FTAI Aviation Ltd (NASDAQ:FTAI) Q1 2024 Earnings Call Transcript

FTAI Aviation Ltd (NASDAQ:FTAI) Q1 2024 Earnings Call Transcript April 26, 2024

FTAI Aviation Ltd isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to the FTAI Aviation First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today Alan Andreini, Investor Relations. Please go ahead.

Alan Andreini: Thank you, Shannon. I would like to welcome you all to the FTAI Aviation first quarter 2024 earnings call. Joining me here today are Joe Adams, our Chief Executive Officer; Angela Nam, our Chief Financial Officer; and David Moreno our Chief Operating Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download, if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today including EBITDA. The reconciliation of those measures to the most directly comparable GAAP measures can be found in the earnings supplement.

Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements including regarding future earnings. These statements by their nature are uncertain and may differ materially from actual results. We encourage – we encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. Now I would like to turn the call over to Joe.

Joe Adams: Thank you, Alan. To start today, I’m pleased to announce our 36th dividend as a public company and our 51st consecutive dividend since inception. The dividend of $0.30 per share will be paid on May 21 based on a shareholder record date of May 10. Now let’s turn to the numbers. The key metric for us is adjusted EBITDA. We began the year strongly with adjusted EBITDA of $164.1 million in Q1 2024, which is up 1% compared to $162.3 million in Q4 2023 and up 29% compared to $127.7 million in Q1 of 2023. During the first quarter, the $164.1 million EBITDA number was comprised of $104.8 million from our Leasing segment, $70.3 million from our Aerospace Products segment and negative 11% from Corporate & Other. Turning now to Leasing.

Leasing had another good quarter, posting approximately $105 million of EBITDA. The pure Leasing component of the $105 million came in at $98 million for Q1 versus $99 million of Q4 of last year. With exceptionally strong demand for assets and the commencement of the Northern Hemisphere summer season, we expect meaningful growth in Q2. We remain very confident in Leasing EBITDA of $425 million for the year excluding gains on asset sales. Part of the $105 million in EBITDA for Leasing came from gains on asset sales. We sold $31.9 million book value of assets for a gain of $6.7 million, slightly below our expectations but we have more assets that are coming in Q2 and the rest of the year and are comfortable assuming gains on asset sales of approximately $12.5 million per quarter or $50 million for all of 2024.

Aerospace Products had yet another excellent quarter with $70.3 million of EBITDA at an overall EBITDA margin of 37%. We sold 72 CFM56 modules in Q1 to 16 unique customers. Additionally, we sold six V2500 engines in Q1 to three customers through our recently launched V2500 engine program. We continue to see the tremendous potential in Aerospace products and are comfortable that we will generate approximately $250 million of EBITDA in 2024, the high end of our previous range. Our Maintained Repair and Exchange or MRE model for the two most widely used engines in commercial aviation produces cost savings and operational flexibility for airlines and aircraft lessors by allowing them to avoid shop visits through engine or module exchanges. Our recently executed perpetual power agreement with LATAM covering over 60 V2500 and CFM56 engines illustrates the growing acceptance of airlines and lessors to outsource this activity to FTAI aviation.

Overall, looking ahead, we continue to expect our annual aviation EBITDA for 2024 to be approximately $725 million not including Corporate & Other. With that, I’ll turn the call back to Alan.

Alan Andreini: Thank you, Joe. Shannon, you may now open the call to Q&A.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Kristine Liwag with Morgan Stanley. Your line is now open.

Kristine Liwag: Hey, good morning, guys.

Joe Adams: Good morning.

Kristine Liwag: Yesterday you announced the successful execution of a perpetual power agreement with LATAM Airlines. Can you provide more color on what this agreement entails? How meaningful is this contract?

David Moreno: Hey, Kristine, this is David. So to provide additional color on LATAM, the deal itself is predominantly a V2500 maintenance repair and exchange contract. It does have a smaller component related to the sale leaseback, but what we’re doing is we’re building engines ahead of a shop visits and we’re providing engine exchanges that are avoiding shop visits for LATAM and offering flexibility. As far as EBITDA and how that’s going to show up, we’re going to be recognizing V2500 MRE contribution as soon as engines are exchanged. There’s going to be a ramp-up period. So as we exchange more engines, there’s going to be a ramp-up on Aerospace EBITDA. We’re expecting ramp-up to take about two to three years, as well as there’s a smaller contribution on the leasing side that’s going to commence as soon as we close those airplanes.

Kristine Liwag: Thanks, David. And then when you said the ramp up over two to three years, you said over 30 aircraft would be part of this agreement. Can you parse out the timing of when that could occur? And also regarding the EBITDA contribution of this deal what are the economics?

Joe Adams: Well, we’re not giving a specific number on that yet. I think the — it’s a bit of a function of how many engine exchanges occur and how quickly they occur and we don’t have certainty on that yet. But we do expect that it will ramp up such that we have — it will be a needle mover in years two, three, four, five for our Aerospace Products business. So that’s really all we’re saying at the moment at this point. It’s going to take a little bit of time for that to kick in. But then once it does, it’s a needle mover and it’s very stable.

Kristine Liwag: Thanks. If I could do one more follow-up on this. With the V25 MRE that you announced earlier this year, how should we think about the LATAM contract as a proxy for economics for additional V25 MRE. Should this be what we look at for additional V2500 contracts? Is this a good starting point, is this better? Any sort of context would be helpful.

Joe Adams: It’s a great starting point. And we would love to do more of these. And we hope we will. We have several projects that are similar nature. Each airline, obviously, has their own requirements and their own specs. So they’ll all be a little bit different but we hope this model is used by other airlines. And we — in discussions with the big operators of V2500s, we’ve gotten very positive feedback on this. So we expect to do more and we hope to do more.

Kristine Liwag: Great. Thank you. I’ll stop there.

Operator: Thank you. Our next question comes from the line of Louis Raffetto from Wolfe Research. Your line is now open.

Louis Raffetto: Thank you. Good morning.

Joe Adams: Good morning.

Louis Raffetto: Joe on the last or maybe October earnings call you said you thought maybe 200 module swaps not a precise number but ballpark for 2024 but doing 72 in the first quarter, any thoughts on that now? And then rolling into that obviously you’ve got module swaps, you’ve got the MRE and the V2500 where you just said you’re doing these shop visits ahead of time. How should we think about capacity limitations at this point?

Joe Adams: So on the first point I think we — my recollection is we indicated between 250 and 300 module swaps or exchange sales for this year for 2024, and so we’re obviously on a great path given the first quarter of that and we have pretty strong backlog. So we feel very good about that number. We have built our plan around being able to deliver that. So we have ample capacity at our two maintenance facilities that we use the Montreal facility and the Miami facility. So we’ve got adequate capacity to do that. Obviously we’re working to increase capacity and ramp up because we want to stay ahead of this and we do see substantial upside in the years ahead. So we’re building additional capacity but we have in place what we need to deliver this year.

Louis Raffetto: Okay. Great. Thank you. And then — I’m sorry go forward Joe.

Joe Adams: What was the second question, or did I?

Louis Raffetto: No. You covered both of them. Sorry, I was just going to ask a quick one Angela. Just any commentary around how to think about cash flow in the quarter and rest of the year?

Angela Nam: Sure. So our cash flows for this quarter as you can see, our operating cash flows were about neutral but that’s because part of our proceeds from sales is sitting and investing. We believe for the rest of the year our cash flow operations will improve significantly.

Louis Raffetto: Okay. Thank you very much.

Operator: Thank you. Our next question comes from the line of Josh Sullivan with The Benchmark Company. Your line is now open.

Josh Sullivan: Good morning. Just — with the addition of the V2500 here, can you just help us understand some of the relative savings maybe versus the GE56 for an airline. I want to say in the past you’ve talked about a $3.5 million differential on the GE56. But is there a way to think about that for the V2500?

Joe Adams: Yes, we have the same set of same approach to that engine as we taken CFM56 and we’ve looked at sourcing used service raw material doing hospital repairs potentially PMA better — being able to get better deals with MROs because of volume commitments. And it’s all on the table. The shop visit cost for the V is higher than the CFM56. It’s typically full front to back is $9 million to $10 million versus probably $7 million for the CFM56. So we think we can get similar dollar savings out of using all those albeit on a higher price. So it’s a lower percentage, but it’s still the same amount of savings. So I think we feel very good about that. We haven’t locked in all of the partners that we will — that we’re talking to right now on this program. And as the volumes increase and build we’ll be able to give more specifics around who we’re working with and what are the components of that.

Josh Sullivan: Got it. And then just given the move in the stock all the changes, do you have a sense of the investor base at this point versus last year? Any major changes you’re seeing?

Alan Andreini: You know, hi it’s Alan. There have been. And I think that there are people that are initiating on the stock right here. And I think when you see the 13 Fs filed for this quarter in May 2015 you’re going to see some names that you’ve never seen before.

Josh Sullivan: Great. Thank you for that, Alan.

Alan Andreini: Thanks.

Operator: Thank you. Our next question comes from the line of Giuliano Bologna with Compass Point. Your line is now open.

Giuliano Bologna: Good morning. Congrats on the continued outflows on the product segment. What I was curious about asking was that — we would obviously love to have an update about PMA. But with that being said we’ve heard a lot of discussion recently about the industry pushing into PMA and increased demand for PMA from airlines. I’m curious if you agree with that? And why do you think that’s happening?

Joe Adams: Sure. So on the first part we continue to make very good progress on getting approval on the next set of parts. And we don’t have — we’re not giving a specific estimate on the timetable but very good progress. We — and the quality and the performance of those parts is going to be terrific and we’re very excited about that. So as I said consistently it’s worth the wait. On the acceptance PMA I mean, I think, that a lot of in the recent last year or so people focus a lot on the supply chain reliability and when you have a sole source for critical parts that’s a bad dynamic. And so I think people are recognizing that PMA not only delivers cost savings in a very high-quality product, but it delivers a second source of product which can be very, very important if you have an engine sitting in a shop and shop turn times are stretching out beyond six months now if you’re waiting for a single part and you have a single supplier.

And they tell you they can’t get you that for a year then you’re in a bad position. So that’s I think, why it’s becoming more talked about or maybe more people are recognizing that it’s not just a cost saving opportunity.

Giuliano Bologna: That’s very helpful. And I will turn back into queue. Thank you.

Joe Adams: Thanks.

Operator: Thank you. Our next question comes from the line of Hillary Cacanando with Deutsche Bank. Your line is now open.

Hillary Cacanando : Hi. Thank you for taking my question. So this one for Angela. Angela you have two preferreds that go from fixed to floating this year one in September and one in December. Obviously, you’ve had some great returns on those preferred securities. Could you talk about what your plans are for them? And how your discussions are going with the rating agencies?

Angela Nam : Sure. Hi, Hillary. So, yes, you’re correct in our Series As and Bs are converting to floating later this year. And we’re currently planning on refinancing those preferreds before those reset dates. So we continue to reassess that. In regards to the rating agencies, our current analysts are those that typically cover aircraft lessors. But each rating agency is recognizing the great contribution that we’re getting from the Aerospace Products business and the different metrics that will be involved in those sectors. So we are bringing in Aerospace Products business coverage analysts to each of our discussions with the rating agencies this year, which we think will be beneficial to our ratings.

Hillary Cacanando : Great. Thank you. And then my second question is just on the Leasing side. You mentioned that the demand for these assets remain strong. I know the gains could be lumpy. So how should we think about the segment for the rest of the year? And could you just talk about the pipeline for that segment? You sounded pretty excited about it in terms of what the pipeline looks like for the second quarter?

Joe Adams : Sure. So two things in the first quarter that depressed Leasing EBITDA, pure Leasing EBITDA. One is as you may recall we had four airplanes we took back terminated a lease with a Vietnamese airline in the fourth quarter last year and those are off lease. They go on lease in the second quarter and that had about a $5 million impact — negative impact to EBITDA. And then secondly the first quarter is typically seasonally the slowest period for flying hours and a lot of airlines don’t fly the same schedules and some of our EBITDA is driven off of hours flown. So all of that changes in Q2 and Q3 and we expect as I said a little uptick starting next quarter and we’re reaffirming our $425 million of leasing EBITDA for the year without gains on asset sales.

Hillary Cacanando : Okay, great. Thank you so much.

Operator: Thank you. Our next question comes from the line of Brian Mckenna with Citizens JMP. Your line is now open.

Brian Mckenna : Okay. Great. Thanks. Good morning everyone. Joe I appreciate the comments on the $250 million of EBITDA expected from Aerospace prosper this year. But if I annualize first quarter results you’re already run rating at $280 million. It sounds like — it seems like there’s quite a bit of on that committee heading into 2Q and beyond. So I would — so I would think it’s reasonable to assume continued growth from the first quarter level. So why not move the upper end of the range for 2024 for the segment?

Joe Adams : Well, it’s just one quarter. I mean, it was a good quarter and we see good things ahead, but it’s 25% of the year. And so we’re just not ready to do that. We’ll reassess a quarter. But at this point we’re sticking with the $250 million.

Brian Mckenna: Got it. Okay. Makes sense. And then just a follow-up, it’s great to see the V2500 program ramping. But how should we think about the incremental margin from this business? It would seem like there are some synergies with your existing platform and ways to leverage the infrastructure already in place. So could this business actually be margin accretive to the segment over time?

Joe Adams: It could. I think the — I mean, the LATAM deal is a good example where it’s both V2500 and CFM56 engines. And we offer engine solutions to every airline in the world that operates either a 737NG or an A320 CO family aircraft which is basically every airline. So it’s pretty powerful that we can combine and sell them essentially in a single transaction those services. There are some unique aspects right now because the V2500, the demand is so high given that there’s over — reportedly over 600 GTF aircraft — powered aircraft that are grounded right now which is times 2 that’s 1200 engines that are out of service. And so the demand for the V2500 is extremely high and will likely stay that way for the next three years and it’s a smaller market.

So airlines, I think are a little more fearful that they may not be able to get the V2500 at all. So, we see airlines willing to talk about longer-term leases on that product, which inevitably leads to more value creation, right? If we can do the MRE, put it on a long-term lease, then you can sell it as a cash flowing asset and create value two different ways. So, I think that possibility is something that we’re seeing now likely to play out. So, I do think it has some added upside.

Brian Mckenna: All right. Great. I’ll leave it there and congrats on another great quarter.

Joe Adams: Thanks.

Operator: Thank you. Our next question comes from the line of David Zazula with Barclays. Your line is now open.

David Zazula: Hey, thanks for taking my question. For David, I guess my understanding is with the V2500, you have a little bit less flexibility in how you execute the maintenance and operations of that type of engine. And just with high demand overall, can you just talk about some of the challenges you have in balancing the V2500 versus CFM56 and how you’re managing that?

David Moreno: Sure. So on the V2500, you have a lot of the same components that you do on any engine, right, which is you have access to use service raw material, you have access to independent MROs, then you have access to new parts via either OEM or PMA. The V2500 as we discussed a more expensive shop visit. It is a little more complicated from engineering, which therefore creates more demand for ways to avoid that shop visit. So we’re seeing a lot of folks come to us, not wanting to shop those engines and wanting us to come with solutions. We’re able to integrate those solutions and provide a better product. So we are working through all that. There’s a lot of innovations around the hospital side of that engine that are coming out, just because there’s not enough V2500s today in the market. So, we’re going to continue to develop our capabilities and continue to find innovative ways to maintain those engines.

Joe Adams: And it’s continuous improvement. We did the same thing on the CFM56 when we started that program, we knew about 10% of what we know now. So, I would expect in a year or 2, we’re going to be a lot — we’re going to have a lot more tools to work with on the V2500 that we didn’t have today. But even without the tools, it’s still a great market, so…

David Zazula: Very helpful. And for Joe or Angela, impressive work on the tender for the October 2025 notes. Just curious as to what the plan is for that funding. And if your balance sheet you’re not looking at expanding the leasing balance sheet significantly, would you consider potentially funding from the Aerospace Product side via a refi of those notes or what the plan would be?

Joe Adams: Well, I think the refi is done. The next opportunity is the $9.75 that are coal — the coal price drops in August that’s the next opportunity for refi to lower our interest costs. In terms of cash flow generation, we will look at using cash flow to repay debt. And our priority on cash flow is to; one, make investments; and two, then obtain a strong BB rating from all three agencies which we’re on track to do; and then three we would look at increased dividends or stock buyback. On the investment side, we are expecting to increase the balance sheet slightly for the V2500 investments that we’re making this year, we expect to end the year at 150 to 200 engines of V2500 which is up from 70 now. So, we will be increasing slightly that. But I think the opportunity will comment at some point later this year probably to look at repaying debt and paying some of that more expensive debt off.

David Zazula: Great. Thanks. And if I could just squeeze one more in. Any update on insurance or where you stand there?

Joe Adams: Yes. We have four separate work streams going, three of them are negotiations with counterparties they are not insurance companies and they’re very advanced and we expect hopefully to get those done around the middle of this year which represents about $75 million out of the expected $150 million that we expect in total to recover. The balance of that will be with insurance companies which we think will take somewhat longer which we’re expecting to be in the middle of next year. But we think we’ll get $150 million. We think half of that in the middle of this year and the other half in the middle of next year.

David Zazula: Thanks very much. Appreciate it.

Operator: Thank you. Our next question comes from the line of Sherif Elmaghrabi with BTIG. Your line is now open.

Sherif Elmaghrabi: Hey good morning. Thanks for taking my question. So, a couple on the LatAm deal. What’s the lead time on the V2500 exchanges? You touched on your capacity but I’m curious on the timing side you said you’d be sort of prepping the engines for exchange ahead of time. And I’m wondering how long it takes before FTAI can recognize revenue?

David Moreno: Yes. So, we have engines in shop right now and we’re starting to deliver those engines as soon as we will close the transaction. So, the engine exchanges will start relatively soon. The ramp-up will take time. So, we are — we have it in schedule right now for this year of shop visits at expected dates but we’re still working on the next outer years. So, we’re going to be receiving that soon and working through that and producing those engines ahead of time. But those engines have been produced and some of them are finalizing shop visit at the moment.

Joe Adams: We started — I mean we have 1,500 in the shop right now the V2500. We started that earlier this year. So, some of them are already coming out and we’ve got a schedule where we expect to be able to meet the requirements for LATAM when they need them and we’ll have those engines ready. We spend a lot of time asking us that question. So we went through the rigor on that. That was one of their key criteria given the shortages in the industry.

Sherif Elmaghrabi: Yes, that makes sense. And then on the sale/leaseback side of the deal. Obviously, that generates some liquidity for LATAM, right? So does it deal like that potentially for a future customer not just this airline, does that open up opportunities for asset sales under the Leasing business? Is that – is that sort of a multiphase deal something you’re thinking about?

Joe Adams: Yes. Yes it does. I mean LATAM in this situation wasn’t really focused as much as some airlines are and generating a lot of liquidity from this deal. So it’s – it’s not a huge amount to them but they were more focused on the engine exchange program. But airlines are – every deal ends up being a snowflake. And it’s always a different set of priorities. And – but the demand for unleased aircraft is very high, again. So there’s a lot of money that’s come into the Leasing segment again. If you have a six-year lease with a known airline you can easily monetize that. And we will be doing more of that in the second quarter so that we’ll generate some cash – more cash and more gains in – from that activity. So yes, we do like that.

Sherif Elmaghrabi: Okay. Thanks for taking my questions everyone.

Operator: Thank you. Our next question comes from the line of Stephen Trent with Citi. Your line is now open.

Stephen Trent: Good morning, everybody and thanks for taking my question. A couple of my questions have already been answered. But I’m curious as well when we think about the engine module side you’ve got very good exposure, in US you acquired that 50% stake in quick turn, I believe a facility in Montreal. When you think about this high level are there sort of any other geographic spots, where you maybe think you can add your footprint?

David Moreno: Yes, it would be Southeast Asia, which we did a relatively very good job early on of covering North and South America and Europe. And we started it about six, nine months ago really with a more intense focus on Southeast Asia. And we see – we’ve had success there and – but there’s a lot – I mean it’s a huge, huge market opportunity that we were relatively underrepresented but that will be changing this year and we see that as a future significant growth opportunity. Whether we had maintenance capacity there or not is something we’ve started thinking about. So I don’t have anything conclusive yet, but we will look at maintenance facilities and would potentially either our own or partners in that market in the coming months.

Stephen Trent: Okay. Appreciate that. It’s super helpful and thanks for the time.

David Moreno: Thanks.

Operator: Thank you. Our next question comes from the line of Frank Galanti with Stifel. Your line is now open.

Frank Galanti: Great. Thank you. Hi. Thanks for taking my questions and congrats on the great quarter. I wanted to ask about the Aerospace segment. Can you help us understand what the breakdown in the segment was between module swaps, USM sales and full engine sales or exchanges, given the varying levels of differentiation and margins between those businesses?

Joe Adams: Sure. So we — in the starting with the module factory. We generate about — this quarter was about $600,000 EBITDA per module sale or exchange. That’s up a little bit from the last quarter and it’s consistent with what we’ve been seeing since really when we started the Montreal factory. Module transactions happen in either one, two or three. So a customer can choose either any of those flavors that you want. Three modules is a whole engine. And in some cases what airlines realize is that rather than them working to try to keep their fan or the low-pressure turbine that they could actually save more money by just doing a whole engine exchange and not having to deal with that because they may have 0 days of downtime.

So — but on average the average transaction averages out to two modules per transaction. In terms of the rest of the — so we call that in the module factory in the MRE V2500 business is very similar. And the profitability from the V2500 on an equivalent basis it’s probably a little bit higher than the equivalent on the CFM56 today but they’re pretty comparable. And we expect that to remain similar. That’s assuming that an engine has three modules for the V2500. On USM it’s been — we’ve indicated in the past that we — it was roughly previously about 25% of EBITDA from Aerospace Products but as we have ramped up the MRE business that percentage is going down to where it less than 15% of EBITDA at this point. And we’ll continue as a percentage to decline because that’s not a high-growth business.

So hopefully that helps.

Frank Galanti: That does. Thanks. And so sort of digging in onto the three whole engine CFM sales. So based on last quarter’s reclassification of the V2500 gain on sale from that Leasing segment into the Aviation segment it’s sort of my understanding, right? So when you sell full CFM56 engine that shows up with three modules and the result of a gain on sale the Aerospace segment. So just confirm for me that that’s correct. And then so how many of those setting two modules for full engines? And of those engines sold how many of those engines did you sell with sort of the same three modules that you had purchased them with?

Joe Adams: I have no idea. I don’t when we sell a whole engine as I said it’s the customer’s choice. If they wanted to take their fan off and only buy two modules they can do that. So we don’t really think of it any differently and we don’t break it out that way. It’s not relevant to us as — from a business operation. So I don’t have any numbers on that.

Frank Galanti: Okay. But just like if you purchased an engine in COVID and did no work on it it’s sort of no value-added work. When you sell that — is that showing up in Aerospace EBITDA?

Joe Adams: Well, there’s no such saying as an engine that sits around for two to three years. So that doesn’t happen. When we buy an engine we put it into the facility and it’s split into three modules. It’s either repaired torn down or combined reassembled into an engine. So that doesn’t happen.

Frank Galanti: Okay. So then just to be clear, every CFM56 engine goes through the module factory in some capacity?

Joe Adams: No. I mean we’ve bought airframes, sold the airframe and leased engines directly. If the engine doesn’t require work, it doesn’t go into the module factory.

Frank Galanti: Okay. That’s really helpful. I appreciate you taking my questions. Thank you very much.

Operator: Thank you. Our next question comes from the line of Robert Dodd with Raymond James. Your line is now open.

Robert Dodd: Morning, everybody and congrats on the quarter. Thanks for all the details about cash flow and potential use of funds et cetera to pay down debt. You did mention the dividend. I’m going to ask about the dividend. I mean you’re barely yielding more than the S&P 500 given the stock performance. Is there — I mean you mentioned maybe increasing the dividend later this year with the cash flow you’re going to generate. Is there a rule of thumb you’re thinking of? I mean, way back in the past there used to be a two times FAD coverage we’ll think about the dividend. Obviously the whole — the metrics are different now. But is there a rule of thumb we should think about, as to what would you view as the comfort necessary to increase the dividend from what I do right now?

Joe Adams: Yes. You’re right. We really haven’t thought about the coverage calculation recently for the last four years or five years, but you have the history. No, I don’t think that’s necessarily the way we’re approaching it today is it’s more — we have investments. We want to have a strong BB. And then when we have excess cash, we’ll return it to shareholders somehow. That’s kind of the waterfall.

Robert Dodd: Got it. Thank you. And one more if I can. On the capacity question, you’re really opportunistic when you added the Lockheed capacity for example, during COVID and the facility was being underutilized, and we were very opportunistic kind of locking that up long-term. Are those kind of, — facilities aren’t being unutilized now, right? There’s backlogs everywhere. Are those kinds of opportunities going to be available? Or is it going to be any — is an expansion in capacity going to be more — is it going to necessitate an acquisition or be capital intensive? Or are you going to be able to find capacity on an as-needed basis do you think?

Joe Adams: There’s capacity out there. There are some shops that — I mean the successful shops — the large shops are very busy. And they have — and many of them have now geared turbofan work that they either want to do or have to do which is sort of squeezing out some other capacity. But there are lots of other facilities out in the world that we look at and see and we also have partners in different parts of the world. So the opportunity for the maintenance side it’s more of a — it’s available. And we have plenty of capacity right now, but we are always looking ahead and trying to stay in front of it. So yes, there’s still opportunities maybe not the same as during COVID, but there’s — it’s a big industry and it’s global. There’s lots of smaller and medium-sized players out there.

Robert Dodd: Yeah. Got it. Thank you.

Joe Adams: Yeah.

Operator: Thank you. And I’m currently showing no further questions at this time. I’d like to hand the call back over to Alan Andreini, for closing remarks.

Alan Andreini: Thank you, Shannon. And thank you all for participating in today’s conference call. We look forward to updating you after Q2.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.