2020 Highlights

• Full year 2020 revenue of $208.9 million.
• Full year 2020 GAAP net income of $8.5 million, or 4.1% of sales.
• Adjusted EBITDA of $51.9 million or 24.8% of sales for full year 2020.
• Achieved significant progress towards obtaining FAA certification of our AerAware product and initiated discussions with potential launch customer.
• 2021 guidance: expects revenue in the range of $340 - $360 million and adjusted EBITDA in the range of $60 - $70 million¹.

March 15, 2021 04:36 PM Eastern Daylight Time

AerSale Corporation (Nasdaq: ASLE) (the “Company”) today reported results for the fourth quarter and full year ended December 31, 2020.

The Company reported fourth quarter 2020 revenue of $49.4 million and full year 2020 revenue of $208.9 million. Revenue in the fourth quarter and full-year of 2020 were adversely impacted by the effects of COVID-19 on AerSale’s commercial customers, which resulted in lower used serviceable material (USM) and whole asset sales. Fourth quarter GAAP net income was $0.6 million and full year 2020 net income was $8.5 million. Full year 2020 adjusted EBITDA was $51.9 million and fourth quarter adjusted EBITDA was $3.3 million. Adjusted EBITDA reflected benefits from the CARES Act, cost reductions in response to COVID-19, and strong performance in the Company’s aircraft MRO business.

Looking forward to 2021, the Company expects continued growth driven by anticipated strong MRO volume due to the recommissioning of commercial aircraft, a return of whole asset sales primarily from its Boeing 757 procurement program, contributions from its innovative AerAware product launch, and the gradual recovery of commercial markets.

Nicolas Finazzo, AerSale’s Chief Executive Officer, commented, “We are pleased to report our first quarterly and year-end results as a public company, and are grateful for the confidence our shareholders have placed in the AerSale team to generate long-term value. 2020 marked a challenging year globally and particularly in the aerospace industry as a result of the effects of COVID-19. We believe our ability to navigate these headwinds is a testament to the extraordinary efforts of our dedicated and skilled workforce, demonstrates the resilience of our business, and validates the fully-integrated aircraft service model we have established. Our ability to service aircraft at every point in the cycle not only adds tremendous value to our customers, but also allows us to emerge into 2021 positioned to resume our growth trajectory.”

Finazzo continued, “In the year ahead we expect our MRO facilities to be operating at or near capacity as we continue to work on freighter aircraft conversions and support the continued maintenance and reactivation of parked aircraft as commercial aviation gradually recovers. Our team was also able to make important investments in our Boeing 757 program, which is expected to bolster operating performance as we finalize customer contracts. Finally, we anticipate launching our AerAware program with our first customer in 2021, which will bring innovative military technology to commercial aviation through a partnership with Universal Avionics, an ELBIT Systems company. We believe the AerAware program represents a significant long-term revenue opportunity for AerSale.”

Fourth Quarter 2020 Results of Operations

For the fourth quarter of 2020, AerSale reported consolidated revenue of $49.4 million, which did not include any whole asset sales. In the fourth quarter of 2019, revenue was $120.9 million, which included $57 million of whole asset sales. The Company’s revenue was adversely impacted by the effects of COVID-19 on its commercial customers, which resulted in declines in whole asset and USM sales. These effects were partially offset by stronger aircraft storage volume and related aircraft maintenance work.

Asset Management Solutions (AMS) revenue was $17.4 million compared to $98.2 million in the prior year period. In addition to whole asset sales, USM revenue declined as a result of fewer opportunities to buy feedstock, the decrease in demand for existing inventory, and lower utilization rates on flight equipment against the backdrop of the COVID-19 pandemic. The pandemic also led to the grounding of a significant portion of the global passenger fleet and reduced passenger air travel, which negatively impacted the demand for USM parts consumption for maintenance and overhaul activity.

Revenue from TechOps increased 41% to $32 million in the fourth quarter of 2020 and partially offset the decline in AMS volume. The increase in TechOps revenue was largely driven by our aircraft MRO facilities as this business benefitted from the increased storage demand from the groundings noted above. AerSale’s aircraft MRO facilities are strategically located in dry desert environments in New Mexico and Arizona, which are ideal for aircraft storage.

Gross margin remained consistent with the fourth quarter of 2019 at 26.6%, as measures taken by AerSale during 2020 translated into efficiencies and cost savings across its business lines.

Selling, general and administrative expenses declined 15.5% from the fourth quarter of 2019 to $15 million in the fourth quarter of 2020, primarily due to cost savings initiatives taken as a result of COVID-19.

Loss from operations was $26 thousand in the fourth quarter of 2020, compared to income from operations of $12.1 million in the fourth quarter of 2019.

The benefit from income tax was $0.9 million in the fourth quarter of 2020, while the provision for income tax was $2.5 million in the fourth quarter of 2019.

GAAP net income for the fourth quarter of 2020 was $0.6 million, or 1.3% of sales, compared to $9 million, or 7.4% of sales, in the fourth quarter of 2019.

Adjusted EBITDA for the fourth quarter of 2020 was $3.3 million, or 6.7% of sales, compared to adjusted EBITDA of $23.8 million, or 19.7% of sales, in the fourth quarter of 2019.

Full Year 2020 Results of Operations

For the fiscal year 2020, AerSale reported consolidated revenue of $208.9 million, which included whole asset sales of $3.1 million, compared to $304.2 million in 2019, which included $70.1 million of whole asset sales. The Company’s revenues may fluctuate from quarter-to-quarter and year-to-year for whole asset sales, and therefore, progress should be monitored based on asset purchases and related sales. In addition, the Company’s revenue was adversely impacted by the effects of COVID-19 on its commercial customers. These effects were partially offset by stronger aircraft storage volume and related MRO work.

AMS revenue was $98.7 million compared to $221.8 million in the prior year period. In addition to whole asset sales, USM revenue declined as a result of fewer opportunities to buy feedstock, the decrease in demand for existing inventory, and lower utilization rates on flight equipment against the backdrop of the COVID-19 pandemic. The pandemic also led to the grounding of a significant portion of the global passenger fleet and lowered passenger air travel, which resulted in diminished demand for USM parts consumption for maintenance and overhaul activity.

Revenue from TechOps increased by approximately 33.8% to $110.2 million and partially offset the decline in ASM volume. The increase in TechOps revenue was largely driven by our heavy MRO operations as these businesses benefitted from increased storage demand.

AerSale expects the significant number of aircraft currently stored at its facilities to provide upside opportunities for reactivation work, heavy maintenance, and cargo conversion going forward; as well as an advantage in identifying well-maintained feedstock for our Asset Management segment.

The revenue split between the AMS and TechOps segments was fairly balanced in 2020 as the business mix changed as a result of the pandemic, demonstrating AerSale’s ability to respond effectively to changing market dynamics. However, as the passenger aviation market recovers, the Company expects both AMS and TechOps to benefit.

Gross margin was 25.3% in 2020 compared to 28% in 2019, which was primarily driven by the change in sales mix noted above.

Selling, general and administrative expenses declined 7% to $55.6 million primarily due to cost reduction efforts taken during the pandemic. The Company also benefitted from a CARES Act grant received in 2020 that reduced cost of sales and operating expenses by $12.7 million.

Income from operations for the year 2020 was $11.3 million, compared to $22.1 million for 2019. The provision for income tax was $1.6 million for 2020, compared to $4.2 million in 2019.

GAAP net income for 2020 was $8.5 million, or 4.1% of sales, compared to $15.5 million, or 5.1% of sales, in 2019.

Adjusted EBITDA for 2020 was $51.9 million, or 24.8% of sales, compared to adjusted EBITDA of $56.9 million, or 18.7% of sales, in 2019. The improvement in adjusted EBITDA margin primarily reflects benefits from the CARES Act, cost reduction efforts and strong performance in the Company’s MRO and aircraft storage business.

Martin Garmendia, AerSale’s Chief Financial Officer, said: “Our strong financial performance is the result of the multi-dimensional and fully-integrated business model we spent the last decade building. Following the onset of the COVID-19 pandemic, we made adjustments in areas impacted by the pandemic, but continued to invest in our business units experiencing the greatest demand. The diversity of our revenue sources has created a counter-cyclical hedge, enabling AerSale to thrive in a challenging commercial aviation market. We believe we are well positioned to outperform our competitors in the upcoming recovery.”

2021 Guidance

AerSale expects revenue of $340–$360 million and adjusted EBITDA of $60-$70 million in 2021. This outlook reflects an increase 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 monetization of the Boeing 757 feedstock acquisition in 2020. Because of the strong demand for cargo conversion aircraft, AerSale expects 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 as well as the commencement of sales of its AerAware product in late 2021. In 2021, additional CARES Act grant proceeds of $9.2 million were awarded to the Company.