Executive Summary / Key Takeaways

• AerSale is strategically evolving its business model, shifting focus from volatile whole asset sales towards more predictable revenue streams through expanded MRO services, a growing leasing portfolio, and proprietary Engineered Solutions.
• Recent financial performance, including a Q1 2025 revenue decline to $65.8 million (down 27.4% YOY) driven by lower whole asset sales, highlights the inherent volatility, though underlying revenue excluding whole assets grew 23.4%.
• Significant investments in MRO capacity, including new facilities expected to add at least $50 million in annual sales at full capacity, and the ramp-up of AerSafe sales driven by a 2026 regulatory deadline, are key near-term growth catalysts.
• Proprietary technologies like AerSafe (50%+ margins, growing backlog) and the potentially revolutionary AerAware EFVS (FAA-approved for 737NG, active customer demos, planned enhancements like ADS-B-in) represent significant long-term value potential, despite commercialization delays for AerAware.
• Management forecasts full-year 2025 growth in both revenue and EBITDA, with EBITDA growth expected to outpace revenue growth, supported by new capacity coming online, efficiency measures ($10.4 million expected annual savings), and monetization of existing inventory.

The Integrated Engine of Aviation Aftermarket Value

AerSale Corporation operates as a distinctive platform within the commercial aviation aftermarket, specializing in maximizing the value of aircraft and engines in the middle to end of their operating lives. Unlike competitors who may focus solely on parts distribution, MRO, or leasing, AerSale employs a multi-dimensional, fully integrated model encompassing asset acquisition, disassembly for used serviceable material (USM), parts sales, leasing, maintenance, repair, and overhaul (MRO), and the development of proprietary engineered solutions. This comprehensive approach, honed by a management team with decades of industry experience, is designed to extract maximum value from flight equipment across its lifecycle, offering a "one-stop shop" for airlines, lessors, and other industry participants.

The company's operations are structured into two primary segments: Asset Management Solutions and TechOps. The Asset Management segment focuses on acquiring flight equipment and monetizing it through whole asset sales, leasing, or disassembly for USM. The TechOps segment provides internal and third-party MRO services, including heavy maintenance, component repair, aircraft modifications, and the sale of Engineered Solutions. This integrated structure allows AerSale to be opportunistic in how it monetizes assets based on market conditions and the specific characteristics of the acquired equipment, particularly benefiting from assets that require significant work to return to service.

However, this model inherently introduces volatility, especially from the timing and value of whole asset sales, which can fluctuate significantly quarter-to-quarter. Recognizing this, AerSale is strategically emphasizing the expansion of its more predictable revenue streams, namely its specialized leasing portfolio and enhanced MRO capabilities, while continuing to leverage its integrated model in a competitive landscape.

Technological Edge: Engineered Solutions Driving Value

A critical differentiator for AerSale lies within its TechOps segment: its internally developed Engineered Solutions. These proprietary products, backed by Supplemental Type Certificates (STCs) from the FAA, offer non-OEM solutions to technical challenges and regulatory requirements, often providing cost and time advantages.

The AerSafe product line is a prime example. Developed to provide fuel tank flammability protection, it addresses an FAA airworthiness directive with a compliance deadline of November 2026. This regulatory tailwind is a significant driver for AerSafe sales. The product offers airlines a cost-effective and efficient method to meet this mandate for various aircraft types, including popular Boeing and Airbus models. AerSafe has demonstrated strong demand, with a backlog of $11 million as of March 31, 2025, and management anticipates this backlog will continue to grow as the compliance deadline approaches, likely peaking towards the end of 2025 due to airline scheduling needs. Crucially, Engineered Solutions products, including AerSafe, have historically generated sales margins in excess of 50%, a figure management expects to remain consistent, providing a significant boost to overall profitability as volume increases.

The company's most ambitious technological endeavor is AerAware, an Enhanced Flight Vision System (EFVS) for the Boeing 737NG aircraft. AerSale holds the only STC of its type issued by the FAA for this system. AerAware integrates external camera feeds with a dual head wearable display, designed to significantly improve pilot situational awareness and enable operations in low-visibility conditions. The tangible benefits include enhanced safety by allowing pilots to "see through" weather or darkness and potentially reducing flight diversions or delays. While specific quantitative performance metrics (e.g., visibility improvements in feet/meters) were not detailed, the strategic intent is clear: to offer a step-change in cockpit technology. AerSale is actively developing future product improvements, such as a foldable SkyLens display and the addition of ADS-B-in capability. The ADS-B-in feature is particularly noteworthy, aiming to display traffic information directly on the pilot's SkyLens, enhancing awareness of nearby aircraft independent of air traffic control visibility – a benefit highlighted by recent aviation incidents.

Despite the FAA approval received in December 2023, the commercialization phase for AerAware is proving to be a protracted process. Management notes it is much longer than originally anticipated, dependent on customer availability for demonstrations and the complex implementation planning required by airlines (including training, simulators, and logistics). While no customer orders have been secured yet, customer feedback from demonstrations remains overwhelmingly positive, and management expresses confidence that adoption is a matter of "when, not if." The company has proactively built an inventory of 150 AerAware kits and has internal capacity to produce 10-20 kits per month, with the potential to farm out production for higher volumes, indicating readiness for initial orders. The purchase commitment of $19.8 million for technical equipment for AerAware manufacturing, expected to be satisfied in 2026, underscores the ongoing investment in this technology's future.

These Engineered Solutions, particularly the high-margin profile of AerSafe and the long-term potential of AerAware, represent a significant competitive moat. While competitors like HEICO Corporation (HEI) excel in proprietary parts with high margins, AerSale's approach leverages its MRO and modification capabilities to integrate these solutions directly onto aircraft, offering a unique value proposition. The success of AerAware's commercialization and the continued ramp-up of AerSafe sales are critical factors for realizing the full potential of this technological differentiation.

Strategic Investments and Operational Shifts

Beyond technology, AerSale is making substantial investments in its MRO infrastructure and strategically adjusting its operational focus to enhance stability and drive future growth. The company is undertaking three key MRO expansion projects: adding pneumatic capabilities at its Miami component facility, tripling the capacity of its Miami Aerostructures facility, and ramping up operations at the new Millington, Tennessee on-airport MRO facility.

These expansions are nearing completion, with the Miami facilities expected to be operational in Q1 2025 and Millington having commenced revenue generation in Q3 2024. At full capacity, these expanded facilities are expected to add at least $50 million in annual sales over the next few years. While initial ramp-up at Millington caused a $0.9 million EBITDA drag in Q3 2024, management anticipates sequential step-ups in volume and profitability throughout 2025 and into 2026. The current MRO business base contributes approximately $8 million to $10 million in EBITDA, and the new capacity is expected to operate at 20% to 30% margins, significantly increasing the segment's overall contribution.

Concurrently, AerSale is making strategic operational shifts within its existing MRO footprint. At the Goodyear facility, the completion of a large customer contract has opened capacity. Instead of immediately replacing volume with short-term work, the company is focusing on securing longer-term, more predictable contracts that better align staffing and volume. Similarly, at the Roswell facility, they are strategically reducing heavy maintenance to focus on higher-margin aircraft storage and part-out services. These adjustments, while potentially impacting near-term top-line MRO revenue in specific locations like Goodyear in H1 2025, are intended to improve overall profitability and predictability in the long run.

In the Asset Management segment, the company is actively expanding its specialized leasing portfolio. By adding assets like engines to its lease pool (ending 2024 with 17 engines and 1 757 freighter on lease), AerSale is building a base of recurring quarterly revenue. This initiative, more aligned with its pre-pandemic operating structure, is designed to help smooth the quarterly volatility caused by whole asset sales. The company is also focused on monetizing its remaining six 757 converted freighters, which are among the youngest and most recently converted in the market. While demand for these aircraft slowed post-pandemic, customer interest is returning, and their monetization is expected to generate significant cash flow to strengthen the balance sheet and fund future feedstock acquisitions.

Financial Performance and Liquidity in Context

AerSale's financial performance reflects the dynamics of its business model and the current market environment. Q1 2025 revenue decreased 27.4% year-over-year to $65.8 million, primarily due to significantly lower whole asset sales ($1.8 million in Q1 2025 vs. $38.6 million in Q1 2024). This underscores the volatility inherent in this revenue stream. However, excluding whole asset sales, underlying revenue grew 23.4% to $64.0 million, indicating strength in other areas like USM and leasing.

Gross profit in Q1 2025 fell 37.6% to $18.0 million, with the gross margin decreasing to 27.3% from 31.8% in the prior year, mainly due to the lower volume of high-margin whole asset sales and changes in product mix within segments. Selling, general and administrative expenses increased slightly by 2.0% to $24.6 million, partly due to higher share-based compensation, though cost reduction initiatives helped offset other increases. This resulted in a loss from operations of $6.6 million in Q1 2025, compared to income from operations of $4.7 million in Q1 2024. The net loss for the quarter was $5.3 million.

For the full year 2024, revenue increased 3.2% to $345.1 million, and adjusted EBITDA rose significantly to $33.4 million from $12.3 million in 2023, demonstrating improved underlying performance despite lower whole asset sales compared to 2023.

Liquidity remains a key focus. As of March 31, 2025, AerSale had $4.7 million in cash and $44.2 million available under its $180 million revolving credit facility, totaling $48.9 million in liquidity.

Cash used in operating activities in Q1 2025 was $45.2 million, primarily driven by investments in feedstock acquisitions ($43.4 million acquired) and make-ready costs to increase inventory ($39.7 million increase in inventory). This highlights the capital-intensive nature of building inventory to fuel future sales and leasing. The company believes its current liquidity and internally generated funds are sufficient for the next twelve months. A notable use of cash in Q1 2025 was the repurchase of 6.43 million shares for $45 million in a privately negotiated transaction, funded by available cash.

The company's debt structure includes the Revolving Credit Agreement ($133.1 million outstanding as of March 31, 2025) and a CIBC (CM) Equipment Loan ($1.9 million outstanding). The company was in compliance with all debt covenants as of the latest reporting period.

Competitive Landscape and Positioning

The aviation aftermarket is highly competitive, with players ranging from large, diversified corporations like AAR Corp. (AIR), HEICO Corporation, and TransDigm Group (TDG) to smaller niche specialists. AerSale positions itself by leveraging its integrated model to extract value from mid-life assets, particularly those requiring significant work, where its disassembly, MRO, and modification capabilities provide an advantage.

Compared to AAR Corp. , which has a broader global network and strong logistics focus, AerSale's strength lies in its end-to-end asset monetization capabilities and proprietary technology. While AAR may have higher customer retention in its established MRO network, AerSale's integrated approach can offer cost efficiencies for customers managing mid-life fleets. Financially, AAR generally exhibits more stable profitability and lower debt levels than AerSale, reflecting its scale and mature operations.

Against HEICO Corporation and TransDigm Group, which focus on high-margin proprietary parts and components, AerSale competes through its MRO services and its own Engineered Solutions. HEICO and TDG typically boast significantly higher gross and operating margins due to their intellectual property and pricing power in specific component markets. AerSale's Engineered Solutions, particularly AerSafe with its 50%+ margins, represent the company's effort to capture similar high-margin opportunities. However, the commercialization pace of AerAware and the scale of AerSafe sales are critical for AerSale to narrow the profitability gap with these component powerhouses.

In the feedstock acquisition market, AerSale faces intense competition from airlines buying assets directly, lessors selling assets with leases attached, and new financial entrants (private equity, hedge funds) who may bid aggressively. AerSale maintains a disciplined approach, adhering to its target ROI hurdles, even if it means a lower win rate (3.1% in Q3 2024 vs. historical ~10%). Management believes their ability to monetize assets requiring substantial work, leveraging their integrated infrastructure, provides a competitive edge that allows them to win deals where others may struggle to extract sufficient value or even close the transaction.

Outlook and Growth Catalysts

Management's outlook for 2025 is positive, forecasting full-year growth in both revenue and EBITDA, with EBITDA growth expected to exceed revenue growth. They anticipate performance to improve incrementally each quarter throughout the year, stepping up from the lower Q1 base.

Several factors underpin this outlook:

1. Inventory Monetization: A strong position with ready-to-sell inventory, built partly from feedstock acquired in 2023 and Q1 2025, is expected to drive higher USM sales and whole asset transactions throughout the year.
2. Lease Pool Expansion: The growing lease pool will contribute increasing amounts of predictable, recurring revenue.
3. MRO Expansion: The new component MRO facilities and the ramp-up at Millington are expected to come online and generate new incremental revenue within the next 30-60 days, with increasing contributions, particularly in the second half of 2025.
4. AerSafe Ramp-Up: The approaching 2026 compliance deadline is expected to drive a robust AerSafe backlog and increasing installation volume quarterly.
5. Efficiency Measures: Cost reduction initiatives are expected to enhance profitability, contributing to EBITDA growth outpacing revenue growth, especially in H2 2025.

Management is balancing lease pool expansion with quicker turn whole asset transactions to generate cash and fund further feedstock acquisitions without increasing debt. While the feedstock market remains tight, the company's disciplined approach and integrated model position it to capitalize when conditions normalize.

Conclusion

AerSale Corporation is navigating the dynamic aviation aftermarket by strategically investing in its future and evolving its business model. While the inherent volatility of whole asset sales continues to impact quarterly results, as seen in Q1 2025, the company is building a more stable foundation through the expansion of its MRO capabilities, growth in its specialized leasing portfolio, and the development of high-margin Engineered Solutions like AerSafe and AerAware.

The significant MRO capacity coming online, the regulatory tailwind for AerSafe, and the long-term potential of AerAware represent compelling growth catalysts. Management's forecast for full-year 2025 growth, with EBITDA outpacing revenue, signals confidence in the impact of these initiatives and implemented efficiency measures. The investment thesis hinges on AerSale's ability to successfully execute on these strategic priorities, monetize its existing inventory (including the remaining 757 freighters), and leverage its unique integrated model to acquire and extract value from feedstock in a competitive market. Investors should monitor the ramp-up of the new MRO facilities, the trajectory of AerSafe sales and backlog, progress in AerAware commercialization, and the company's success in acquiring feedstock at disciplined prices.