• Adjusted EBITDA: $232 million in Q3 2024, up 8% from $213.9 million in Q2 2024 and up 50% from $154.2 million in Q3 2023.
• Leasing Segment EBITDA: $136.4 million in Q3 2024.
• Aerospace Product Segment EBITDA: $101.8 million in Q3 2024 with a 34% EBITDA margin.
• Corporate and Other EBITDA: Negative $6.2 million in Q3 2024.
• Pure Leasing Component EBITDA: $122 million in Q3 2024, up from $112 million in Q2 2024 and $102 million in Q3 2023.
• Asset Sales Gain: $14.3 million from $20.7 million book value of assets sold in Q3 2024.
• 2024 Estimated Leasing EBITDA: $500 million, including $50 million in gains on asset sales.
• 2024 Estimated Aerospace Products EBITDA: Increased to $360 million to $375 million from previous estimate of $325 million to $350 million.
• 2024 Estimated Annual Aviation EBITDA: $860 million to $875 million, up from previous guidance of $825 million to $850 million.

• Warning! GuruFocus has detected 9 Warning Signs with FTAI.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• FTAI Aviation Ltd (NASDAQ:FTAI) announced its 38th dividend as a public company, maintaining a consistent dividend payout history.
• The company reported a strong adjusted EBITDA of $232 million for Q3 2024, marking an 8% increase from Q2 2024 and a 50% increase from Q3 2023.
• FTAI's leasing segment achieved approximately $136 million in EBITDA, with asset sales contributing to a gain of $14.3 million.
• The aerospace products segment reported an impressive EBITDA of $101.8 million with a 34% margin, reflecting significant growth and increased adoption.
• FTAI is expanding its production capabilities, with plans to increase module production to 100 per quarter by 2025, enhancing its ability to meet customer demand.

Negative Points

• The aerospace segment's EBITDA margin decreased to 34% from 37% in the previous quarter due to low-margin legacy contracts from a recent acquisition.
• FTAI is facing challenges in meeting its PMA parts revenue target for 2024, indicating potential delays in product approvals.
• The company has increased its working capital by $120 million, partly due to inventory purchases to mitigate supply chain risks, which could impact cash flow.
• FTAI has not provided detailed guidance on the number of CFM56 models sold, citing commercial sensitivity, which may limit transparency for investors.
• The company is still in the process of settling insurance claims, with full recoveries expected to take time, potentially affecting financial results.

Q & A Highlights

Q: Investors often perceive FTAI as benefiting from short-term aftermarket bottlenecks. What is FTAI's long-term vision, especially regarding the CFM56 platform? A: Joe Adams, CEO, explained that FTAI's business model is designed to provide tangible cost and time savings, which customers find beneficial even in a normalized market. The company sees no evidence of customers reverting to traditional engine maintenance methods. FTAI is expanding its customer base and production capabilities, particularly with the acquisition of the Montreal facility, now FTAI Canada, which is expected to increase production to 100 modules per quarter by 2025.

Q: Can you provide an update on the V2500 engine program and customer demand? A: David Moreno, COO, stated that the V2500 program is progressing well, with engines in the shop and turnaround times on target. The LatAm program has started, and FTAI has secured agreements with two large North American airlines for over 20 engines. The company is also exploring opportunities in Asia.

Q: With Chromalloy receiving FAA approval for a V2500 blade, what are the implications for FTAI and the industry? A: Joe Adams, CEO, views the approval as a positive sign, indicating the FAA's confidence in the rigorous approval process. This development is encouraging for future parts, including CFM56 parts that FTAI is working on.

Q: How is FTAI managing supply chain risks, particularly for CFM56 and V2500 parts? A: Joe Adams, CEO, explained that FTAI has increased its working capital to pre-order parts and maintain a robust inventory, which helps mitigate supply chain disruptions. This strategy ensures that FTAI can meet customer demands and maintain production schedules.

Q: What is the outlook for FTAI's capital needs and the potential sale of offshore assets? A: Joe Adams, CEO, mentioned that the sale of offshore vessels is expected to close in Q4 2024. Angela Nam, CFO, added that FTAI plans to redeem its Series B preferred shares and has no significant capital needs beyond completing V2500 engine purchases for the year. The next debt maturity is not until 2028.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.