AerSale Corp: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. You should read the following management’s discussion and analysis and the accompanying financial statements and related notes with AerSale’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”). This discussion contains forward-looking statements about AerSale’s business, operations and industry that involve risks and uncertainties, such as statements regarding AerSale’s plans, objectives, expectations and intentions. AerSale’s future results and financial condition may differ materially from those currently anticipated because of the factors described in the section titled “Risk Factors” in the 2024 Form 10-K and in any of AerSale’s subsequent reports filed with the Securities and Exchange Commission. Events relating to the possibility of customer demand fluctuations, supply chain constraints, continuing inflationary pressures, the effects of foreign currency fluctuations and high interest rates, geopolitical uncertainties including continuing hostilities and tensions, trade restrictions and sanctions, tariffs and retaliatory countermeasures. Should one or more of these risks or uncertainties materialize, actual outcomes, including the future results of AerSale’s operations, may vary materially from those indicated.

The Company

We operate as a platform for serving the commercial aviation aftermarket sector. Our top executives have on average over 30 years of experience in aircraft and engine (“Flight Equipment”) management, sales and maintenance services, and are supported by an experienced management team. We have established a global purpose built and fully integrated aviation company focused on providing products and services that maximize the value of Flight Equipment in the middle to end of its operating life cycle.

We are a worldwide provider of aftermarket commercial aircraft, engines, and their parts to passenger and cargo airlines, leasing companies, original equipment manufacturers (“OEM”), government and defense contractors, and maintenance, repair and overhaul (“MRO”) service providers. We report our activities in two business segments: Asset Management Solutions, comprised of activities that extract value from strategic Flight Equipment acquisitions either as whole assets or by disassembling for used serviceable material (“USM”), and TechOps, comprised of MRO activities for aircraft and their components, sales of internally developed advanced technical repairs, modifications and products, which we market under the tradename “Engineered Solutions”, and other serviceable products.

Our Asset Management Solutions segment focuses on mid-life Flight Equipment. Asset Management Solutions’ activities include monetization of assets through the lease or sale of whole assets, or through disassembly activities in support of our USM-related activities. Our monetizing services have been developed to maximize returns on mid-life Flight Equipment throughout their operating life, in conjunction with realizing the highest residual value of Flight Equipment at its retirement. We accomplish this by utilizing deep market and technical knowledge related to the management of Flight Equipment sales, leasing and MRO services. To extract value from the remaining flight time on whole assets, we provide flexible short-term (generally less than five years) leasing solutions of Flight Equipment to passenger and cargo operators across the globe. Once the value from the Flight Equipment’s flight time has been extracted,

Flight Equipment is considered to be at or near the end of its useful life and is analyzed for return maximization as either whole asset sales or disassembled for sale as USM parts. Revenue from this segment is segregated between Aircraft and Engine depending on the asset type that generated the revenue. Lease revenue and the related depreciation from aircraft and engines installed on those aircraft are recognized under the Aircraft category. Revenue from sales of whole aircraft and related cost of sales are allocated between the Aircraft and Engine categories based on the allocated cost basis of the asset sold.

Our TechOps segment provides internal and third-party aviation services, including internally developed Engineered Solutions, full heavy aircraft maintenance and modification, component MRO, as well as end-of-life disassembly services to all Flight Equipment. Our MRO business also engages in longer-term projects such as aircraft modifications, cargo and tanker conversions of aircraft, and aircraft storage. The TechOps segment also includes MRO services for landing gear, thrust reversers, hydraulic systems, and other aircraft components.

We utilize these capabilities to support our customers’ Flight Equipment, as well as to maintain and improve our own Flight Equipment, which is subsequently sold or leased to our customers. These processes require a high degree of expertise on each individual aircraft or component that is being serviced. Our knowledge of these processes allows us to assist customers to comply with applicable regulatory and OEM requirements. A significant amount of skilled labor is required to support this process, which the Company has accumulated through its diversified offerings.

In addition to our aircraft and USM parts offerings, we develop Engineered Solutions consisting of Supplemental Type Certificates (“STCs”) that can be installed on existing Flight Equipment to improve performance, comply with regulatory requirements, or improve safety. An example of these solutions is the AerSafe® product line, which we designed and for which we obtained Federal Aviation Administration (the “FAA”) approval to sell as a solution for compliance with the FAA’s fuel tank flammability regulations. Another example of these solutions is our AerAware™ product, an industry-leading, next generation Enhanced Flight Vision System that has recently received approval by the FAA for the Boeing B737NG product line. These products are proprietary in nature and function as non-OEM solutions to regulatory requirements and other technical challenges, often at reduced delivery time and cost for operators. In order to develop these products, we engage in research and development activities (“R&D”) that are expensed as incurred.

Although we are not aware of any specific event or circumstance that would require updates to our estimates or judgments, disruption in the global economy and financial markets, geopolitical instability, and government actions related to trade policies, tariffs and immigration continue to create uncertainty. We source parts and components for our business from various suppliers around the world. Current geopolitical conditions, including trade restrictive actions, strained intercountry relations, and the continued shutdown of the U.S. government, could cause significant materials and parts shortages, as well as delivery delays, labor shortages, disruptions to government contracts such as delayed payments or halted projects, effects on supply chains due to reduced staffing for customs, inspections and transportation oversight, or delays in regulatory approvals, distribution issues, energy cost increases and price increases. Furthermore, the U.S. government’s adoption of new approaches to trade policy and imposition of tariffs on certain foreign goods (as well as the possibility of imposing significant, additional tariffs in the future) may make it more difficult or costly for us to procure components and other material supplies and, in turn, may increase the cost to our customers, which may materially and adversely impact demand for our products and services, our results of operations or our financial condition. We continue to monitor the current economic environment and its potential impact on our business, results of operations or financial condition, as well as potential impact on our end customers whose demand for our products and services may be adversely impacted as a result of changes in policies by the U.S. or other governments, and closely manage our costs and capital resources so that we can respond appropriately as circumstances change. Our estimates may change as new events occur and additional information is obtained. Actual results could differ from these estimates under different assumptions or conditions.

Recent Accounting Pronouncements

The most recently adopted and to be adopted accounting pronouncements are described in Note B of our condensed consolidated financial statements included in this Quarterly Report and in Note B within our consolidated annual financial statements in Part II, Item 8 of the 2024 Form 10-K.

Results of Operations

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

Sales and gross profit for AerSale’s two business segments for the three months ended September 30, 2025 and 2024 were as follows:

(in thousands, except percentages)

(in thousands, except percentages)

Total revenue for the three months ended September 30, 2025 decreased $11.5 million, or 13.9%, compared to the three months ended September 30, 2024, driven by a decrease of $11.2 million, or 22.2%, in revenue within Asset Management Solutions, and a decrease of $0.3 million, or 0.9%, in revenue within TechOps.

Asset Management Solutions

Revenue in the Asset Management Solutions segment decreased $11.2 million or 22.2%, to $39.2 million for the three months ended September 30, 2025, due to a $0.7 million, or 7.7%, decrease in revenue from Aircraft and a $10.5 million, or 25.4%, decrease in revenue from Engine. The decrease in Aircraft revenue is due to lower USM revenue across multiple product lines in the amount of $2.0 million, as well as lower Flight Equipment sales, partly offset by higher leasing activity in the B757 product line in the amount of $1.6 million. The decrease in Engine revenue is primarily attributable to lower activity in the CFM56 and RB211 product lines due to lower Flight Equipment sales in the amount of $21.9 million, partly offset by higher leasing activity of $0.9 million, and higher USM sales of $10.5 million in the CF6-80 and PW4000 product lines, as we monetize our previous feedstock acquisitions.

Cost of sales in Asset Management Solutions decreased $5.3 million or 17.1%, to $25.8 million for the three months ended September 30, 2025, compared to the prior year period. The decrease in cost of sales was primarily driven by the sales decrease discussed above. Gross profit in the Asset Management Solutions segment decreased $5.9 million, or 30.6%, to $13.4 million for the three months ended September 30, 2025, compared to the three months ended

September 30, 2024. The gross profit decrease is mainly attributable to lower revenue generated for the three months ended September 30, 2025, as noted above.

Aircraft gross profit margins increased to 40.3% for the three months ended September 30, 2025, from 33.7% for the three months ended September 30, 2024 due to higher margin contribution from leasing revenue. Engine gross profit margin was 32.5% for the three months ended September 30, 2025, a decrease from 39.3% for the three months ended September 30, 2024, which was primarily the result of changes in the revenue mix, mainly lower Flight Equipment sales which, historically, tend to generate higher margins.

TechOps

Our revenue from TechOps decreased by $0.3 million or 0.9%, to $32.0 million for the three months ended September 30, 2025, compared to the prior year period. The decrease was driven by lower sales volume in our Goodyear, Arizona and Roswell, New Mexico facilities, partly offset by higher revenue from the Company’s component MROs.

Cost of sales in TechOps decreased $4.0 million or 14.3%, to $23.9 million for the three months ended September 30, 2025 compared to the prior year period. This was driven by lower revenue as discussed above and a shift to more profitable work. Gross profit in TechOps increased $3.7 million, or 84.6% for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, driven by higher gross profit of $2.1 million on MRO services, as a result of focus on higher margin opportunities and implementation of process efficiencies that allowed us to increase gross margins, which fully offset the lower revenue. Gross profit margin increased to 25.3% for the three months ended September 30, 2025 compared to 13.6% for the prior year period, due to the initiatives discussed above which increased MRO margins from 11.3% in the prior year period to 21.2% for the three months ended September 30, 2025.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $3.1 million, or 14.1% to $18.6 million for the three months ended September 30, 2025, compared to the prior year period. The decrease was related to lower variable and fixed payroll costs, which benefited from the efficiency initiatives implemented earlier in the year.

Change in Fair Value of Warrant Liability

We account for our private warrants as a liability at their fair value, with changes in fair value recognized in our results from operations for the period. The fair value of our private warrants is determined using a Black Scholes option pricing model. For the three months ended September 30, 2025, the amount recorded for change in fair value of warrant liability loss was not significant, compared to a $0.2 million income in the prior year period.

Interest Expense, Net

Interest expense, net was $2.4 million for the three months ended September 30, 2025, compared to $1.8 million interest expense, net for the three months ended September 30, 2024. The increase in interest expense is primarily driven by higher borrowings under our debt facilities during the current year period driven by increased feedstock acquisitions to continue our growth and funding of a stock buyback executed in the first quarter of 2025.

Income Taxes

The effective tax rate for the three months ending September 30, 2025 was 119.6% compared to 13.3% for the three months ended September 30, 2024. The difference between the effective tax rate and the statutory tax rate of 21.0% for the three months ended September 30, 2025, is primarily due to the impact of state income taxes and stock-based compensation. The difference between the effective tax rate and the statutory tax rate of 21.0% for the three months ended September 30, 2024, is primarily due to the impact of state income taxes and stock-based compensation.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

Sales and gross profit for AerSale’s two business segments for the nine months ended September 30, 2025 and 2024 were as follows:

(in thousands, except percentages)

(in thousands, except percentages)

Total revenue for the nine months ended September 30, 2025 decreased $6.0 million, or 2.4%, compared to the nine months ended September 30, 2024, driven by a decrease of $9.2 million, or 9.3%, in revenue within TechOps, partially offset by an increase of $3.2 million, or 2.1%, in revenue within Asset Management Solutions.

Asset Management Solutions

Revenue in the Asset Management Solutions segment increased $3.2 million or 2.1%, to $154.7 million for the nine months ended September 30, 2025, due to a $11.6 million, or 9.9%, increase in revenue from Engine; offset by an $8.4 million, or 24.3%, decrease in revenue from Aircraft. The increase in Engine revenue is primarily attributable to increased activity in the CF6-80 and PW4000 product lines as a result of higher USM sales in the amount of $35.2 million and higher leasing revenue in the amount of $7.4 million, partly offset by lower sales of Flight Equipment. The decrease in Aircraft revenue is primarily attributable to decreased activity in the B737 product line due to lower Flight Equipment sales in the amount of $12.6 million, partially offset by higher leasing revenue from the B757 product line.

Cost of sales in Asset Management Solutions increased $8.1 million, or 8.6%, to $102.3 million for the nine months ended September 30, 2025, compared to the prior year period. The increase in cost of sales was primarily driven by higher costs on USM sales driven by the sales increase noted above. Gross profit in the Asset Management Solutions segment decreased $4.9 million, or 8.6%, to $52.4 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The gross profit decrease is mainly attributable to changes in the revenue mix for the nine months ended September 30, 2025, mainly lower Flight Equipment sales which, historically, tend to generate higher margins.

Aircraft gross profit margin increased to 35.7% for the nine months ended September 30, 2025, from 32.8% for the nine months ended September 30, 2024, due to higher margins on leasing revenue. Engine gross profit margin was 33.5% for the nine months ended September 30, 2025, a decrease from 39.3% for the nine months ended September 30, 2024, which was primarily due to changes in the USM product mix, offset by higher margin on leasing revenue.

TechOps

Our revenue from TechOps decreased by $9.2 million, or 9.3%, to $89.7 million for the nine months ended September 30, 2025, compared to the prior year period. The decrease was primarily driven by lower MRO services.

Cost of sales in TechOps decreased $14.7 million, or 17.9%, to $67.3 million for the nine months ended September 30, 2025, compared to the prior year period, driven by the lower revenue discussed above. Gross profit in TechOps increased $5.5 million, or 32.6%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, driven by higher profit generated on product sales and a focus on higher margin work. Gross profit margin increased to 25.0% for the nine months ended September 30, 2025 compared to 17.1% for the nine months ended September 30, 2024, and was largely attributable to higher margins from the Company’s on airport and landing gear MROs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $3.3 million, or 4.8%, to $66.0 million for the nine months ended September 30, 2025, compared to the prior year period. The decrease was related to lower variable and fixed payroll costs that benefited from the efficiency initiatives that were implemented earlier in the year, partially offset by inflationary cost increases.

Change in Fair Value of Warrant Liability

We account for our private warrants as a liability at their fair value, with changes in fair value recognized in our results from operations for the period. The fair value of our private warrants is determined using a Black Scholes option pricing model. For the nine months ended September 30, 2025, we recorded a change in fair value of the warrant liability income of $0.1 million, compared to a $2.3 million income in the prior year period.

Interest Expense, Net

Interest expense, net was $6.0 million for the nine months ended September 30, 2025, compared to $4.2 million for the nine months ended September 30, 2024. This was primarily related to interest expense incurred on higher borrowings under our debt facilities during the current year period compared to the prior period related to the timing of changes in working capital and funding of the stock buyback executed in the first quarter of 2025.

Income Taxes

The effective tax rate for the nine months ended September 30, 2025 was 35.7% compared to 5.2% for the nine months ended September 30, 2024. The difference between the effective tax rate and the statutory tax rate of 21.0% for the nine months ended September 30, 2025, is primarily due to the impact of state income taxes and stock-based compensation. The difference between the effective tax rate and the statutory tax rate of 21.0% for the nine months ended September 30, 2024, is primarily due to the impact of state income taxes and stock-based compensation.

Financial Position, Liquidity and Capital Resources

As of September 30, 2025, we had $5.3 million of cash and cash equivalents. We finance our growth through cash flows generated from operations and borrowings secured by our assets. We had $123.8 million outstanding under the Revolving Credit Agreement (as defined below) as of September 30, 2025, and we had $53.6 million of availability thereunder. We used cash in operations of $34.3 million for the nine months ended September 30, 2025, primarily for feedstock acquisitions, and used cash in investing activities of $5.4 million for the nine months ended September 30, 2025.

We believe our equity base, internally generated funds, and existing availability under our debt facilities are sufficient to maintain our level of operations through the next twelve months. Any projections of future cash needs and cash flows beyond the next twelve months are subject to substantial uncertainty, but we believe our sources of liquidity, as discussed above, will be sufficient to meet our long-term cash requirements. If an event occurs that would affect our ability to meet our capital requirements, including events beyond our control such as a potential tightening of debt capital markets, including in response to the implementation of new tariffs as part of the U.S. trade policy and any reciprocal or retaliatory tariffs thereto, our ability to continue to grow our asset base consistent with historical trends could be impaired and our future growth limited to that which can be funded from internally generated capital.

We may, from time to time, purchase our outstanding shares of common stock through cash purchases and/or exchanges for equity or debt, open-market purchases, privately negotiated transactions or otherwise. Such purchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, legal and regulatory considerations, contractual restrictions and other factors. Purchases, if any, will be funded through our available cash from operations. The amounts involved may be material.

On March 18, 2025, the Company repurchased, directly from a selling stockholder, 6,428,571 shares of the Company’s common stock, par value $0.0001 per share, at a price of $7.00 per share for total consideration of $45.0 million.

Cash Flows— Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

Cash Flows from Operating Activities

Net cash used in operating activities was $34.3 million for the nine months ended September 30, 2025, compared to cash used of $26.4 million for the same period in 2024. The increase in cash deployed of $8.0 million was primarily due to the timing of vendor advances associated with feedstock and changes in working capital levels during the nine months ended September 30, 2025 compared to the prior year period.

Cash Flows from Investing Activities

Net cash used in investing activities was $5.4 million for the nine months ended September 30, 2025, compared to cash used of $11.5 million in the same period for 2024. The reduction in cash used in investing activities was driven by purchases of property and equipment during the nine months ended September 30, 2025 and September 30, 2024 due to the completion of the Company’s expansion projects.

Cash Flows from Financing Activities

Net cash provided by financing activities was $40.3 million for the nine months ended September 30, 2025, compared to cash provided of $41.7 million in the same period for 2024. Cash provided by financing activities during the nine months ended September 30, 2025 resulted from net borrowings under our Revolving Credit Agreement and borrowings under the CIBC Equipment Loan (as defined below), offset by cash used in the repurchase of common stock in the first quarter of 2025. Cash provided by financing activities during the nine months ended September 30, 2024 is the result of proceeds from net borrowings under the Revolving Credit Agreement.

Debt Obligations and Covenant Compliance

Wells Fargo Senior Secured Revolving Credit Facility

Effective July 25, 2023, we amended our revolving credit agreement (as amended, the “Revolving Credit Agreement”) to increase our maximum commitments under the Revolving Credit Agreement to $180.0 million aggregate amount, expandable to $200.0 million, subject to conditions and the availability of lender commitments and borrowing base limitations, and to extend the maturity date to July 24, 2028, subject to certain conditions.

The maximum amount of such commitments available at any time for borrowings and letters of credit is determined according to a borrowing base calculation equal to the sum of eligible inventory and eligible accounts receivable reduced by the aggregate amount, if any, of trade payables of the loan parties, as defined in the Revolving Credit Agreement, and is subject to contractual restrictions. Extensions of credit under the Revolving Credit Agreement are available for working capital and general corporate purposes.

As of September 30, 2025, there was $123.8 million outstanding under the Revolving Credit Agreement and we had $53.6 million of availability thereunder. We were in compliance with our debt covenants for the Revolving Credit Agreement as of September 30, 2025.

CIBC Equipment Loan

On November 22, 2024, the Company entered into a property and equipment revolving term loan (the “CIBC Equipment Loan”) with a total advance commitment of $10.0 million for the purpose of financing capital expenditures on property and equipment. Advances made by the lender are convertible into term loans at the option of the lender at a rate of SOFR plus 3.0% and have a maturity date of thirty-six (36) months from the term loan conversion date. Advances under this loan are collateralized by the property and equipment it finances and require interest only payments until converted to a term loan, at which point, principal and interest payments are required.

During the nine months ended September 30, 2025, the Company borrowed an additional $1.2 million under this facility, converted to a term loan maturing on September 30, 2028. As of September 30, 2025, $2.5 million remained outstanding under this facility.

We were in compliance with our debt covenants for the CIBC Equipment Loan as of September 30, 2025.

Off-Balance Sheet Arrangements and Contractual Obligations

We did not have any off-balance sheet arrangements as of September 30, 2025. Refer to Note Q – Leases, within our consolidated annual financial statements in our 2024 Form 10-K for a listing of our non-cancelable contractual obligations under operating leases.

The Company has entered into a purchase commitment with Universal Avionics for the acquisition of technical equipment for manufacturing our AerAwareTM product of which $6.8 million remain outstanding as of September 30, 2025. The commitment is expected to be satisfied in 2025.

Critical Accounting Policies and Estimates

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. A summary of our critical accounting estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the 2024 Form 10-K. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a material impact on our financial results. During the nine months ended September 30, 2025, there were no material changes in our critical accounting estimates and policies.

In the normal course of business, we are subject to market risks. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and sales. Our exposure to market risk includes fluctuating interest rates and changes in foreign exchange rates.

Interest Rate Risk

We are exposed to the risk that our earnings and cash flows could be adversely impacted by fluctuations in interest rates associated with borrowings under our Revolving Credit Agreement and the CIBC Equipment Loan, which have variable interest rates tied to the Secured Overnight Financing Rate. As of September 30, 2025, we had $123.8 million outstanding variable rate borrowings under the Revolving Credit Agreement and $2.5 million outstanding variable rate borrowings under the CIBC Equipment Loan. A ten percent increase in the average interest rate affecting our variable rate debt outstanding as of September 30, 2025 would increase our annual interest expense by $0.6 million.

Foreign Currency Exchange Risk

We primarily use the U.S. dollar as our functional currency in all markets in which we operate in order to reduce our foreign currency market risk. Only general office expense and payroll transactions for our international locations are denominated in local currency. A hypothetical ten percent devaluation of the U.S. dollar against foreign currencies would not have had a material impact on our financial position or continuing operations as of and for the three and nine months ended September 30, 2025.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of September 30, 2025.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2025.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There are no material changes in the information reported under Part I – Item 1A “Risk Factors” contained in the 2024 Form 10-K.