AerSale Corp

Previous wording

The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. You should read the following management’s discussion and analysis and the accompanying financial statements and related notes together with AerSale’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). This discussion contains forward-looking statements about AerSale’s business, operations and industry that involve risks and uncertainties, such as statements regarding AerSale’s plans, objectives, expectations and intentions. AerSale’s future results and financial condition may differ materially from those currently anticipated because of the factors described in the section titled “Risk Factors” in the 2023 Form 10-K.

Current wording

The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. You should read the following management’s discussion and analysis and the accompanying financial statements and related notes with AerSale’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”). This discussion contains forward-looking statements about AerSale’s business, operations and industry that involve risks and uncertainties, such as statements regarding AerSale’s plans, objectives, expectations and intentions. AerSale’s future results and financial condition may differ materially from those currently anticipated because of the factors described in the section titled “Risk Factors” in the 2024 Form 10-K and in any of AerSale’s subsequent reports filed with the Securities and Exchange Commission. Events relating to the possibility of customer demand fluctuations, supply chain constraints, continuing inflationary pressures, the effects of foreign currency fluctuations and high interest rates, geopolitical uncertainties including continuing hostilities and tensions, trade restrictions and sanctions, tariffs and retaliatory countermeasures. Should one or more of these risks or uncertainties materialize, actual outcomes, including the future results of AerSale’s operations, may vary materially from those indicated.

Previous wording

We are a worldwide provider of aftermarket commercial aircraft, engines, and their parts to passenger and cargo airlines, leasing companies, original equipment manufacturers (“OEM”), government and defense contractors, and maintenance, repair and overhaul (“MRO”) service providers. We report our activities in two business segments: Asset Management Solutions, comprised of activities that extract value from strategic Flight Equipment acquisitions either as whole assets or by disassembling for used serviceable material (“USM”), and TechOps, comprised of MRO activities for aircraft and their components, and sales of internally developed engineered solutions and other serviceable products.

Current wording

We are a worldwide provider of aftermarket commercial aircraft, engines, and their parts to passenger and cargo airlines, leasing companies, original equipment manufacturers (“OEM”), government and defense contractors, and maintenance, repair and overhaul (“MRO”) service providers. We report our activities in two business segments: Asset Management Solutions, comprised of activities that extract value from strategic Flight Equipment acquisitions either as whole assets or by disassembling for used serviceable material (“USM”), and TechOps, comprised of MRO activities for aircraft and their components, sales of internally developed advanced technical repairs, modifications and products, which we market under the tradename “Engineered Solutions,” and other serviceable products.

Previous wording

In addition to our aircraft and USM parts offerings, we develop Engineered Solutions consisting of Supplemental Type Certificates (“STCs”) that can be installed on existing Flight Equipment to improve performance, comply with regulatory requirements, or improve safety. An example of these solutions is the AerSafe® product line, which we designed and for which we obtained Federal Aviation Administration (“FAA”) approval to sell as a solution for compliance with the FAA’s fuel tank flammability regulations. Another example of these solutions is our AerAware™ product, an industry-leading, next generation Enhanced Flight Vision System (“EFVS”) that has recently received approval by the FAA for the Boeing B737NG product line. These products are proprietary in nature and function as non-OEM solutions to regulatory requirements and other technical challenges, often at reduced delivery time and cost for operators. In order to develop these products, we engage in research and development activities that are expensed as incurred.

Current wording

In addition to our aircraft and USM parts offerings, we develop Engineered Solutions consisting of Supplemental Type Certificates (“STCs”) that can be installed on existing Flight Equipment to improve performance, comply with regulatory requirements, or improve safety. An example of these solutions is the AerSafe® product line, which we designed and for which we obtained Federal Aviation Administration (“FAA”) approval to sell as a solution for compliance with the FAA’s fuel tank flammability regulations. Another example of these solutions is our AerAware™ product, an industry-leading, next generation Enhanced Flight Vision System that has recently received approval by the FAA for the Boeing B737NG product line. These products are proprietary in nature and function as non-OEM solutions to regulatory requirements and other technical challenges, often at reduced delivery time and cost for operators. In order to develop these products, we engage in research and development activities (“R&D”) that are expensed as incurred.

Previous wording

Sales in the Asset Management Solutions segment decreased $14.6 million or 22.5%, to $50.4 million for the three months ended September 30, 2024, due to $11.9 million, or 57.2%, decrease in revenue from Aircraft and a $2.7 million, or 6.1%, decrease in revenue from Engines. The decrease in Aircraft revenue is a result of lower Flight Equipment sales in the amount of $12.7 million due to the timing and availability of assets, primarily attributable to decreased activity in the B757 product line, offset by higher USM sales. The decrease in Engines revenue is primarily attributable tolower activity across most product lines due to lower Flight Equipment sales in the amount of $9.5 million.

Current wording

Sales in the Asset Management Solutions segment decreased $20.0 million, or 33.8%, to $39.2 million for the three months ended March 31, 2025, due to a $11.1 million, or 25.8%, decrease in revenue from Engine, and a $9.0 million, or 55.0%, decrease in revenue from Aircraft. The decrease in Engine revenue is due to lower Flight Equipment sales in the amount of $25.7 million primarily attributable tolower activity in the CFM56 and V2500 product lines, partly offset by higher USM sales in the amount of $11.3 million, and higher leasing revenue in the amount of $3.8 million. The decrease in Aircraft revenue is primarily attributable to reduced activity in the B737 product line as a result of lower Flight Equipment sales in the amount of $11.2 million, as well as lower USM sales.

Previous wording

Cost of sales in Asset Management Solutions decreased $15.4 million or 33.1%, to $31.1 million for the three months ended September 30, 2024, compared to the prior year period. The decrease in cost of sales was primarily driven by the sales decrease discussed above. Gross profit in the Asset Management Solutions segment increased $0.8 million to $19.3 million, or 4.1%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The gross profit increase is mainly attributable to higher margins on Flight Equipment sales for the three months ended September 30, 2024.

Current wording

Cost of sales in Asset Management Solutions decreased $9.4 million, or 25.8%, to $27.2 million for the three months ended March 31, 2025, compared to the prior year period. The decrease in cost of sales was primarily driven by the decrease in Flight Equipment sales discussed above. Gross profit in the Asset Management Solutions segment decreased $10.6 million to $12.0 million, or 46.8%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The gross profit decrease is mainly attributable to lower revenue generated for the three months ended March 31, 2025, as noted above.

Previous wording

Engines gross profit margin was 39.3% for the three months ended September 30, 2024, an increase from 26.9% for the three months ended September 30, 2023, which was primarily the result of higher margins on Flight Equipment sales and leasing revenues. Aircraft gross profit margins increased to 33.7% for the three months ended September 30, 2024, from 31.9% for the three months ended September 30, 2023 due to higher margin contribution from USM sales.

Current wording

Aircraft gross profit margins decreased to 21.4% for the three months ended March 31, 2025, from 29.6% for the three months ended March 31, 2024 due to higher margins generated on the prior period Flight Equipment sales with margins generated on USM sales remaining consistent. Engine gross profit margin was 32.9% for the three months ended March 31, 2025, a decrease from 41.5% for the three months ended March 31, 2024, which was primarily the result of changes to the product mix and lower margins on USM sales.

Previous wording

Cost of sales in TechOps increased $5.4 million or 24.0%, to $27.9 million for the three months ended September 30, 2024 compared to the prior year period. This was driven by higher revenue discussed above. Gross profit in TechOps decreased $0.5 million, or 11.1% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, driven by lower gross profit of $0.7 million on MRO services. Gross profit margin decreased to 13.6% for the three months ended September 30, 2024 compared to 18.0% for the prior year period, and was largely attributable to lower margin on MRO services of 11.3% for the three months ended September 30, 2024 compared to 16.8% for the prior year period, driven by lower margin generated on our heavy and component MROs.

Current wording

Cost of sales in TechOps decreased $4.5 million, or 17.9%, to $20.6 million for the three months ended March 31, 2025 compared to the prior year period, driven by the sales decrease discussed above. Gross profit in TechOps decreased $0.2 million, or 3.7%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, driven by lower gross profit of $1.0 million on MRO services. Gross profit margin increased to 22.3% for the three months ended March 31, 2025 compared to 19.6% for the prior year period, and was largely attributable to higher margin on Product Sales of 35.6% for the three months ended March 31, 2025 compared to 22.6% for the prior year period, driven by higher demand for AerSafe products.

Previous wording

We account for our private warrants as a liability at their fair value, with changes in fair value recognized in our results from operations for the period. The fair value of our private warrants is determined using a Black Scholes option pricing model. For the three months ended September 30, 2024, we recorded a $0.2 million change in fair value of warrant liability income, compared to a $0.1 million loss in the prior year period.

Current wording

We account for our private warrants as a liability at their fair value, with changes in fair value recognized in our results from operations for the period. The fair value of our private warrants is determined using a Black Scholes option pricing model. For the three months ended March 31, 2025, we recorded a $0.1 million change in fair value of warrant liability expense, compared to a $2.0 million income in the prior year period.

Previous wording

Interest expense, net, was $4.2 million for the nine months ended September 30, 2024, compared to $1.2 million interest income, net, for the nine months ended September 30, 2023. This was primarily related to interest expense incurred on higher borrowings under our debt facilities during the current year period compared to the prior period related to feedstock and MRO expansion investments to grow our business.

Current wording

Interest expense was $1.2 million for the three months ended March 31, 2025, compared to $0.9 million interest expense for the three months ended March 31, 2024. This was primarily related to higher outstanding borrowings under our debt facilities.

Previous wording

The effective tax rate for the three months ended September 30, 2024, was 13.0% compared to 93.0% for the three months ended September 30, 2023. The difference between the effective tax rate and the statutory tax rate of 21% for the three months ended September 30, 2024, is primarily due to the impact of state income taxes and stock-based compensation. The difference between the effective tax rate and the statutory tax rate of 21% for the three months ended September 30, 2023 is primarily due to the impact of state income taxes and non-deductible executive compensation, offset by the foreign derived intangible income deduction and R&D credits.

Current wording

The effective tax rate for the three months ended March 31, 2025 was 12.0% compared to (6.8%) for the three months ended March 31, 2024. The difference between the effective tax rate and the statutory tax rate of 21% for the three months ended March 31, 2025 is primarily due to the benefit of the foreign derived intangible income deduction and R&D credits. The difference between the effective tax rate and the statutory tax rate of 21% for the three months ended March 31, 2024, is primarily due to the benefit of the foreign derived intangible income deduction and R&D credits.

Previous wording

As of September 30, 2024, we had $9.8 million of cash and cash equivalents. We finance our growth through cash flows generated from operations and borrowings secured by our assets. We had $78.5 million outstanding under the Revolving Credit Agreement (as defined below) as of September 30, 2024, and we had $93.7 million of availability thereunder. We used cash in operations of $26.4 million for the nine months ended September 30, 2024, primarily for feedstock acquisitions, and used cash in investing activities of $11.5 million for the nine months ended September 30, 2024.

Current wording

Revolving Credit Agreement (as defined below) as of March 31, 2025, and we had $44.2 million of availability thereunder. We used cash in operations of $45.2 million for the three months ended March 31, 2025, and used cash in investing activities of $3.5 million for the three months ended March 31, 2025.

Previous wording

We believe our equity base, internally generated funds, and existing availability under our debt facilities are sufficient to maintain our level of operations through the next 12 months. Any projections of future cash needs and cash flows beyond the next twelve months are subject to substantial uncertainty, but we believe our sources of liquidity, as discussed above, will be sufficient to meet our long-term cash requirements. If an event occurs that would affect our ability to meet our capital requirements, our ability to continue to grow our asset base consistent with historical trends could be impaired and our future growth limited to that which can be funded from internally generated capital.

Current wording

We believe our equity base, internally generated funds, and existing availability under our debt facilities are sufficient to maintain our level of operations through the next twelve months. Any projections of future cash needs and cash flows beyond the next twelve months are subject to substantial uncertainty, but we believe our sources of liquidity, as discussed above, will be sufficient to meet our long-term cash requirements. If an event occurs that would affect our ability to meet our capital requirements, including events beyond our control such as a potential tightening of debt capital markets, including in response to the implementation of new tariffs as part of the U.S. trade policy and any reciprocal or retaliatory tariffs thereto, our ability to continue to grow our asset base consistent with historical trends could be impaired and our future growth limited to that which can be funded from internally generated capital.

Previous wording

Net cash used in operating activities was $26.4 million for the nine months ended September 30, 2024, compared to cash used of $168.1 million for the same period in 2023. The decrease in cash deployed of $141.7 million was primarily due to lower feedstock acquisitions and the timing of advances to vendors during the nine months ended September 30, 2024 compared to the prior year period.

Current wording

Net cash used in operating activities was $45.2 million for the three months ended March 31, 2025, compared to cash used of $21.5 million for the same period in 2024. The increase in cash used in operating activities of $23.7 million was primarily due to higher feedstock acquisitions of $15.7 million and lower results from operations.

Previous wording

Net cash used in investing activities was $11.5 million for the nine months ended September 30, 2024, compared to cash provided of $6.7 million in the same period for 2023. Cash used in investing activities during the nine months ended September 30, 2024 was driven by purchases of property and equipment in support of TechOps expansion. Cash generated by investing activities during the nine months ended September 30, 2023 was driven by Flight Equipment sales.

Current wording

Net cash used in investing activities was $3.5 million for the three months ended March 31, 2025, compared to cash provided of $0.2 million in the same period for 2024. Cash used in investing activities during the three months ended March 31, 2025, was driven by purchases of property and equipment. Cash provided by investing activities during the three months ended March 31, 2024, was driven by the sale of Flight Equipment, partly offset by purchases of property and equipment.

Previous wording

Net cash provided by financing activities was $41.7 million for the nine months ended September 30, 2024, compared to cash provided of $17.3 million in the same period for 2023. Cash provided by financing activities during the nine months ended September 30, 2024 was primarily related to the proceeds from net borrowings under our Revolving Credit Agreement (as defined below). Cash provided by financing activities during the nine months ended September 30,

Current wording

Net cash provided by financing activities was $48.8 million for the three months ended March 31, 2025, compared to cash provided of $18.0 million for the three months ended March 31, 2024. Cash provided by financing activities during the three months ended March 31, 2025, resulted from borrowing under our Revolving Credit Agreement, offset by cash used in the repurchase of common stock. Cash provided by financing activities during the three months ended March 31, 2024 resulted from borrowing under our Revolving Credit Agreement.

Previous wording

Effective July 25, 2023, we amended our revolving credit agreement (as amended, the “Revolving Credit Agreement”) to increase our maximum commitments under the Revolving Credit Agreement to $180.0 million aggregate amount, expandable to $200.0 million, subject to conditions and the availability of lender commitments and borrowing base limitations, and to extend the maturity date to July 24, 2028, subject to certain conditions.

Current wording

amount, expandable to $200.0 million, subject to conditions and the availability of lender commitments and borrowing base limitations, and to extend the maturity date to July 24, 2028, subject to certain conditions.

Previous wording

As of September 30, 2024, there was $78.5 million outstanding under the Revolving Credit Agreement and we had $93.7 million of availability thereunder. We were in compliance with our debt covenants for the Revolving Credit Agreement as of September 30, 2024.

Current wording

As of March 31, 2025, there was $133.1 million outstanding under the Revolving Credit Agreement and we had $44.2 million of availability thereunder. We were in compliance with our debt covenants for the Revolving Credit Agreement as of March 31, 2025.

Previous wording

On June 30, 2023, the Company entered into the Equipment Loan with a total advance commitment of $10.0 million for the purpose of financing capital expenditures on property and equipment. This facility became a term loan during quarter ended June 30, 2024, with a maturity date of June 26, 2027. The Equipment Loan is collateralized by the property and equipment it finances and requires interest only payment until converted to a term loan, at which point, principal and interest payments will be required.

Current wording

On November 22, 2024, the Company entered into the CIBC Equipment Loan with a total advance commitment of $10.0 million for the purpose of financing capital expenditures on property and equipment. Advances made by the lender are convertible into term loans at the option of the lender at a rate of SOFR plus 3.0% and have a maturity date of thirty-six (36) months from the term loan conversion date. Advances under this loan are collateralized by the property and equipment it finances and require interest only payment until converted to a term loan, at which point, principal and interest payments are required.

Previous wording

During the nine months ended September 30, 2024, the Company repaid $8.6 million outstanding under this facility as of December 31, 2023, and borrowed $0.6 million, of which $0.6 million remained outstanding as of September 30, 2024.

Current wording

During the three months ended March 31, 2025, the Company borrowed $0.2 million, which has not been converted to a term loan as of March 31, 2025. As of March 31, 2025, $1.9 million remained outstanding under this facility.

Previous wording

We were in compliance with our debt covenants for the Equipment Loan as of September 30, 2024.

Current wording

We were in compliance with our debt covenants for the CIBC Equipment Loan as of March 31, 2025.

Previous wording

We did not have any off-balance sheet arrangements as of September 30, 2024. Refer to Note Q – Leases, within our consolidated financial statements in our 2023 Form 10-K for a listing of our non-cancelable contractual obligations under operating leases.

Current wording

We did not have any off-balance sheet arrangements as of March 31, 2025. Refer to Note Q – Leases, within our consolidated annual financial statements in our 2024 Form 10-K for a listing of our non-cancelable contractual obligations under operating leases.

Previous wording

The Company has entered into a purchase commitment with Universal Avionics valued at $24.5 million for the acquisition of technical equipment for manufacturing our AerAware TM product. The commitment is expected to be satisfied by the second quarter of 2025.

Current wording

The Company has entered into a purchase commitment with Universal Avionics, a subsidiary of Elbit Systems, valued at $19.8 million for the acquisition of technical equipment for manufacturing our AerAware TM product. The commitment is expected to be satisfied in 2026.

Previous wording

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. A summary of our critical accounting policies and estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the

Current wording

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. A summary of our critical accounting estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the 2024 Form 10-K. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a material impact on our financial results. During the three months ended March 31, 2025, there were no material changes in our critical accounting estimates and policies.