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FTAI Aviation Ltd (FTAI) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and ...

GuruFocus Research
·4-min read

  • Dividend: $0.30 per share, payable on May 21.

  • Adjusted EBITDA: $164.1 million in Q1 2024, up 1% from Q4 2023 and 29% from Q1 2023.

  • Leasing Segment EBITDA: $105 million in Q1 2024, with $98 million from pure leasing activities.

  • Aerospace Products Segment EBITDA: $70.3 million in Q1 2024, with an EBITDA margin of 37%.

  • Asset Sales: Gains of $6.7 million from $31.9 million book value of assets sold.

  • Annual EBITDA Forecast: Expects $425 million from leasing and $250 million from aerospace products in 2024.

  • Total Annual Aviation EBITDA Forecast: Approximately $725 million for 2024, excluding Corporate & Other.

Release Date: April 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • FTAI Aviation Ltd reported a strong start to the year with adjusted EBITDA of $164.1 million in Q1 2024, marking a 29% increase compared to Q1 2023.

  • The Aerospace Products segment performed exceptionally well, generating $70.3 million of EBITDA with a high margin of 37%.

  • FTAI Aviation Ltd successfully executed a perpetual power agreement with LATAM, covering over 60 V2500 and CFM56 engines, illustrating growing acceptance of outsourcing by airlines and lessors.

  • The company is confident in achieving a leasing EBITDA of $425 million for the year, excluding gains on asset sales, supported by strong demand for assets and seasonal growth expectations.

  • FTAI Aviation Ltd is actively expanding its V2500 engine program, expecting to end the year with 150 to 200 engines, up from 70, indicating significant growth potential.

Negative Points

  • Despite overall strong performance, the Leasing segment's pure EBITDA slightly decreased to $98 million in Q1 2024 from $99 million in Q4 2023.

  • Gains on asset sales in the Leasing segment were slightly below expectations at $6.7 million for the quarter.

  • The company noted that the ramp-up of the LATAM contract would take about two to three years, indicating a slower initial contribution to EBITDA from this deal.

  • FTAI Aviation Ltd's operating cash flows were neutral for the quarter, with expectations of improvement later in the year.

  • There are ongoing challenges and complexities in managing the maintenance and operations of the V2500 engines compared to CFM56, requiring continuous innovation and adaptation.

Q & A Highlights

Q: 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? A: (David Moreno, COO) The agreement primarily involves a V2500 maintenance repair and exchange contract with LATAM, focusing on building engines ahead of shop visits and providing engine exchanges to avoid shop visits, thus offering flexibility. The EBITDA impact will ramp up as more engines are exchanged, expected to significantly influence Aerospace EBITDA in two to three years.

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Q: Can you parse out the timing of when the aircraft involved in the LATAM agreement will occur and the EBITDA contribution of this deal? A: (Joseph Adams, CEO) The specifics of the EBITDA contribution are not disclosed yet as it depends on the pace and volume of engine exchanges, which are uncertain at this stage. However, it is expected to be a significant contributor to the Aerospace Products business in the next few years.

Q: With the V2500 MRE announced earlier this year, how should we think about the LATAM contract as a proxy for economics for additional V2500 contracts? A: (Joseph Adams, CEO) The LATAM contract serves as a great starting point and model for future V2500 contracts. The company is in discussions with other major operators of V2500s and has received positive feedback, expecting to secure more contracts of a similar nature.

Q: Regarding the 200 module swaps forecasted for 2024 and the capacity to meet these swaps, can you provide an update? A: (Joseph Adams, CEO) The company is on track with its forecast, having completed 72 swaps in Q1 and with a strong backlog. Current facilities in Montreal and Miami provide sufficient capacity to meet the year's targets, with plans to further increase capacity to accommodate future growth.

Q: Can you discuss the cash flow for the quarter and expectations for the rest of the year? A: (Angela Nam, CFO) The operating cash flows were neutral this quarter due to the timing of sales proceeds. However, cash flow from operations is expected to improve significantly throughout the rest of the year.

Q: With the addition of the V2500, can you help us understand the relative savings for an airline compared to the GE56? A: (Joseph Adams, CEO) The approach to the V2500 is similar to that for the CFM56, involving sourcing used serviceable material and optimizing repair costs. Although the V2500 has a higher shop visit cost, similar dollar savings are expected due to the strategies employed.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.