FTAI Aviation Ltd. Common Stock 2026 Q3 Earnings Call

I would like to welcome you all to the FTAI Aviation third quarter 2026 earnings call, which is open to the public in listen-only mode and is being webcast. Joining me here today are Joe Adams, our Chief Executive Officer, David Moreno, our President, Nicholas McAleese, our Chief Financial Officer, and Stacy Kuperus, our Chief Operating Officer. We have posted an investor presentation in our press release on our website, which we encourage you to download if you have not already done so. We will be discussing some non-GAAP financial measures during the call today, including adjusted EBITDA. The reconciliation of these measures to the most directly comparable GAAP measures can be found in the earnings supplement. In addition, 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.

Thank you, Charlie. We have built FTAI around solving the problems our customers face. Our solutions combine engineering and asset ownership to innovate around the turbine. In both aviation and power, customers want a partner that is flexible and thinks differently and creatively, now more than ever. We are very well-positioned to be the go-to partner in both of these markets. Every business we have built at FTAI began with a challenge our customer face. We built our MRE business originally to help airlines avoid costly engine maintenance and streamline their operations. Today, with the challenges facing new-generation engines and new aircraft sold out until 2032, we are helping our customers fly their 737NGs and A320ceo fleets longer by providing efficient ways to support their engine maintenance needs. In addition, with higher oil prices pressuring airline liquidity, predictable engine maintenance cost is more important than ever.

FTAI was built for exactly this environment. We keep mid-life fleets flying at lower costs through our Aerospace Products division, and we turn these fleets into liquidity for the airline through strategic capital. We have started to offer flexible financing solutions for engines in partnership with institutional investors. I will touch on the high-level impacts, and David will walk you through how that is benefiting each of our businesses. Aerospace Products had its strongest quarter yet. Adjusted EBITDA was $282.4 million, up 57% year-over-year at an EBITDA margin of 31%, in line with our guidance of 30%. We produced a record 311 CFM56 modules, and our market share reached approximately 15% this quarter.

The strategic capital ramp is accelerating with 410 aircraft closed or under LOI across SCI I and SCI II. Importantly, the second vehicle, SCI II, started investing in September of this year and is off to a great start. For power, we reached two important milestones this quarter. First, we now have over 100 Mod-1 units under contract for 2027 and 2028, with a significant pipeline of customer demand behind that. Second, we have completed all critical testing milestones, and the Mod-1 unit has produced 25 megawatts at peak output and 23 megawatts at ISO continuous output. Finally, capital allocation. This morning, we announced a $500 million accelerated share repurchase program that will be complete by the end of this year and was accompanied by an increase in overall authorization from $500 million to $1 billion.

In addition, we have completed $80 million of share repurchases since our initial announcement in September, and this will leave us with $420 million of authorization available for one year after the ASR, or accelerated share repurchase program, has been completed. I will now hand it over to David.

Thanks, Joe. Expanding on Joe's comments, three things are shaping the market today. First, mid-life aircraft and engines remain supply-constrained. New 737 MAX and A320neo orders are unavailable until 2032 and beyond, and the LEAP and GTF still spend far more time in the shop than the CFM56 and the V2500s. Airlines continue to extend leases and add mid-life aircraft as a result. Second, airlines are prioritizing liquidity. Higher oil prices have made cash a top priority, and sale-leaseback interest has grown meaningfully. At FTAI, sale-leasebacks come with engine maintenance attached, so it is both a liquidity lever and a cost control tool, which makes these transactions even more attractive. Third, financing solutions make our engine products more compelling. Whether an airline buys the engine outright or takes an operating or finance lease through our capital partners, FTAI builds the engine, sells it, and keeps the customer relationship.

WestJet shows what happens when these come together. The airline sold 27 Boeing 737-700s. 17 on-lease aircraft went to SCI II via sale-leaseback, so WestJet keeps operating them, and 10 off-lease aircraft went to Aerospace Products, where the engines become modules for the MRE network. WestJet extends the life of a 737 NG fleet and created liquidity for its balance sheet. Now to the quarter, starting with Aerospace Products, which delivered a record on every measure. $910 million of revenue, up 76% year-over-year, and $282.4 million of adjusted EBITDA, up 57%, at a 31% margin in line with guidance. We produced a record of 311 CFM56 modules in the quarter, bringing year-to-date production to 877, and we remain on track for 1,200 in 2026 and 1,700 in 2027.

Moving to Aviation Leasing, Strategic Capital is now more than half of the segment's EBITDA, exactly the asset-light transition we planned, and both SCI vehicles will continue to scale into year-end. SCI I is fully committed at 301 aircraft. Since quarter end, we closed a landmark $1 billion deal for 30 aircraft, and we expect to close substantially all 301 by December 31 for approximately $6 billion of total capital deployed. The vehicle is returning capital as well. We have distributed 17.5% of commitment this year and plan another 5% at year-end, supported by strong realizations on airframe and engines at redelivery. SCI II started investing in September and is deploying quickly. With 109 aircraft committed and the first closings coming from WestJet, across both vehicles, we have raised $5.5 billion of warehouse financing from 13 lenders in under two years, and with sale-leaseback activity rising, the pipeline is robust.

What remains on our balance sheet is a simpler business. 150 to 200 spare engines with a net book value of approximately $1 billion, earning $30 million to $50 million of EBITDA per quarter with minimal aircraft. These engines are how we keep customers flying. When an airline needs an engine immediately, they come to us, and that short-term lease often becomes an engine sale once we have built a replacement. Growth in the segment from here comes from our Strategic Capital. Lastly, Power, where we hit two milestones this quarter. The Mod-1 critical testing is complete, meeting its target of 25 megawatts for peak power and 23.1 megawatts for continuous base load power, with testing completed on both natural gas and liquid fuels. And now we have more than 100 Mod-1 units under contracts across customer types in the U.S. and Canada extending into 2028.

We've also received $234 million of customer deposits during the quarter ahead of our future deliveries, partially offsetting our inventory investment for 2027 production. Production is ramping now, and at an expected full run rate of 10 to 15 per month by year-end 2027, we're well-positioned to meet our 100-unit guidance for 2027. Let me spend a moment on why customers are choosing the Mod-1. It comes down to three things they care about most: speed, scale, and cost. On speed and scale, that is where the market is heading. Data centers are taking longer to build and require more capital, and the market needs power that installs quickly and can be delivered anywhere in the world. Many GPU providers are moving to containerized compute with the goal of being operational on-site in under two weeks.

The Mod-1 is a modular unit that ships, installs, and stacks in the same timeline. Modular power for modular compute. On cost, for behind-the-meter customer, equipment is the most important piece of the equation, and the best way to save on equipment is to need less of it. A smaller stackable unit means less capital tied up in redundancy because the increment you are protecting is 25 megawatts, not 300 megawatts. It also means less downtime. Taking one unit offline takes a fraction of the site down rather than all of it, and a turbine exchange from our engine pool returns a unit into service in 2 days, not months. Combined cycle is the next lever on cost.

The joint venture we launched this quarter adds a fully mobile trailer-mounted unit that will convert excess heat into 9 megawatts of additional output with no additional fuel emissions or water, taking efficiency to over 50% and lowering fuel cost per megawatt hour over the life of the asset. First units begin testing in the second half of 2027. I will now hand it to Nicholas.