AerSale Corp: Form 10-Q for the period ended Mar 31, 2026

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, 2025 (the “2025 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 2025 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 (“R&D”) activities that are expensed as incurred.

We source parts and components for our business from various suppliers around the world. Current geopolitical conditions, including trade restrictive actions and strained intercountry relations, and potential shutdowns of the U.S. government could cause significant materials and parts shortages, disruptions to government contracts such as delayed payments or halted projects, effects on supply chains due to reduced staffing for customers, inspections and transportations authorities, 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. In addition, these U.S. actions have, and could in the future, result in other countries imposing retaliatory tariffs on our goods and services provided to foreign customers, which similarly could materially and adversely impact demand for our products and services. 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 increased geopolitical instability or 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, as well as in Note B within our consolidated annual financial statements in Part II, Item 8 of the 2025 Form 10-K.

Results of Operations

Three months ended March 31, 2026 compared to the three months ended March 31, 2025

Sales and gross profit for AerSale’s two business segments for the three months ended March 31, 2026 and 2025 were as follows:

(in thousands, except percentages)

(in thousands, except percentages)

Total revenue for the three months ended March 31, 2026 increased $4.8 million, or 7.4%, compared to the same period in 2025, driven by an increase of $3.9 million, or 10.0%, within Asset Management Solutions, and an increase of $0.9 million, or 3.4%, within TechOps.

Asset Management Solutions

Sales in the Asset Management Solutions segment increased $3.9 million, or 10.0%, to $43.1 million for the three months ended March 31, 2026, due to a $2.6 million, or 8.1%, increase in revenue from Engine, and a $1.3 million, or 18.3%, increase in revenue from Aircraft. The increase in Engine revenue is due to higher Flight Equipment sales in the amount of $3.5 million and higher leasing revenue of $3.0 million primarily attributable to higher activity in the RB211 and CF6-80 product lines, partly offset by lower USM sales in the amount of $3.9 million. The increase in Aircraft revenue is primarily attributable to higher activity in the B757 product line as a result of higher leasing revenue in the amount of $1.2 million.

Cost of sales in Asset Management Solutions decreased $1.0 million, or 3.5%, to $26.2 million for the three months ended March 31, 2026, compared to the prior year period. The decrease in cost of sales was primarily driven by the decrease in USM sales discussed above. Gross profit in the Asset Management Solutions segment increased $4.9 million to $16.9 million, or 40.6%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The gross profit increase is mainly attributable to higher revenue generated on our Flight Equipment sales for the three months ended March 31, 2026, as noted above.

Aircraft gross profit margins increased to 30.9% for the three months ended March 31, 2026, from 21.4% for the three months ended March 31, 2025 due to higher margins generated on leased Flight Equipment as well as higher margins generated on USM sales. Engine gross profit margin was 41.4% for the three months ended March 31, 2026, an increase from 32.9% for the three months ended March 31, 2025, which was primarily the result of higher margins generated on Flight Equipment sales.

TechOps

Our revenue from TechOps increased by $0.9 million, or 3.4%, to $27.5 million for the three months ended March 31, 2026, compared to the prior year period. The increase was primarily driven by higher volume in our heavy MRO facilities as Millington, Tennessee returned to service and Goodyear, Arizona filled some of its previously available capacity. Component MRO revenue also increased following the relocation and commencement of operations at our expanded facility in Hialeah Gardens, Florida. These increases were partially offset by lower revenue from MRO product sales.

Cost of sales in TechOps increased $4.9 million, or 23.6%, to $25.5 million for the three months ended March 31, 2026 compared to the prior year period, driven by the sales increase discussed above. Gross profit in TechOps decreased $4.0 million, or 67.1%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, driven by lower margin generated from our heavy MROs, as a result of higher initial costs at our facility in Millington, Tennessee as it returned to service; as well as higher margin work completed during the prior year in our facility in Goodyear, Arizona. Gross profit margin decreased to 7.1% for the three months ended March 31, 2026 compared to 22.3% for the prior year period, and was largely attributable to lower margin on Service Revenue of 0.9% for the three months ended March 31, 2026 compared to 18.9% for the prior year period, driven by gross profit reduction from our heavy MROs noted above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $2.4 million, or 9.7%, to $22.2 million for the three months ended March 31, 2026, compared to the prior year period. The decrease was mostly related to lower payroll costs as well as severance expense incurred in the prior year period as part of cost reduction initiatives.

Change in fair value of warrant liability

We accounted for 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 was determined using the Black-Scholes option pricing model. For the three months ended March 31, 2025, we recorded a $0.1 million change in fair value of warrant liability expense. The Private Warrants expired unexercised during the year ended December 31, 2025.

Interest Expense, Net

Interest expense, net was $2.1 million for the three months ended March 31, 2026, compared to $1.2 million interest expense, net for the three months ended March 31, 2025. The increase was primarily related to higher outstanding borrowings under our debt facilities.

Income Taxes

The effective tax rate for the three months ended March 31, 2026 was 22.6% compared to 12.0% for the three months ended March 31, 2025. The difference between the effective tax rate and the statutory tax rate of 21% for the three months ended March 31, 2026 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% for the three months ended March 31, 2025 is primarily due to the benefit of the foreign derived intangible income deduction and R&D credits.

Financial Position, Liquidity and Capital Resources

As of March 31, 2026, we had $2.1 million of cash and cash equivalents. We finance our growth through cash flows generated from operations and borrowings secured by our assets. We had $137.8 million outstanding under the Revolving Credit Agreement (as defined below) as of March 31, 2026, and we had $39.7 million of availability thereunder. We used $26.7 million of cash for operating activities, primarily related to feedstock acquisition, and used cash in investing activities of $3.1 million for the three months ended March 31, 2026.

We believe our equity base, internally generated funds, and existing availability under our debt facilities are sufficient to maintain our level of operations over 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. The Company does not typically engage in long-term purchase commitments for the acquisition of feedstock; as a result, the Company has generally been able to manage its liquidity by managing the timing of its feedstock acquisitions so as to deploy funds when advantageous to the Company. However, if an event occurs that affects our ability to meet our capital requirements, 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, including, but not limited to, privately negotiated transactions with certain stockholders who have rights to require us to file a registration statement covering shares of our common stock. 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 and cash equivalents. 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— Three months ended March 31, 2026 compared to three months ended March 31, 2025

Cash Flows from Operating Activities

Net cash used in operating activities was $26.7 million for the three months ended March 31, 2026, compared to cash used of $45.2 million for the same period in 2025. The decrease in cash used in operating activities of $18.6 million was primarily due to lower feedstock acquisitions of $11.6 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $3.1 million for the three months ended March 31, 2026, compared to cash used of $3.5 million in the same period for 2025. Cash used in investing activities during the three months ended March 31, 2026 was driven by capitalized costs on Flight Equipment and purchases of property and equipment.

Cash Flows from Financing Activities

Net cash provided by financing activities was $27.5 million for the three months ended March 31, 2026, compared to cash provided of $48.8 million for the three months ended March 31, 2025. Cash provided by financing activities during the three months ended March 31, 2026 resulted from borrowing under our Revolving Credit Agreement. Cash provided by financing activities during the three months ended March 31, 2025 resulted from borrowing under our Revolving Credit Agreement, offset by cash used in the repurchase of common stock.

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 in the aggregate, 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 March 31, 2026, there was $137.8 million outstanding under the Revolving Credit Agreement and we had $39.7 million of availability thereunder. We were in compliance with our debt covenants for the Revolving Credit Agreement as of March 31, 2026.

CIBC Equipment Loan

On November 22, 2024, the Company entered into a property and equipment 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 payment until converted to a term loan, at which point, principal and interest payments are required.

Effective November 30, 2025, we amended the CIBC Equipment Loan to extend the term of the advance commitment until November 30, 2026 and reduce the total advance commitment to $2.5 million.

During the three months ended March 31, 2026, the Company repaid $0.2 million under this facility, and $2.0 million remained outstanding as of March 31, 2026.

We were in compliance with our debt covenants for the CIBC Equipment Loan as of March 31, 2026.

Off-Balance Sheet Arrangements and Contractual Obligations

We did not have any off-balance sheet arrangements as of March 31, 2026. Refer to Note Q – Leases, within our consolidated annual financial statements in our 2025 Form 10-K for a summary of our non-cancelable contractual obligations under operating leases.

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 2025 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 three months ended March 31, 2026, 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 March 31, 2026, we had $137.8 million outstanding variable rate borrowings under the Revolving Credit Agreement and $2.0 million outstanding variable rate borrowings under the CIBC Equipment Loan. A ten percent increase of the average interest rate affecting our variable rate debt outstanding as of March 31, 2026 would increase our interest expense by $0.3 million for the quarter ended March 31, 2026.

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 months ended March 31, 2026.

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 March 31, 2026.

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 March 31, 2026.

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 March 31, 2026 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 2025 Form 10-K.