AerSale Corporation (NASDAQ:ASLE) Q2 2023 Earnings Call Transcript

Nicolas Finazzo: Let me elaborate a little further on that. As I mentioned, we’ve been using our balance sheet really since the beginning of the year to acquire feedstock that is going through an extended prolonged repair cycle, in many cases as much as a multiple of time from what it used to take pre-COVID to get USM repaired and available for sale. So, we’ve been deploying cash to buy inventory or to buy feedstock that pieces of which will turn into USM pushing it through the repair cycle, which is very extended. And the bulk of that material that we started buying last year that was not related to the 757 program was about $40 million last year. And then the $107 million, I think we announced in the first quarter that we had under contract for the first quarter.

We are just starting to see that material come available for sale now. So, we’ve had it. we put it through the process to get it in a position to turn into serviceable USM. We fed the repair cycle machine. we suffered through the delayed — extended repair cycle and we’re just now starting to see the benefits of that. So, the relatively nominal improvement over last year in this quarter really is not a result, is not a function of a lack of demand, it’s a function of a lack of availability of the feedstock coming out of USM, which is why we have such strong confidence in the second half of the year and into 2024 at the rate we’re buying that feedstock that we will see a substantial growth in our USM business. Because all that material we’ve invested in in the repair cycle is now starting to come out and it will continue to come out all through the year.

I’ve said this before and I stand by the statement. There is not enough good USM to satisfy the demand for USM. The key is can you buy it at the right price and can you stomach the long repair cycle that it takes to feed it into a repair machine and wait until you get it out two, three, four, five, six months later?

Pete Osterland: Very helpful color. Thank you. And then I just wanted to ask one on AerAware as well. just assuming that the best case you talked about happens and the STC is issued sometime near the end of third quarter or sometime in the fourth quarter, how quickly after that point could sales start to materialize? Are there any supply chain considerations here that would make sales initially ramp slowly? Or is there a significant inventory of shipments that you could get ready to go soon after you get that approval?

Nicolas Finazzo: So, I can only speak for the installation kits that we have. And I can tell you that a large order from an airline will require a very prolonged installation cycle getting the aircraft ready for a use of the system. If you have an airline that’s got hundreds of airplanes, there’s just no way we can reconfigure all those airplanes to accept AerAware in a month. It’s going to spread out over the course of year. Now, our plan was to have over 100 kits available this year. We’re well underway. We’ll probably do 150, 160 kits that we have this year. So, we’ll be in a position by the end of this year to start installing 150 plus kits starting this year and moving into 2024. Now, that’s the kits. And we can certify an airplane with a few sets of routable components from Elbit.