Q1 2024 FTAI Aviation Ltd Earnings Call

Participants

Alan Andreini; IR Contact Officer; FTAI Aviation Ltd

Joseph Adams; Chairman of the Board, Chief Executive Officer; FTAI Aviation Ltd

David Moreno; Chief Operations Officer; FTAI Aviation Ltd

Angela Nam; Chief Financial Officer; FTAI Aviation Ltd

Kristine Liwag; Analyst; Morgan Stanley

Louis Raffetto; Analyst; Wolfe Research

Josh Sullivan; Analyst; The Benchmark Company

Guiliano Bologna; Analyst; Compass Point

Hillary Cacanando; Analyst; Deutsche Bank

Brian McKenna; Analyst; Citizens JMP Securities, LLC

David Zazula; Analyst; Barclays Corporate & Investment Bank

Sherif Elmaghrabi; Analyst; BTIG, LLC

Stephen Trent; Analyst; Citi

Frank Galanti; Analyst; Stifel Nicolaus and Company, Incorporated

Robert Dodd; Analyst; Raymond James

Presentation

Operator

Good day and thank you for standing by. Welcome to the FTAI Aviation first-quarter 2024 earnings conference call. (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 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.

Joseph Adams

Thank you, Alan. Starting 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 product segment and negative 11 from corporate and other.
Turning now, the 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 asset sales 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 V 2,500 engines in Q1 to three customers through our recently launched V 2,500 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 to high end of our previous range. Our maintain 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 a TAM 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 and 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.

Question and Answer Session

Operator

(Operator Instructions) Kristine Liwag, Morgan Stanley.

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 the TAM. The deal itself is predominantly a B. 2,500 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 on that are avoiding shop visits for Lat-Am and offering flexibility as far as EBITDA and how that's going to show up, we're going to be recognizing the 25 hundred MRMRE. contribution as soon as engines are changed, 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 on as well as there's a smaller contribution on the leasing side that's going to commence as soon as we close those airplanes as the.

Kristine Liwag

Thanks, David, and then when you said the ramp up over two to three years, you said, you know, 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?

Joseph Adams

Well, this I mean, 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'll have it'll be a needle mover in years, two, three, four five for our aerospace products business. So that's that's really all we're saying at the moment at this point is it's going to take a little bit of time for that to kick in. But then once it does, it's a it's a needle mover and it's very stable.

Kristine Liwag

If I could do one more follow-up on this on with the B. 25 MRE. that you've announced earlier this year, how should we think about the LatAm, our contract as a proxy for economics for additional of the 25 MRE, should this be what we look at for additional 72,500 contracts is this a good starting point, is this better on any sort of context would be helpful.

Joseph Adams

It's a great starting point, and we would we would love to do more of these and we hope we will. We have several projects that are of a similar nature detail on that obviously has their own requirements and their own spec. So they'll all be a little bit different, but we hope the this model is used by other airlines, and we are in discussions with the big operators of E. 2005 hundreds. We've gotten very positive feedback on this. So we expect to do more and we hope to do more.

Operator

Louis Raffetto, Wolfe Research.

Louis Raffetto

Good morning. Wondering, Joe, on the last or maybe October earnings call, you said you thought maybe 200 module swaps not precise number of ballpark for 24, but you're doing 72 in the first quarter. Any thoughts on that now and then sort of rolling into that, obviously, you've got module swaps, you've got the MRE and the V. 2,500 where you just mean you're kind of doing the shop visits ahead of time. How should we think about capacity limitations at this point?

Joseph Adams

As Jim on the first point, I think we my recollection is we indicated between 250 and 300 module swaps of 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 backlogs. So I 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 some 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 for what was your second question or did I know you kind of you cover both of them?
So I was just going to ask a quick one, Angela, just any commentary around how to think about cash flow in the quarter rest of the year?

Angela Nam

Sure. So our cash flows for this quarter, as you can see, operating cash flows were about neutral on par. That's because part of our proceeds from sales is sitting and investing. And we believe for the rest of the year, our cash flow from operations will improve significantly.

Louis Raffetto

Okay. Thank you very much.

Operator

Josh Sullivan, The Benchmark Company.

Josh Sullivan

With the addition of the V. 2,500 here, can you just help us understand some of the relative savings maybe versus the 56 for an airline? And I want to say in the past, you've talked about a $3.5 million differential on the G. 56. Is there a way to think about that for the V. 2,500?

Joseph Adams

Yes, we have the same set of same approach to that engine is we've taken the CFM56 engine and we've looked at sourcing, used serviceable material, doing hospital repairs potentially PMA better being able to get better deals with MROs because of volume commitments. And it's all it's all on the table that the shop visit cost for the V is higher than the CFM56, it's typically are full. Front-to-back is 9 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 at 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 in build, we'll be able to give more specifics around who we're working with and what what are the components of that?

Josh Sullivan

And then just given the move in the stock, all the changes, you can get a sense of the investor base at this point versus last year? Any major changes you're seeing?

Alan Andreini

Hi, it's Alan. There have been and I think that, um, um, you know, there are people that are initiating on the stock rate here. And I think when you see the 13 as filed for this quarter in May 15, you're going to see some names that you've never seen before.

Operator

Guiliano Bologna, Compass Point

Guiliano Bologna

Good Morning America. Congrats on the continued our performance on the our product segments, our grocers were asking was that good. So we would obviously love to have an update about P. and A., but with that, being said, we've heard a lot of discussion recently about the industry pushing into PMA and increased demand for DNA from different airlines. I'm curious if you agree with that and why you think that's happening?

Joseph 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 on the except as we I mean, I think that a lot of the recent last year or so people focus a lot on 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 TMA not only delivers cost savings, a very high-quality product, but it delivers a second source of products which can be it 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 party and you have a single supplier and they tell you, they can't get you. That's it for a year, then you're in a bad position. So that's I think why it's becoming more talked about it. Maybe more people are recognizing that it's not just us your cost saving opportunity.

Operator

Hillary Cacanando, Deutsche Bank.

Hillary Cacanando

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

Angela Nam

Sure, Hilary on. So yes, you're correct in our Series A. and B are converting to floating later this year on. We're currently planning on refinancing those preferreds before those reset dates until we continue to reassess that.
In regards to the rating agencies on our current analysts are those that typically cover are classed less source and But each rating agency is recognizing the great contributions 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 on which we think will be beneficial.
You are meeting.

Hillary Cacanando

Thank you. And then my second question is just on the seed side. You mentioned that the demand for these assets remains strong and I know the gains could be lumpy. So how should we think about the segment for the rest of the year. And, you know, could you just talk about the pipeline for that segment?

Joseph Adams

You sounded pretty excited about it in terms of what the pipeline looks like for the second quarter, what's sort of two things in the first quarter that depressed leasing EBITDA, pure leasing EBITDA was?
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 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 periods for flying hours and a lot of airlines don't fly. The same schedules in some of our EBITDA is driven off of hours flown. So all of that changes in Q2 and Q3. And we expect to, as I said, a meaningful uptick on starting next quarter. And we're reaffirming our $425 million of leasing EBITDA for the year with or without gains on asset sales increased.

Operator

Brian McKenna, Citizens JMP.

Brian McKenna

Good morning, everyone. Joe, I appreciate the comments on the 250 million of EBITDA expected from aerospace products for 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 momentum here heading into 2Q and beyond. So I would say 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 segments?

Joseph Adams

Well, it's just one quarter and it is 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 now on the second quarter but at this point, we're sticking with the two 50.

Brian McKenna

Got it.
Okay.
Makes sense.
And then just to follow-up, it seems it's great to see the V. 2,500 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 in ways to leverage the infrastructure already in place. So can this business actually be margin accretive to the segment over time?

Joseph Adams

It could. I think the out I mean, unless MDL is a good example where it's both V2500 and CFM56 engines in a week, we offer engine solutions to every airline in the world that operates either a seven three seven MG. or A. three, 20 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 and there are some unique aspects right now because the V. 25 hundred's, the demand is so high, given that over reportedly over 600 GTF. aircraft powered aircraft that are grounded right now, which is times two, that's 1,200 engines that are out of service. And so the demand for the V. 2,500 is extremely high and will state 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 V. 2,500 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 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 to different ways. So I think that that possibility is something that we're seeing now are likely to play out. So I do think that has some added upside.

Brian McKenna

Great.
I'll leave it there and congrats on another great quarter.

Operator

David Zazula, Barclays.

David Zazula

Thanks for taking my questions for David. I guess my understanding is with the B. 2,500, you have a little bit less flexibility in how you execute that the maintenance and operations of that type of engine and would just with your high demand overall, can you just talk about some of the challenges you have in balancing the V. 2,500 versus CFM56 and how you're managing that?
Sure.

David Moreno

So on the V. 2,500. You have a lot of the same components that you do on any engine, right, which is you have access to used serviceable material. You have access to independent MROs. Then you have access to new parts via either OEMRPMAV. 2,500, as we discussed, is a more expensive shop visit. It is a little more complicated from an 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 on, we're able to integrate those solutions on providing 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 and just because there's not enough B. 25 hundreds today in the market. So we're going to continue to develop our capabilities and continue to find innovative ways to maintain those engines and it's continuous improvement.

Joseph Adams

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 that a year or two, we're going to be a lot. We're going to have a lot more tools to work with on the V. 2,100 that we did not have today. And even even without the tools, it's still a great market. So great that's very helpful for George.

David Zazula

Angela, impressive work on the the tender for the October 2025 notes. I'm just curious as to what their plan is for that funding and deal. 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?

Joseph Adams

Be it a refi of those notes are what the plan would be like. I think the refi is done. The next opportunity is the nine and three quarters that are callable the call 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 flows too one, make investments into them obtain a strong double-B 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, the V. 2,500, which is up from 70 now. So we will be increasing slightly that, but I think the opportunity will come at some point this later this year, probably to look at repaying that and paying some of that take 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?

Joseph Adams

Yes, we have four separate work streams going up. Three of them are negotiations with counterparties that are not insurance companies and they're very advanced and we expect them hopefully to get those done around the middle of this year, which represents about 75 million out of the expected 150 that we expect to talk about 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 the middle of next year, but we think we'll get 150. We think half of that the middle of this year and the other half in the middle of next year.

David Zazula

Thanks very much.
Appreciated.

Operator

Sherif Elmaghrabi, BTIG, LLC.

Sherif Elmaghrabi

Good morning. Thanks for taking my questions. So a couple on lead and deal. What's the lead time on the V. 2,500 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 SI 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 you relatively soon. The ramp up will take time. So we are on we have a schedule right now for this year of shop visits, 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 not producing those engines ahead of time. But those engines have been produced and some of them are finalizing shop visit at the moment, we started I mean, we have 15 engines in the shop right now of 2019.

Joseph Adams

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 our time's up when they need them. We'll have those engineers ready. They spent a lot of.
Thank you.
Spent a lot of time asking that question. So we went through the ringer on that. That was one of their key criteria given the shortages in the industry that makes sense.

Sherif Elmaghrabi

And then on the sale leaseback side of the deal, obviously that generates some liquidity for Lat Am right? So does a 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 multi-phase deals, something you're thinking about?

Joseph Adams

Yes, yes, it does. I mean my time on this in this situation wasn't really focused as much as some airlines on generating a lot of liquidity from this deal. So it's a it's not a huge amount to them and they were more focused on the engine exchange program. But airlines are all every deal ends up being a Snowflake and it's always different set of priorities and on. But the demand for on leased 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 and with a known airline, you can easily monetize that and we will be doing more of that in the second quarter. So that will generate some cash more cash and more games in, but from that activity. So yes, we do like that.

Operator

Stephen Trent, Citi.

Stephen Trent

Good morning, everybody, and thanks for taking my question. On a couple of my questions have already been answered, but I'm curious as well, when we think about I know 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 are there geographic spots where you maybe think you can add a footprint on?

Joseph Adams

Yes, it would be Southeast Asia which we've we did have a relative very good job early on of covering North and South America in Europe, and we started it about now 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 have. We're relatively underrepresented, but that will be changing this year. And we see that as a future significant growth opportunity, whether we whether we have maintenance capacity there or not, is something we've started thinking about. And so don't have a concrete failing conclusive yet, but we will look at maintenance and facilities. We potentially are either our own or partners in that market in the coming months.

Stephen Trent

Okay. Appreciate that as a super helpful. And thanks for the time.

Operator

Frank Galanti, Stifel.

Frank Galanti

I wanted to ask about the aerospace segment. Can you help us understand what the breakdown in the segment was between module swaps, USN. sales and full engine sales or exchanges, given the varying levels of differentiation and margins between those businesses?

Joseph Adams

Sure. So we in the starting with the module factory we generate about us 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 data module factory module transactions happen in either one, two or three. So a customer can choose either what any of those flavors that you want. Three modules is a whole engine. In some cases, what airlines realizes that rather than then working to trying to keep their fan or their low pressure turbine that they can actually save more money by just doing a whole engine exchange and not having to deal with that because they have zero days of downtime. So So but on average, the average transaction averages out to two modules per transaction. And in terms of the the rest of the so we call that in the module factory in the MREV. 25, our business is very similar and the profitability from review 20, about 100 on an equivalent basis is probably a little bit higher than the equivalent on the CFM56 today, but they're pretty comparable, and we expect that to remain similar. And 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 there was roughly previously about 25% of EBITDA from areas of aerospace products. But as we have ramped up the memory business, that percentage is going down towards less than 15% of EBITDA at this point and will continue as a percentage to decline because that's not a high growth business. So hopefully that, that helps it does.

Frank Galanti

Thanks, Adam. And so sort of digging in on to the three whole engine defense sales and sort of based on last quarter's reclassification of the 25 hundred gain on sale from that leasing segment into the aviation segment. It's sort of my understanding, right that when you sell for CFM56 engine, does that shows up as three modules and it results in a gain on sale of an aerospace segment. So just confirm for me that that's correct.
And then so how many of those synergy modules were for engines and all of this format of engines sold, how many of those engines that you sell sort of the same three modules that you purchase and what and I have no idea when we sell a whole engine, as I said, it's the customer's choice.

Joseph Adams

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 you know, from from a business operations center. I don't have any numbers on that.
Okay.

David Moreno

But just like if you had purchased an engine in COVID and did no work on it and so sort of no value added work. And when you sell that, is that showing up in aerospace EBITDA?

Joseph Adams

Well, we there's no such thing 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 or torn down or combined reassembled into an engine. So that doesn't happen.
Okay.

David Moreno

Then just to be clear, every CFM56 engine goes through the module factory in some capacity?

Joseph Adams

No. I mean, we've bought airplanes sold the airframe and leased engines directly. If the engine doesn't require work, it doesn't go into the module factory.

Angela Nam

Okay.

David Moreno

That's really helpful. I appreciate you taking the question. Thank you very much.

Operator

Robert Dodd, Raymond James.

Robert Dodd

Morning, everybody, and congrats on the quarter and thanks for the detail about our cash flow and potential use of funds, et cetera, patent that I you did mention the dividends. I'm going to ask about the dividend on. I mean that 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 a home of some of your thinking, I mean, way back in the past that used to be a good time.
Yes, two times FAD coverage will 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 give you the comfort necessary to increase the dividend from where it is right now?

David Moreno

Yes, you're right. We really haven't thought about the coverage calculation recently for us four years or five years. But you have the history says yes or no, I don't think that's necessarily the way we're approaching it today, is it it's more we have investments. We want to have a strong double-B. And then when we have excess cash, we'll return it to shareholders somehow that's kind of the waterfall.

Robert Dodd

And one one more, if I can on on the capacity question.
You are very opportunistic when we 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, all those kind of things, facilities are being underutilized.

Joseph Adams

Now this backlogs everywhere, all of those kind of opportunities come to be available or is it going to be analytics is an expansion in capacity come to be more, is it going to mess this necessitate an acquisition or be capital intensive? Or are you going to be able to find capacity on a as needed basis to think there's capacity out there. There's there are some shops that are under the successful shops and 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 that we and I look at and see and we also have partners in different parts of the world. So if the opportunity for the maintenance side is 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 be stay stay in front of it. So yes, there's still opportunities maybe maybe not the same as during COVID. But but but there's it's a it's a big industry and it's global and there's lots of smaller and medium-size players out there.

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.