AerSale outlines $25M MRO revenue target for 2026 while expanding recurring lease base

Earnings Call Insights: AerSale Corporation (ASLE) Q3 2025

MANAGEMENT VIEW

* CEO Nicolas Finazzo reported revenue of $71.2 million for the third quarter, attributing the year-over-year decline to "the absence of engine or aircraft sales in the quarter compared to 5 engine sales in the prior year period." Excluding these whole asset sales, "the balance of our business grew 18.5% to $71.2 million, driven by a strong inventory position supporting our USM business and higher leasing revenue."
* Finazzo highlighted margin improvement, stating, "Adjusted EBITDA was $9.5 million or 13.3% of sales compared to $8.2 million or 10.0% of sales in the prior year period." The improvement was credited to "stronger leasing contributions, higher USM activity and the ongoing benefits from our cost reduction efforts."
* The company is executing a strategic shift toward recurring leasing revenue, with Finazzo noting, "We’ve made a strategic decision to balance whole asset transactions with assets deployed on lease, which is more in line with our historical operating model."
* In the 757 passenger to freighter conversion program, Finazzo stated, "We had 1 aircraft on lease during the quarter, and we placed an additional 757 freighter on lease that will begin generating revenue in the fourth quarter. Customer interest is high, and we’re in active discussions to place the remaining 5 757s."
* On the TechOps side, Finazzo announced, "Construction of our expansion projects at both our Aerostructures and pneumatics facilities are now complete, and we’re in the process of transitioning to production in both facilities. We expect this to be a significant driver of revenue growth in 2026 and beyond."
* Finazzo added that "AerSafe remains a steady contributor, and we expect it to continue supporting results through the regulatory compliance deadline in the fourth quarter of 2026."
* CFO Martin Garmendia said, "Third quarter gross margin was 30.2% compared to 28.6% in the third quarter of 2024. This year-over-year improvement reflects stronger execution across the business, including higher lease revenue, sales mix and cost control measures."

OUTLOOK

* Garmendia stated, "We continue to expect full year revenue in excess of 2024 levels with a greater increase in EBITDA year-over-year as a result of more robust lease pool, continued monetization of our USM inventory and the cost reduction initiatives."
* The company expects the new MRO facilities to be "a significant driver of revenue growth in 2026 and beyond."
* No numerical forward guidance for EPS or revenue was provided in the transcript, and no comparison to analysts' estimates is included due to lack of data.

FINANCIAL RESULTS

* Revenue for the quarter was $71.2 million, with gross margin at 30.2%.
* Selling, general and administrative expenses totaled $18.6 million, including $1.3 million of noncash stock-based compensation.
* Operating income for the quarter was $2.9 million. Net loss for the quarter was $0.1 million.
* Adjusted net income was $1.5 million. Adjusted EBITDA was $9.5 million. Adjusted diluted earnings per share was $0.04.
* The company ended the quarter with $58.9 million of liquidity, including $5.3 million of cash and $53.6 million in available capacity on its revolving credit facility.

Q&A

* Stephen Strackhouse, RBC Capital Markets: Asked about EBITDA baseline for the MRO business into 2026 and revenue or margin targets. Garmendia responded, "Looking at 2026, we think those numbers will be approximately $25 million of revenue and generating pretty strong margins of $4 million to $5 million."
* Strackhouse asked about demand for the 757 passenger to freighter conversion. Finazzo explained, "There isn’t a competitive product really, say, in existence for the 757... we do have another 2 under LOI at this point, which we expect to deliver this quarter and the next quarter, which will put us at 4 aircraft for the year... So, we feel that things have definitely changed from a low point in 2023."
* Strackhouse inquired about the USM strategy and supply. Finazzo stated the company remains disciplined in acquisitions to hit target margin and IRR profiles, and "we’ve got ample inventory to carry us, I think, all the way through '26 without buying much more, but we expect to continue to buy more."
* Samuel Struhsaker, Truist Securities: Asked about the transition timing at Roswell and Goodyear. Finazzo said the Roswell facility is "substantially" transitioned, while Goodyear is "almost full" and Millington is beginning to fill up with a new regional carrier LOI.
* Struhsaker inquired about engine demand and repair turnaround. Finazzo responded, "Demand is insatiable at this point. The issue we face is not a lack of demand, but what do we do with that?"

SENTIMENT ANALYSIS

* Analysts showed an optimistic and constructive tone, focusing on growth drivers and capacity utilization, with detailed operational questions and positive acknowledgement of management strategies.
* Management maintained a confident and forward-looking tone during prepared remarks and Q&A, using phrases such as "we’re very optimistic" and "we feel pretty optimistic about Millington at this point."
* Compared to the previous quarter, management showed continued confidence but placed greater emphasis on recurring revenues and margin stability, while analysts shifted from margin and cost control questions to recurring revenue and asset deployment.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted from a focus on sales growth and margin expansion to emphasizing recurring revenue streams and lease pool growth.
* Strategic focus evolved from aggressive feedstock acquisition and USM sales to the stabilization of revenue through leasing and asset management.
* Analysts in the current quarter focused more on operational execution and recurring revenue rather than cost cutting and one-time asset sales.
* Key metrics, such as revenue and EBITDA, declined from the prior quarter, largely due to the absence of whole asset sales, but margin and recurring revenue showed improvement.
* Management's confidence in the ability to place remaining 757 freighters and fill new MRO capacity increased, with concrete revenue targets and detailed operational updates.

RISKS AND CONCERNS

* Finazzo cited market challenges: "Overall supply of attractively priced feedstock has been limited as new OEM production has yet to catch up with demand. We remain extremely disciplined not to overpay for feedstock in this highly competitive market."
* Engine repair turnaround times are a challenge, as Finazzo noted: "It’s taking a ridiculously long time to get anything through the shop."
* Dependency on regulatory deadlines for AerSafe and the timing of customer adoption for AerAware were highlighted as areas of uncertainty.

FINAL TAKEAWAY

AerSale management emphasized the strategic transition toward recurring and diversified revenue streams, highlighting expanding lease pools, new MRO facility contributions, and a disciplined approach to asset acquisition. Despite a quarter without whole asset sales, the company delivered improved margins and set clear expectations for growth in 2026, backed by a robust inventory position and strong demand for core offerings.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/asle/earnings/transcripts]

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