Unidentified Company Representative: 20.
Joseph Adams: About 20. So that’s a pretty good run rate. And demand from industry partners, major airlines around the world is good. So we think that is playing out very nicely, and we’ll continue to use that for delivering and exchanging modules. So we’re very happy with that acquisition. On the broader topic of M&A, there are things happening in the industry. It’s obviously the industry, the aftermarket segment has got people’s attention. It’s performing very well in a market where not a lot of things are performing well. So that’s sort of a bit of a rising sector. And we are seeing things that are being offered for sale. We’re very focused on engines and engine maintenance. So we’re not going to get off of that track. But there are segments that have aspects that would be interesting to us that we’re looking at.
And I mentioned before, engine piece part repair is still a focus for us and we’ve made progress on that, but I still think that, that is an interesting segment for us to get bigger in.
Brian Mckenna: Great. Congrats on another nice quarter.
Joseph Adams: Thanks.
Operator: [Operator Instructions]. Our next question comes from the line of Sherif Elmaghrabi with BTIG.
Sherif Elmaghrabi: So first, you talked about having more core sales in Q3. Could we see some lumpiness going forward as the mix shift between core and fan? Or is this kind of more of a hockey stick trajectory?
Joseph Adams: I think it’s moderate. I mean the mix is not going to shift dramatically because, again, you have — an engine has 3 different modules, so you’re going to ultimately move all of them at some point. So it’s really just a quarter-to-quarter fluctuation not something that I would say would be that dramatic over a longer measurement period.
Sherif Elmaghrabi: Okay. And then given PMA is sounding more of a 2025 story, and I know you said it’s hard to be precise, but can you remind us of the timeline between PMA approval and when we start seeing them show up in the modules? And where do we sit on that timeline for the 4 PMAs going through approval right now?
Joseph Adams: So there — as I said, good progress on all of them. We will — as soon as those part numbers — parts are approved, we will put them into our engines. And so they will be available almost immediately. Chromalloy begins production usually ahead of when they submit — finally submit, so there’s inventory available immediately. What — the longer lead time will be third-party sales or other airlines who have to go through an approval process and an engineering review and that varies airline to airline, which is why it’s always difficult to predict how long that will take and what the ramp period is. But you’re talking months, not years.
Operator: [Operator Instructions]. Our next question comes from the line of Frank Galanti with Stifel.
Frank Galanti: Great. I wanted to sort of dig in just sort of a true-up question. Earlier in your comments, you said this year, you expect 130 modules to be sold. That would be something like 10 modules in 4Q. I just want to sort of give an opportunity to correct that number if that number is indeed wrong. But then on a bigger scale, you sort of — in the prepared remarks, you mentioned that EBITDA kind of growing sequentially in order to see that, especially around next year, if there’s only 200 modules sold, your margins are in the 50-plus percent range, which means a lot more cores. How do you sort of think about the lumpiness and then the kind of sequential growth of cash flows out of modules sold?
Joseph Adams: On the first question, you’re right. The 130 is low, we should be in the 150 to 160 for the year total for modules — for the year for modules. So that is correct. And the second question was margins. I mean we’ve been talking about blended margins of around 35% for Aerospace Products. the USM margins tend to be lower than module margins. So it sort of blends out to a mid-30s is what we’ve been indicating, and there could be some variations. We’ve had quarters where it was in the 40s. We haven’t had any low quarters yet, but we could. And so it’s really hard to — I think — we’re comfortable with the mid-30s range. But actually, how it plays out each quarter is going to be — we’ll have to talk about it when it happens.
Frank Galanti: Sure. That’s helpful. And switching over to sort of the lease income on the aviation side. You mentioned lease amortization is sort of eats into that lease income number. But looking quarter-over-quarter, that’s only a $5 million increase in lease intangible amortization. So if you back that in, you’re only at $41 million, which is still a $7 million lease income for the quarter and that seems like too much relative to utilization increasing. And really, the question is maybe if there’s any comment on that? But then secondly, in the guide for ’24, can you sort of break down what your assumptions are from a utilization perspective relative to a portfolio growth perspective?
Joseph Adams: Yes. So we indicated that leasing for 2024 would be approximately $425 million, if you exclude gain on sale. And we have put — we are seeing higher lease rates, and we have added quite a few engines on lease in Q3 and Q4, and we have some acquisitions we’re making. So when you put that together, if you take $100 million run rate currently, $425 million assumes, I think, modest growth going forward for 2024 for Leasing. And certainly, we’re seeing a very strong market, which if it continues, it would provide, I think, some potential upside.
Frank Galanti: Okay. That’s helpful. And one more, if I could. On the PMA side, is there any possibility you can comment on if the engineering work is complete for the 4 modules graining to be approved?
Joseph Adams: No, I wouldn’t comment on specific parts at this point.
Operator: [Operator Instructions]. Our next question comes from the line of Brandon Oglenski with Barclays.
David Zazula: This is David Zazula on for Brandon. Congrats on the real growth in Aerospace Products this quarter. Joe, if I could ask kind of a broad one to start. You guys have done very well, it appeared to us anyway, on the cargo side during the last couple of years, and that market has been under at least a little bit more pressure from what we can tell. Can you talk a little bit about your exposure there and how you’re thinking about the cargo mix, what you’re hearing from those type of customers right now?
Joseph Adams: Yes. Our cargo exposure is de minimis. We decided, I think starting 18 months ago, to basically get out. It was a very, very strong market sort of driven by COVID and e-commerce, and we didn’t see — we saw a lot more downside than upside. And so we basically got out of the cargo market. I don’t see an immediate rebound. So I wouldn’t rush to go back in.
David Zazula: And then on the module side, it seems like you had an uptick in repeat customers. I guess can you talk anything about the composition of those customers and what feedback you’re getting there?
Joseph Adams: Yes. We’re getting great repeat. I mean every customer I think we’ve had sold a module to has come back for more. So we have a 100% success rate on repeat customers and we actually have a number of those customers who’ve given us orders for 2024 or indications, they’ve said, we want 8 fans or we want 6 LPTs or 5 cores next year. So that helps us because we can position that and plan for the year ahead of time. And people have — I mean, it really is — it’s an amazingly simple concept that really saves people time and money. And so people once they do it, they’re like, “Wow, I mean, why didn’t we do this for years?” So it’s — we haven’t — I don’t think we’ve had a single negative comment from anybody on the customer side indicating they wouldn’t do it — they wouldn’t use it more.
David Zazula: Great. And then for Angela, it looks like you drew down the revolver a little bit this quarter, and then Joe was talking about some kind of exciting opportunities down the pike. Is there anything you can tell us about kind of the incremental capital policy or what you’re thinking about at least as you stand right now?
