Eric Gregg

Eric Gregg of Four Tree Island Advisory LLC asked about the long-term revenue potential for the large turbo business for data center backup power and sought more detail on the non-linear stock repurchase strategy, given strong cash flow and a low valuation.

Answer

CEO Olivier Rabiller projected the large turbo business for gensets and marine applications could reach the "hundreds of millions of dollars" in revenue within three to five years, driven significantly by aftermarket sales. Regarding buybacks, CFO Sean Deason reiterated that the program is not linear and mentioned the company maintains "dry powder for block trades," while reaffirming the board's commitment to returning at least 75% of free cash flow to shareholders.

Eric Gregg from Four Tree Island Advisory LLC asked for clarification on the average utilization rate for the quarter, the employee count, the ongoing P&L impact from the sale of the Bridgend consulting business, and the reason for the negative margin in maintenance services revenue.

Answer

CFO Scott Flaherty stated the average utilization for the quarter was 87.2%, trending up from prior periods. CEO Austin Willis added that the employee count is approximately 420. Regarding the Bridgend sale, Willis explained that while its direct P&L was not material, the freed-up capital will be leveraged to acquire profit-making assets, driving positive future impact. He also clarified that the negative margin in maintenance services was due to the strategic buildup of labor to support a new contract with Jet2.com.

Eric Gregg of Four Tree Island Advisory questioned why the Q1 gain on sale of flight equipment was significantly below the 2024 average, sought clarity on the baseline for the $11.4 million increase in consultant fees, and asked for the rationale behind a 60% increase in employee headcount since 2022 despite modest growth in the number of engine assets.

Answer

CFO Scott Flaherty explained that trading activity is inherently 'lumpy' and one quarter is not indicative of long-term margins. President Austin Willis and CFO Scott Flaherty clarified that the consultant fees for the SAF project were an increase from a previously immaterial baseline and represent the 'lion's share' of the year's expected spend. Austin Willis attributed the headcount growth to the build-out of people-intensive services businesses, such as the engine MRO facilities in the U.S. and U.K.

Eric Gregg asked a series of questions regarding new engine purchases, including potential discounts on LEAP engines and their delivery timeline, the status of a Pratt & Whitney engine purchase, plans for investing in HPT durability kits, the impact of new, more durable engines on MRO growth strategy, and the reasons for lower JV earnings in recent quarters.

Answer

President Austin Willis and CFO Scott Flaherty addressed the questions. Willis declined to comment on specific OEM discounts but confirmed 9 of the previously announced Pratt & Whitney engines were purchased. He stated that durability kits will be implemented in the future and that their MROs are well-positioned for next-gen engines. Regarding JVs, Flaherty noted that earnings can fluctuate based on the timing of asset sales, similar to the core business.

Eric Gregg of Four Tree Island Advisory asked about the average remaining lease term, potential provisions for customer Azul, capital allocation strategy regarding buybacks, the cause of negative operating leverage in G&A, and the lumpiness of maintenance reserve revenues.

Answer

Executive Austin Willis stated the average remaining lease term is about two years and confirmed a zero accounts receivable balance with Azul, with no immediate provisions expected. He noted the appreciated stock price provides optionality for capital allocation. Both Willis and CFO Scott Flaherty attributed higher G&A to stock-based compensation and explained that maintenance reserve revenue lumpiness comes from long-term reserves tied to lease extensions, while short-term reserves are growing strongly.