of a universe of probably about 600 total users. Our goal for the company is to achieve about a 25% market share. The industry spends on an annual basis for V2500 and CFM56 engine maintenance annually, about $22 billion a year. So our goal is to achieve a 25% market share, and today we've increased that over... from last year, about 5% to about 9% this year. So we still have a lot of room to continue to grow, and as I say to people, a lot of the, you know, products that we've developed and implemented are relatively new. Today, I was saying we celebrated our one-year anniversary of owning Montreal, which feels like it was actually five years- But it was only a year ago. We bought it, it was 50 engines, 50 modules a quarter of production, and today it's 100 modules per quarter. We bought the facility in Rome in the spring of this year, and we expect to produce 100 modules this year from that facility, and 200 next year. So we're on a, you know, big ramp in terms of production, because the customer, you know, acceptance is so high. So that's sort of an overview, and obviously, I know you're gonna have a lot of questions. I have a lot. So let's think about the CFM56 and V2500 overhaul market. If it's $20 billion, you said you've increased this year from 5% last year to 9%, over 100 customers. So how do you think about the incremental customers you've brought on, how you've convinced them to try you out, and what are you seeing going forward? Yeah, so it, I remember a couple years ago when you were... You know, we were talking to you in the beginning, we said, "We're gonna- I also called you Fortress Aviation back then. I know, and Google still does, so can't figure out how to get rid of that, but when we sat down and we created this thing called the Module Factory, and we discovered, like, other people that own the engine, that that engine is built in three different, you know, modules, and you can swap them, and it's a brilliant design because each one of those modules gets delivered with a different number of hours and cycles on it, and so you can pick up a lot of efficiency by exchanging those modules, so we started this... trademarked this company called the Module Factory up in Montreal, and we started telling people, "You know, we can do a fan swap, and you can avoid, you know, putting that engine into a shop, or we can do a low-pressure turbine swap." So we created that, and we had 25 customers the first year, and we were doing, like, 4 modules per customer, and we were making $500,000 per module. And we said: Gee, that seems like very low numbers. Let's set the bar higher. And we said: Let's double the number of customers from 25 to 50. Let's try to increase, you know, the number of modules from 4 to 8 and double the profitability from $500,000 to $1 million, and two, three times, two cubed is eight times. 50 will grow to 400, and we've exceeded those numbers, you know, based on that early plan. And what our pitch has always been to people is avoid the shop visit, try it out, do an engine exchange, do a module exchange, and if you don't like it, don't do another one. And people, you know, obviously they love it, and they've come back, and they've done a lot of repeat business. And the word of mouth gets easier to expand and get people to try it. We had success with a company called Lion Air in Southeast Asia, where they had a whole fleet of low pressure turbines that were gonna time out. We said, "Do one," and they did in the field. They videotaped it, put it on Instagram, and started selling it to other people, telling how great it was, and we saved them millions and millions of dollars. So it's a lot of, you know, individual marketing. Get the fleet plan, get people to try it, and then use those real-life experiences to get, you know, referrals. And so today, a lot of times, we'll go into a customer, and they'll say, you know: Give me referrals. Tell me other airlines I can call. And so we give them three names, and they call, and they say very good things about us. So it's a lot of, you know, different techniques to get people to change from, you know, the traditional way to the new way, but they're working, and they're working, you know, across the entire, you know, size of industry from big carriers down to little carriers. Just curious, how long does it take before they... Like, Lion Air, as an example, when they were flying that in the like, test deal, does it take a week or a month before they give you additional opportunities? It took us probably three to four months to get them to do the first one, and then once the first one was done, they turned around and said, "Okay, we have fourteen more we wanna do next year." So it was literally that, you know, that fast. Do you find that the typical agreement is for one to ten modules or engines as you bring on customers? Usually what happens is, we try to get from the airline the next twelve to eighteen months of expected shop visits, so that we can start making proposals back on a specific engine and specific serial number, a specific module back to them, and that's usually the way the dialogue, you know, gets going after the first one. You have three facilities, Montreal, Rome, and Miami. I've been to one, so I'm waiting for the other two. They have capability, capacity for six hundred engines or eighteen hundred modules per year. How do you think about the capacity filling up at those sites? So this year, if you think about 1,800 modules, this year our goal is to do about 750 modules of production across the three facilities, and then next year roughly 1,000, so about a 33% growth rate. As I mentioned, Rome is the newest facility. We expect this year to go from 100 to 200. We expect to add probably about 150 to the Montreal production and about 50 from Miami. So the real... You know, they're all increasing and moving in the right direction. It takes two things to overhaul an engine, which is parts and people. Parts, we did a lot of investing in inventory starting about a year ago, and so we are very well supplied with inventory for parts to manage, and now it's really training and making new hires productive as soon as possible. We should have an investor day in November up in Montreal, and we can showcase our training academy, some of the things we're doing with augmented reality to increase the speed by which people become, you know, productive and well trained. We're doing a lot to do that because, obviously, this market, there's a lot of demand, and the more we can produce, the more we can sell. Some folks might not know this, but your margins are quite good, and a lot has been said about the sustainability of your margins this year. You're targeting 40+% in 2026, compared to 34% at the start of this year. Can you talk about the composition of those margins and what drives further upside? Yeah. So we've. One of the key differences we have is we own both the asset and the maintenance facility together, so we actually go buy assets, and we buy maintenance facilities, and so therefore, everything we do in our own shops is an asset that we own. So when you break down the margins, the way we think about it, there's probably a 15% margin that anybody in the industry would get paid for fixing something for someone else, more or less a service of if you're a mechanic and you fix somebody's car, you charge 15% markup. Then we make money by optimizing green time, and we have a very good slide in our deck that we laid out how we buy three different engines, and we do maintenance on those, some of those engines, some of the modules, and recombine them into two uniform build engines and a run-out engine, and we invest $10 million, and we generate $16 million of value. And that green time optimization you know contributes another 15%-20% margins. And then lastly, our parts strategy has been very focused on how do we acquire parts, buy used life limited parts, tear down engines that we own, and recycle those parts back, and then importantly, PMA. And that combination generates another five to ten percentage points of margin that we keep because we own, you know, we own both the inventory and the facility. So when you add it all up, you know, we started the business. We were generating about 35% margins. We see the potential to grow that to 50%, full potential. So it used to be super easy to model the business out, because we would take the module sold times by the number of customers and come up with an EBITDA per module, which was around $500,000. Now it's closer to $750,000 last year. But you've had Aerospace Products EBITDA more than 80% year over year. So how do we think about growing volumes, growing economics, and how the two trend from here and the difference between modules produced and modules sold? Yeah. Right now, modules produced and sold are pretty close to one, you know, the same number. And we started to focus people more on the production as opposed to the profitability for margins per sale, for competitive reasons and also for customer reasons. We think that proxy is a better, you know, way to gauge, you know, how much we can produce and how much we can grow our revenues. And as I said, we expect next year to increase the production of modules by about 33%, you know, year over year. So, and then profitability is, you know, that's reflective of, as we, you know, obtain more benefit from the acquisition of life-limited parts and PMA. Importantly, we will see those margins increase, and we indicated next year to 40% or higher. So we'll start to see that, you know, be a material contributor in 2026, and to some extent, maybe in the fourth quarter of this year. But that's how we kind of think about it. And then, you know, just directly growing the production volume will result in, you know, additional continuing growth. Maybe just taking a step back, the EBITDA per module story from $500K to $750K last year to, you know, $800K this year is sort of what we're modeling. How do we think about what's driven that and where it could go? So I think a lot of it is off of, you know, the doubling of production in the facilities where we've been doing the work and the acquisition of used serviceable material that we've acquired and from used serviceable material and from the secondary market. And so we've become. I always say this is very much a scale business, that as you get bigger, you get better, and you develop more ways of acquiring material, more ways of being efficient in the assembly and the building of those, and then also in the acquisition of the parts and the PMA and the optimization you can do with the modules across all those. So all of those are, you know, basically, you know, contributing to making us, you know, better and more efficient as we get bigger. Let's talk about PMA, 'cause we just presented with how you and somebody accidentally took one of their bushels, so they didn't realize how extensive the PMA parts actually- 50,000, right? Yeah, actually are. They opened the- No, I just saw a picture outside and it was- Your strategy is five PMA parts within your modules to save $500,000 in total. The first two PMA parts have been improved. What would you say adoption is? Is it really showing up in the EBITDA per module number? And how do we think about the third turbine blade certification, which we estimate on our own estimates, is about half that $500,000 savings? Yeah. So the way I would describe the total savings is, per shop visit instead of module, is that the total savings with all five parts is over $2 million, you know, $2.2-$2.4 million. And the first two parts are... The next part that's coming is, you know, the most valuable part and, or most expensive part of the shop visit, and that's the one we expect in, you know, in the next month or so. That is about 60% of the savings. So a lot of what the first two parts have been, we've been installing in our engines that we have in our lease pool. And there's other airlines that are installing it and flying in their fleets. But most of the participants in the industry have been waiting for this third part, because that is, you know, a significant needle mover in terms of savings before they commit to, you know, sort of PMA-ing a hot section of an engine. So that will drive further expansion in the market. It'll drive us to put those into engines that we put into SCI, and then also engines that ultimately get sold into the third-party market, following, you know, the performance data that will be available once those engines start flying a significant number of hours. So it'll happen in a sort of a step function over the next few years, but a lot of the participants want to see, you know, how that next part is gonna perform. Before adopting the first two as well? Yes. Okay. What would you say adoption currently is? We put it into a significant percentage of our lease fleet. I don't think there's a material adoption across the rest of the industry, so I don't think it's a material number. Can we talk about... You produced 322 modules in the first half of the year, implying your full year guidance is 750, implying, I think, 30% sequential pickup in the second half. So how do you think about optimization of the playbook and what you've put across the slides? The biggest, I mean, we had 29 modules produced in Rome in Q2, which weren't in Q1 at all, and we're saying 100 for the year. There's a pretty big material, you know, contribution from the Rome facility, which has been terrific, and it's been a great addition to see that ramp up that quickly. Obviously, we were, I think, 90 or so modules in seventy something, 77, I think, in Q1, in Montreal, and 92 in Q2. I might be off by a little bit, but ramping up probably closer to around 125 or so by the end of the year. It's a steady. It's a significant, you know, increase from beginning to end for the run rate. Even run rate production is gonna, you know, put us on a good trajectory to, you know, achieving the thousand that we are targeting for next year. You talked earlier this year that you're seeing growing interest in full engine swaps versus individual modules. First off, why would anybody have done an individual module to begin with? And just talk about that trend a little bit more, if you can. Yeah. So, we do both. When a customer needs only to, they have an engine that might be hitting limiters on the fan or the low-pressure turbine, the easiest thing to do is do a module swap on those modules, either fan or low pressure turbine, and you can actually do those in the field. So you can totally avoid taking that engine and inducting it for a shop visit. So most of the module swaps are done with fans or low pressure turbines. Usually, when an airline has limiters on the core, then it's more complicated for an airline to have to take off their fan and their low pressure turbine, have us supply a new core, and then reattach the fan and the LPT and run it through a test cell. So when people think about that, they say, "Oh, well, just give me a whole engine." So we put it together. We will then run it through the test cell and deliver the finished product, because in the end, you need an engine that has run through a test cell before you can put that on wing. So it's really, you know, module by module is what drives that decision or customer preference. They could do it if they want. They can buy a core from us, but most people like not to. And so that's kind of the... And if you think about a fan has 30,000 cycles when delivered new, core 20,000 cycles, and a low-pressure turbine, 25,000 cycles, the core is gonna hit the limiter more time, you know, more frequently than the fan or the LPT. How do you think about the time for just a module versus a whole engine swap, how long it takes and the profitability profile for each? So a fan you can do in one to two days in the field. A low pressure turbine, you can also do in a week in the field. Turnaround time on a core would be like 60-80 days to rebuild it, but when you talk about the time to do it, what we're really doing is an immediate engine swap. So if an airline says, "I want to do an exchange," we'll, you know, we'll say, "Well, okay, we'll deliver an engine to you in XYZ city, and then we'll buy back your run out engine," and it's done immediately. So there's literally no downtime for that operator, and that's really the key of this, you know, this product is it's an immediate. You know, there is no downtime. Whatever our turnaround time is in rebuilding it is irrelevant to the customer. Having said that, we're running, you know, probably, you know, sixty to eighty days to do a full performance restoration of a core. How do you think about the profit profile of each? They're all good. I mean, I think that you're gonna see, you know, the profitability of each one is a good contributor. Obviously, the core has bigger dollars, it's more value, but the margins- Are similar. The margins are similar. Maybe if we could talk. We all love the CFM56, but I think most folks don't even realize you have a C, a V2500 partnership. So if you could talk about that. Yeah. So, we had owned the Vs for many years, and then when the powder metal issue, you know, came out and it grounded a lot of the Geared Turbofan engines, a lot of operators realized they were gonna use and need the V2500 for much longer than they originally thought. They thought they'd be retiring it sooner, but then it got a huge life expansion. So we got a lot of calls from airlines saying, you know, "We need these desperately." And so we decided at that point, that was a perfect time to get into that market in a bigger way. And then we called... We had our own network of, you know, maintenance shops that we use with Chromalloy PMA, and then we also called Pratt and said, "We could also do full overhauls with you, but we need to make the math work." And so after a series of, you know, six months of back and forth, we had a proposal from Pratt that was very attractive. There's many things they can do on that engine that no one else can do, and they rebuild that engine fully to twenty thousand cycles, upgrade the thrust, provide, in some cases, you know, you can convert from a Pre-Select to a SelectOne, different things they can do that are very, very valuable. So we chose to put in a large order with Pratt to do that. What we do is we go buy the run-out engines, we acquire those, we send them to Pratt, and they put them in the network, they rebuild them, and then we go back to market, as I said, with a sale, exchange, or lease option to the customer. So the biggest difference is they're putting all new parts in, and they're managing the overall process instead of us doing it. But in the end, it's just math. You know, if you can get the price that we wanted, and which we did, then it's a great way for us to rebuild those engines. You're essentially a placement agent for those engines, and how does the margin profile differ? I don't know if I'd call us a placement agent, but- I'm sorry. I made it sound a little simpler than it is. We aggregate the engines, and then we, you know, manage the rebuild and then go to market. I mean, we've always said that the margins are not dilutive. However, we did point out that there was a customer in the second quarter of this year, where we did some significant material amount of the V2500 sales that was slightly dilutive to the margins. But, you know, we're doing that in the context of looking for a bigger opportunity with that customer, which most probably would involve CFM56 engines. Got it. Maybe if you could just refresh us on your twenty twenty-six targets, which you've kind of almost reached anyway. If you could talk about that a bit and how CFM factors into it. Yeah. So what we did say is that the targets that we put out there were, we're going to revise upward, but we would do it at the end of the third quarter, when we had better information on next year. So we raised the 2025 numbers, but we didn't adjust 2026 at this point. What we said about SCI is that our goal for the year was to acquire into that partnership 250 aircraft, which is a private in a partnership that we set up, you know, at the end of last year. And those, we were at July 31, we had about 145 aircraft either committed or closed. We're on track for our goal of investing and acquiring 250 for the year. The process has gone quite well. We're very happy with the deals we've been able to line up, and the expectation is that we will be, you know, if not done, very close to done on the 250 by the end of this year. And we said we wanna we would like to do one of those every year. If there's two things you need to do the next one, which is good results on the last one and an investment pipeline. So what we expect to see is if in by the fourth quarter of this year, we will know how far we've gotten on investing, what we've got in front of us, and what the results are from the current portfolio, at which point we, based on today's results, expect that we will launch a second one for next year in twenty twenty-six. It's not a sure thing because we're, you know, we're three quarters of the way through, but we're, we're on a very, very good track, to be able to complete that and then launch another one. Maybe if you could talk about just, 20% of, Aerospace Products will be sales into the SCI. So how that filters into the revenue and EBITDA recognition, both within your Aerospace Products segment, but also Leasing? Yeah. So the way SCI contracts with FTAI Aviation for all the engine maintenance events is that the partnership, SCI, sells a run-out engine to FTAI Aviation, and FTAI Aviation sells a rebuilt engine to SCI on a formula basis. It's based on hours and cycles on that engine, and it's predetermined and contractual. When that happens, it's booked as any third-party sale would be, with one exception, and that's because FTAI Aviation owns 20% of SCI, there will be a deferral of that 20% on that. You'll see it on the top line, but then you'll see a deferral of the EBITDA for that 20% of those sales. And you saw that in the, you know, the last two quarters where it was, you know, deferred. So other than that, it's treated like any third-party customer. We did have, in the first half of this year, approximately about 20% of the sales from Aerospace Products were to SCI, and we expected that to be a good, you know, estimate of what the future will be as we both grow Aerospace Products and grow SCI. Can you talk about also on the cash flow statement, how SCI relieves the impact of working cash flow usage for you? Yeah. So, on the cash flow, we, as part of the setup, we took all of the aircraft that were on the FTAI Aviation balance sheet that fit the criteria for SCI and sold those 45 aircraft to SCI. And that generated roughly about $500 million of asset sale proceeds and some gains on sale. At the same time, we've also invested the 20% ownership. Total equity of SCI is about $1.2 billion, and 20% of that is about $240 million. So we've taken roughly the $240 million of that, and we'll put it back into the equity of SCI. And so we've made the asset balance sheet of FTAI Aviation more asset light, and at the same time, you know, had a net cash positive from that. You know, we're continuing... You know, our goal has been over the years to make FTAI Aviation, you know, more capital- less capital-intensive, more asset light, and we see that as a first step of continuing that trend so that we grow the Aerospace Products business. We don't, are not investing in sort of, leasing assets on the balance sheet, and we generate significant amount of free cash flow. So leasing assets are down to $375, I believe, from $420 at the end of 2024. How should we think about modeling the leasing segment going forward? Yeah. So the leasing, what we said is roughly assuming no further investment in other SCIs, is basically not a growing business. So it's roughly $550 million of EBITDA. And what would change that is if we decide to do another SCI 2, then we would have another investment next year, and then you could look at growing the leasing business, you know, going forward. But since we haven't made that decision yet, which I think will happen in the fourth quarter, I think at this point we're assuming that the leasing business today is just basically steady state. And you've announced that financing from Deutsche and Atlas on the first equity tranche with OneIM. So as we think about Q4, we'll see debt come in first and then equity in 2026? You won't actually see that on FTAI Aviation's balance sheet. It'll show up as our equity investment will be the only thing you'll see. That debt is all non-recourse in a private partnership, so you won't see that. Um- It is committed, and so that, that's part of what's used to acquire those 250 aircraft. ... Can we talk about free cash flow in Q2? This was a big focus item in Q1, and you ensured that in Q2, it would be, you know, you raised it, essentially proving investors wrong. So 2025 free cash flow was raised by $100 million to $750 million after $370 million in the first half. Can you talk about the puts and takes to this and how you think about that trending? Yeah. So it was, you know, growth in EBITDA is a big contributor, and as I mentioned, we have taken some assets and sold them into the SCI partnership and invested in the equity, and then we also bought some additional engines to replace some of the engines that we moved over with that, and so that's basically taken away, you know, what was in the past, we always had a lot of investment in lease assets that we added, that we put together and commingled, which is, I think, what caused some of the, you know, confusion, because we're running a leasing company which is investing as well as a manufacturing business, which is, and operating, so we've streamlined that and eliminated as much of the investing activity as possible. And as I said, our goal is to keep the leasing business sort of as a status quo, so we're not gonna need to do any significant investing in that. So EBITDA should generate incremental EBITDA should generate significant amount of additional free cash flow going forward. I think Angela must be one of the busiest CFOs at this conference, because you've acquired Pacific Aerodynamics, you have PMA JVs going on, you have SCI, you've de-levered. How do we think about what's next with the balance sheet and what you do from here? We're always trying to keep moving, and as I said, you know, we keep widening the moat. And I think, you know, one of the things that FTAI, to my mind, has also done is it's added another dimension, in that we now have the potential to grow that and to become one of the largest owners of narrow body assets in the industry, and have all of that committed to FTAI Aviation, which is a significant, you know, increase in our, you know, sort of presence with both aviation maintenance in general, as well as all the airline customers we deal with. So I think that's been a... If you think about how do you, you know, do what FTAI does, now there's another jump up in that, you know, we're gonna be a significant manager, asset manager as well. We think of, you know, these things as how do they integrate, how do they keep producing, you know, more. And so on that level, I think it's a huge strategic achievement, and it's a big, you know, increase in our competitive advantage to be able to convert those immediately into long-term FTAI Aviation customers. And then on the other side, we look at. We're always looking at the cost of a shop visit and how can you, you know, keep driving that down. How do you save more money? Repairs has been something, you know, we've been talking about, as you know, for, like, two years, and we've started to see the results of that effort to either grow it organically or buy it. I think there's still a lot of potential in the piece part repair business and repair of things that are connected to the engine that we've just started to, you know, grow and explore. This Pacific Aerodynamics is a great company, has a terrific technology. It's protected, you know, IP. They developed this on their own, and there's other parts of that engine which we can take their knowledge and expand that to increase, you know, our own repair capability using their knowledge. It's, it just keeps. It's sort of a virtuous circle. It keeps getting better and better. Sounds good. Well, thank you so much, Joe. Thanks, everyone. Thanks.