AerSale - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 was a clear beat: Revenue $107.4M vs Wall Street consensus $85.5M*, and Primary EPS $0.20 vs $0.03*, supported by eight engine sales, strong USM demand, and tighter cost control. Values retrieved from S&P Global.*
• Margin expansion and operating leverage were evident: Gross margin rose to 32.9% (from 28.2% YoY and 27.3% in Q1), with operating income improving to $12.5M vs a $1.9M loss in Q2’24.
• Segment performance mixed: Asset Management Solutions surged to $76.3M (ex-flight equipment +79.5% YoY to $42.9M), while TechOps fell 11.9% YoY to $31.1M amid heavy MRO transitions at Goodyear and Roswell.
• Management signaled H2 improvement vs H1 and EBITDA growth outpacing revenue in FY25, aided by cost reductions ($5–$6M benefit in 2025), AirSafe backlog ($12.9M), and MRO capacity expansions; AerAware achieved TCCA validation and FAA demo milestones though initial revenue remains unlikely in 2025.

What Went Well and What Went Wrong

What Went Well

• Robust top-line and profitability: Revenue +39.3% YoY to $107.4M; Adjusted EBITDA $18.3M vs $3.2M in Q2’24, reflecting broad-based growth and cost control.
• Asset Management strength: Segment revenue $76.3M (+83% YoY); ex-flight equipment +79.5% YoY to $42.9M on USM and leasing; eight engines sold with two Q1 deliveries slipping into Q2.
• Positive pipeline signals: AirSafe backlog $12.9M tied to a 2026 FAA AD; AerAware received TCCA validation and completed FAA test flight demo; management expects H2 to improve over H1.
  • CEO: “We delivered encouraging results… adjusted EBITDA to $18.3 million from $3.2 million… ongoing commercial demand for USM parts”.

What Went Wrong

• TechOps revenue contraction: -11.9% YoY to $31.1M as Goodyear’s large program ended and Roswell shifted from heavy maintenance to storage/decommission; partially offset by short-term work and other MRO/service lines.
• Narrowbody engine feedstock remains challenging: Intense competition and unfavorable valuations constrained acquisitions; discipline maintained on narrowbody engines.
• AerAware commercialization timing: Despite regulatory progress and customer demos, management indicated it’s improbable to deliver meaningful 2025 revenue; operators need operational experience and training.

Transcript

Operator (participant)

Good day, and welcome to the AirSale Corp. Second Quarter twenty twenty five Earnings Conference Call. All participants will be in the listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

I would now like to turn the conference over to Jacqueline Carlin, vice president of marketing and communication. Please go ahead. Good

Jackie Carlon (VP - Marketing & Communications)

afternoon. I'd like to welcome everyone to AirSales' second quarter twenty twenty five earnings call. Conducting the call today are Nick Sinazzo, chief executive officer, and Martin Garmendia, chief financial officer. Before we discuss this quarter's results, we want to remind you that all statements made on this call that do not relate to matters of historical fact should be considered forward looking statements within the meaning of the federal securities laws, including statements regarding our current expectations for the business and our financial performance. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results.

Important factors that could cause actual results to differ materially from forward looking statements are discussed in the Risk Factors section of the company's annual report on Form 10 ks for the year ended 12/31/2024, filed with the Securities and Exchange Commission, SEC, on 03/11/2025, and its other filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward looking statements on this call. We'll also refer to non GAAP measures that we view as important in assessing the performance of our business. A reconciliation of those non GAAP metrics to the nearest GAAP metric can be found in the earnings presentation materials made available on the Investors section of the Airesail website at ir.airesail.com. With that, I'll turn the call over to Nick Fonazzo.

Nicolas Finazzo (Chairman & CEO)

Thank you, Jackie. Good afternoon and thank you for joining our call today. I'll begin with a brief overview of the quarter, then provide operational updates before turning the call over to Martin to review the numbers in greater detail. We performed better in the second quarter, driven in part by an increasing amount of ready to sell USM flowing from the feedstock investments we've been making, together with several flight equipment sales. Higher sales growth translated to increased profitability, particularly as we gained leverage in our model at higher volume.

In total, we reported second quarter revenue of 107,400,000.0 compared to 77,100,000.0 in the year ago period. This also underscores the potential in our model as we improve recurring revenue through added assets in the lease pool and increased MRO capacity to provide more consistent results quarter over quarter. Excluding flight equipment sales, the balance of our business grew 25% to $74,000,000 again driven by greater ready to sell inventory in our USM business and higher leasing revenue, partially offset by lower tech ops revenue as we continue working to transition our heavy MRO facilities. As we note every quarter, due to the nature of our business and the impact of flight equipment sales, our revenue levels tend to be volatile quarter to quarter, and we believe our business should be evaluated based on aggregate performance over a longer period of time with a focus on feedstock acquisitions and the value our team is able to extract from those investments. Second quarter adjusted EBITDA improved to $18,300,000 compared to $3,200,000 in the prior year.

The increase reflects stronger execution across the business, including a higher volume of flight equipment sales, improved performance in USM operations and continued benefits from cost reduction initiatives implemented over the past year. Turning to segment performance, starting with asset management, sales increased to $76,300,000 from $41,800,000 last year. This change is attributed to higher flight equipment sales, which rose to $33,400,000 from $17,900,000 and a rise in USM part sales resulting from an increase in available ready to sell inventory. Excluding activity related to flight equipment, segment revenue increased by 79.5% to $42,800,000 This growth is attributable to the expansion of our lease pool as well as a substantial year over year increase in USM sales, which nearly doubled. During the quarter, we aggressively pursued feedstock acquisitions to support our long term growth objectives, acquiring assets totaling $27,100,000 This brings our year to date total to $70,500,000 We've observed a positive trend in feedstock opportunities compared to recent years, especially in airframes and widebody engines, which has been a niche market for air sale over the past decade.

Conversely, the narrow body engine market continues to exhibit intense competition, with current valuations consistently falling below our target internal rate of return benchmarks. As we progress through the remainder of the year, our ample feedstock position will continue to underpin our growth strategy. At the end of the quarter, we held 388,300,000 of total inventory and flight equipment, including 11 engines available for sale or lease and another 11 engines currently undergoing repairs. Regarding our seven fifty seven passenger to freighter conversion program, we're actively marketing the last six aircraft we converted and are seeing a meaningful uptick in customer engagement. Currently, one aircraft is on lease and discussions are ongoing with multiple parties for the remaining units.

Although deal timing is uncertain, this represents the highest level of interest we've seen since the cargo market softened in 2023, and we view the momentum as a positive signal of renewed demand. In the tech op segment, revenue decreased 11.9% year over year from $35,300,000 to $31,100,000 largely due to reduced activity at our heavy MRO facilities after the completion of a customer program at Goodyear. During the second quarter, a portion of this capacity was filled with shorter duration contracts while efforts continued to engage potential long term partners. Consequently, segment revenue rose by 17.1% from the 2025, returning to levels comparable with the 2024. Long term agreements generally require more lead time because of scheduling constraints, but offer improved predictability of future volume, which can lead to better alignment of staffing and margin performance.

We're also seeing margin improvements at our Roswell facility as the unit focuses on higher margin storage and dismantlement opportunities that have helped offset the bottom line impacts of the lower revenue. I'm pleased to provide an update on our component MRO expansion projects. Construction at our aero facilities at our aerostructures facility has been completed and we're now in the final stages of readying our accessory shop to commence servicing pneumatics components. We anticipate these shops will soon generate additional revenue through expanded growth and capabilities, further strengthening our capacity to offer comprehensive maintenance solutions across a wider range of components. During the quarter, our engineered solutions division experienced an increase in deliveries of AirSafe, our FAA approved supplemental type certificate, which provides fuel tank flammability protection.

We expect orders to continue rising over the course of the year as we approach a 2026 compliance deadline for an FAA airworthiness directive relating to fuel tank wiring, which can be satisfied by the installation of air safe. As of quarter end, our air safe backlog stood at $12,900,000 and current secured orders position us to meet our financial objectives for 2025. Turning to AeroAir, our revolutionary enhanced flight vision system. We continue to make incremental progress across product development, customer engagement, and regulatory validation. Two weeks ago on July 18, we were pleased to receive Transport Canada Civil Aviation validation of our AeroWare STC, a major milestone that broadens our international market access and corroborates the safety enhancing capabilities of the system.

AeroWare remains the only enhanced flight vision system to integrate a wearable HUD with advanced infrared imaging and synthetic vision, enabling pilots to see through darkness, fog, smoke and other reduced visibility conditions. In parallel with this regulatory process, we remain in active discussions with several commercial and government operators and have conducted in air demonstrations for multiple potential customers using our seven thirty seven test aircraft. Product development is progressing as well, evidenced by our demonstration to the FAA of the foldable sky lens model after a successful test flight with the agency on July 14. Furthermore, Universal Avionics, our Airwear partner, has made notable progress in integrating ADS B in functionality. This feature is currently being tested on a King Air aircraft equipped with a SkyLens wearable display and will allow pilots to independently monitor the GPS broadcast positions of nearby aircraft directly on their SkyLens display without dependence on air traffic control.

Although integration of ADS B into Airwear on the July may take several years to receive FAA approval, we believe once it's available it will be one of the most practical solutions on the market to provide enhanced aircraft awareness to pilots in the most dynamic vision field available. The value of this capability is underscored by aircraft navigation incidents as we have discussed in the past and most recently included a near miss involving a Delta flight and a B-fifty two military aircraft, highlighting the critical importance of enhanced situational awareness tools. As global demand for safer, more capable flight deck systems grows, AeroAir is well positioned to become a standard setting solution in the enhanced flight vision system market. Overall, following an acceptable second quarter, we expect to build on this momentum through the remainder of the year with incremental financial improvement in the second half relative to the first half. We continue to expect full year sales growth with EBITDA growth outpacing revenue due to expanding margins and increased operating leverage.

Several key drivers are contributing to this outlook. We're well positioned with a strong base of ready to sell inventory, which continues to support robust USM sales and flight equipment transactions. Our lease pool has grown compared to recent years and we anticipate further expansion as additional assets are made ready and deployed throughout the year. Our two component MRO expansion projects are now in the completion phase and will soon be able to generate revenue from these new and enhanced service offerings, contributing more meaningfully in the months ahead. AirSafe backlog continues to build with installation volume expected to increase steadily each quarter as we approach a 2026 airworthiness directive compliance deadline satisfied by the installation of air safe.

And finally, efficiency initiatives implemented by our team are beginning to deliver meaningful benefits and when combined with higher sales volume, we expect continued margin expansion and EBITDA growth that will exceed the pace of revenue growth. In closing, the second quarter marked a significant step forward for ARISIL, highlighted by improving financial performance, expanding operational execution, and meaningful progress across our strategic initiatives. As we look to the 2025, we're building on a foundation of improved feedstock access, growing recurring revenue from our lease pool and MRO operations, sales traction with AirSafe and further product development of Arrowware. With a healthy balance sheet, strong demand signals across core end markets, and increasing operating leverage, we remain confident in our ability to deliver profitable growth and long term value for our shareholders. I want to thank our dedicated and experienced employees for their hard work and our investors for their continued support.

We look forward to updating you on our progress. Now, I'll turn the call over to Martin for a closer look at the numbers. Martin?

Martin Garmendia (CFO & Treasurer)

Thanks, Nick. Our second quarter revenue was $107,400,000 up from $77,100,000 in the 2024. This included $33,400,000 of flight equipment sales compared to $17,900,000 in the prior year period. As we have noted in past calls, flight equipment sales can vary significantly from quarter to quarter, and we believe long term performance is best evaluated based on the cumulative impact of asset purchases and sales over time. Second quarter gross margin was 32.9% compared to 28.2% in the 2024.

The year over year improvement reflects stronger execution across the business, including improved USM sales, a higher volume of flight equipment sales and continued operational efficiency gains across our platform that resulted from efficiency initiatives taken. Selling, general and administrative expenses totaled $22,800,000 compared to $23,600,000 in the 2024. SG and A included approximately $700,000 in non cash stock based compensation in line with recent quarters. The reduction in total SG and A despite higher revenue stemmed from the cost reduction efforts taken over the past twelve months. Operating income for the quarter was $12,500,000 compared to a $1,900,000 loss in the same period last year.

Net income was $8,600,000 compared to a net loss of $3,600,000 in the prior year period. Adjusting for stock based compensation, facility relocation costs, restructuring charges, and other nonrecurring items, adjusted net income was $9,400,000 compared to an adjusted net loss of $2,600,000 in the 2024. Adjusted EBITDA was $18,300,000 in the second quarter, up from $3,200,000 in the prior year period. This improvement reflects higher revenue, stronger execution across the business, increased monetization of our feedstock inventory and continued cost discipline. Adjusted diluted earnings per share was zero two zero dollars compared to an adjusted diluted loss per share of $05 in the 2024.

Airstill ended the quarter with $68,800,000 of liquidity, consisting of $5,700,000 of cash and available capacity of 63,100,000 on its $180,000,000 revolving credit facility expandable to $200,000,000 subject to conditions and the availability of lender commitments and borrowing base liabilities. Cash generated by operating activities during the quarter was $19,800,000 primarily due to strong results from operations and cash generated from USM and flight equipment sales offsetting inventory purchases. This quarter demonstrated the strength of our platform and the progress we've made in executing against our strategic priorities. U. S.

N. Sales nearly doubled year over year, supported by improved feedstock and a strong inventory position. Our lease pool continues to expand and our MRO initiatives are beginning to generate incremental revenue with more upside expected in the second half. SG and A declined year over year despite higher volumes, reflecting the benefit of our cost discipline and improved operating leverage. Flight equipment sales also contributed to the quarter's growth, but the underlying momentum is our recurring revenue streams, along with expanded margins and strong execution across the organization, gives us the confidence in our trajectory.

With an improving market backdrop, growing demand for engineered solutions products, and a scalable, capital efficient model, we are well positioned to continue delivering profitable growth through the balance of 2025. With that, operator, we are ready to take questions.

Operator (participant)

We will now begin the question and answer session. Please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. This time, we will pause momentarily to assemble our roster. Our first question comes from Ken Herbert with RBC Capital Markets. Please go ahead.

Ken Herbert (Managing Director)

Yeah. Hi. Good morning or good afternoon, Nick and Martin. Nice results.

Nicolas Finazzo (Chairman & CEO)

Good afternoon, Ken.

Ken Herbert (Managing Director)

Hey, Nick. Maybe just to start off, it it sounds like you saw a pickup in activity in in assets you were able to acquire and obviously sell. Can you just maybe give a little bit more detail on the types of assets you're seeing as we think about sort of the whole assets? And is the pace of activity in the second quarter something we could extrapolate into the back half of the year?

Nicolas Finazzo (Chairman & CEO)

The type of equipment that we're finding that we can make sense out of is really more on the airframe, whether it be narrow body or wide body, and wide body engines. Now, why airframe? I think we've gotten really, really good at extracting value out of airframes, regardless of whether it's narrow body or wide body. And we've developed a very strong market niche on the wide body side that goes all the way back to the first July transaction, we bought 21 747s in 2010 from Japan Airlines. And we've learned the wide body engine market.

Wide body engines and wide body aircraft scare a lot of investors. They're not familiar with it. It can be a tough market. Not something I expected to build over the course of this business to the extent that we have, but that we have. And that's really been an advantage for us as we see 747s being retired, A330s being retired, and the associated engines, whether they be the Pratt 4,000 or the General Electric CF6 engines.

We understand the market, we know how to sell, we know where to sell the parts, we know what to do with the engines, whether it be sell them as whole engines or break them down into the piece parts and sell USM parts. If you look historically over the last, let's say, three, four, five years and you look at where our engine sales and engine parts sales have come, it's wide body, it's substantially wide body engines. So what is continuing? The fact that we can make sense, I think better sense than most, on the wide body engine side, which generates, candidly, the most amount of revenue on the parts side. And we continue to struggle to make sense out of anything on the narrow body side.

Why is that? I mean I've explained this before, and you know it. The geared turbofan problem on the A320neo and the issues that we've had with the seven thirty seven MAX, including engine problems on the MAX engine. The MAX engines. LEAP.

On the LEAP, otherwise drawing a blank on that one. On the LEAP engine. Besides couple that with FA issues and with Boeing on the MAX, has kept those airplanes out of service for different reasons, whether it be maintenance or not being able to get enough into service to replace the older aircraft, which is what we generally tend to focus on, which is the A320ceo, the older generation, and the 737NG. That has been what we expected to be our primary market for everything, for engine leasing, for USM parts, etcetera. Because those aircraft are still very reliable, very good durable engines, they're staying in service longer than anybody anticipated.

And the bad thing, there's a good and bad part of that, the bad thing is it's keeping a substantial amount of that older equipment, which is kind of where we expected our market to be, from becoming available at reasonable prices. Whatever does become available usually is pretty run down, needs a lot of work, and when we win those, we win those because we have a lot of ways to extract value out of stuff that needs a lot of work. We can cobble together pieces from multiple engines and aircraft and put an engine or aircraft back together, part it out, put it together for trading, leasing, etcetera. But we're not winning a lot of those, so it's a very, very competitive market on the narrow body side. And we remain disciplined on the acquisition of narrow body engines.

Very tough market continues on the narrow body side. I wouldn't say it's not a tough market on the wide body side, it's a tough market on the wide body side, but I think we've created a real niche for ourselves there. So if you look at the combination of those factors, it doesn't appear that the amount of available feedstock on the stuff that we can make sense out of has really changed much. But it may be that we've seen a little bit more availability on the wide body side and we've been able to capture a reasonable portion of that. And again, I think our market niche helps us because we understand what to do with it.

And a little bit, we've seen that the buyers have diminished because we know there's still plenty of people out there making offers, there's not plenty of people that can close. I think that that's helped us a little bit because ultimately, we were always accused of not paying very much, but people know that when we make an offer, we close. So I think from an air sales perspective, that's how we see the market.

Ken Herbert (Managing Director)

Nick, that's very helpful. I think in the quarter you called out that you did sell 33,400,000.0 of flight equipment. Is that a run rate week we should be comfortable with for the second half of the year or I know it can be very volatile and lumpy, but what's visibility in the next couple of quarters like for flight equipment sales?

Nicolas Finazzo (Chairman & CEO)

That's not a question I'm going to answer yet. It's not that I don't want to answer that because we're evaluating the flight equipment that we have. And every time we have quite a bit that's already in inventory that's ready for sale or lease, and that's in work that will be available for sale and lease. And we consistently make the determination, which is, are we better off to put something out on kind of the hybrid leases that we do, which is, like I say, it's like we're Hertz rental car, we're not Ford Motor Leasing company. It's not a long term lease, it's a short term lease.

We take operational risk, we get a significant premium for doing that. And we have to decide based on our long term view of the value of that engine if we're going to put it out on lease. Are we better off to sell it to somebody today who needs an engine, who has the balance sheet to afford to buy an engine, and they'll pay up for it, and we would collect all the revenue that we reasonably would expect to collect over the course of future years, adjusted for risk? If we can collect that all upfront, it's really difficult to turn a deal like that down. And the reason I say it's really difficult is because we can do the same thing and collect similar revenue, taking into account risk over a longer period of time, and that will generate a lot more recurring revenue, which is what I know our investors and we all want to see more recurring revenue.

So we're balancing do we put the stuff out on hybrid leases, and we take a little bit of risk, we understand what the risk is, but we have more recurring revenue, or do we take the I don't want to say the short money, because it's not really short money, it's do we take all the margin upfront, more or less, risk adjusted and make a trade? And it's a little bit of a long answer to your question, but that's the analysis that we go through. So as we look forward and we say, well we have 20 plus engines available to monetize over the balance of the year, is it that which of those are we going to sell, which of those are we going to put on lease? And I don't know the answer to that. And we continue to acquire more flight equipment too, And so that'll change as we find specific, flight equipment to sell.

We may decide, you know what? We bought this. We have a customer for it. We don't need to do much to to make it available for that customer, and then we'll we'll service that, make it available for that customer, and then we would sell. But so everything is on a case by case basis.

That's why I'm not being evasive. I just I just don't know the answer to that.

Martin Garmendia (CFO & Treasurer)

But to add to can assure you, we we do have 22 engines, we have 11 engines that are current currently being marketed for sale or lease. And we've had engines repair another 11 engines that will also be available for for lease or for sale. So we have a good inventory level. We feel confident as Nick noted, now it's what opportunities that we want to pursue.

Ken Herbert (Managing Director)

That's great. And if I could, Martin and Nick, maybe just two more quick questions. The first is, as you look at the balance sheet today, is there any areas you'd call out maybe at risk in terms of the carrying value of the assets on the balance sheet, whether it be engines or whole assets or any other equipment? And then second, maybe Nick, if you could just comment on obviously, your MRO business is coming through a pretty significant restructuring, sort of how we think about that progressing through the back half of this year and into 2026?

Martin Garmendia (CFO & Treasurer)

I'll start with the balance sheet question overall. We evaluate all of our assets on the overall inventory sorry, in our overall balance sheet, inventory, BP and E and intangible assets. And at this point, there's nothing that leads us to believe that there would be any impairment risk on those overall assets. We're seeing strong opportunities, both in passenger and we're starting to see an uptick in passenger and cargo demand. So that's going well for our seven fifty seven fleet.

So right now, on what we're seeing in the market outlook, we do not anticipate any impairments in our inventory position.

Nicolas Finazzo (Chairman & CEO)

Regarding, I'll answer the second part of that question, regarding how do we feel about our MRO operations, whether it be on airport or the component MROs. As I mentioned earlier in the call, that on the component MRO side we have agonized, and I don't know what other word to use, but agonized over a two year, it took us two years longer to finish our component and aerostructure shop than we anticipated and it's just been agonizing for us. They're finally complete. We're moving into the Aerostructure shop in the next couple of weeks, we have business to bring with us, we'll bring the business with us. I wish I could say we're already generating revenue because we're not.

We're generating revenue but not in the shop, we're still in the old shop. We expect with that tripling of capacity on the aerostructure side and adding the pneumatics capability on the accessory side, that we will start to see new incremental business that we don't it's not like we have to go out and find customers for that. It's the same customers that we already have, it's just doing other products that they've got that we don't have the capability of today or in the case of aerostructures, it's taking on more. We're full to the rafters in our old facility for Aerostructures, we can't even take any more business because we can't fit it. Well thankfully we'll be out of the old facility this month and into the new facility and able to expand the business, and we've got customers, big customers, major airlines that have approved our new shop and will be bringing us new work that we're not getting today.

So very optimistic about those businesses starting to see significant expansion the overall business over the next couple of months and accelerating as we get through the end of the year and we're in the new facility and we have customers coming to see them and we're demonstrating new capability. With regard to our on airport MRO, and I'll talk specifically about Goodyear, for the first time in the history of us running that business, have six or seven bays full right now.

Martin Garmendia (CFO & Treasurer)

Seven bays.

Nicolas Finazzo (Chairman & CEO)

We have out of eight bays in Goodyear, we have seven bays full of aircraft. First time in the history of the business. So we've come a long way from three bays plus some spot business that we've received previously when we had a major customer program. Previously we had a major customer program that sucked up most of our labor, and today we've restructured our compensation so that we're able to attract the labor that we need to provide labor to fill that demand for labor for the seven bays that we've got, an eighth bays being readied for it to be filled. And as we fill up our Goodyear facility with more recurring long term revenue versus spot revenue that comes in, ad hoc revenue that comes in, we will then shift our focus to filling up our Millington facility.

Now our Millington facility is basically one hangar, two bays, and we're talking with potential customers even to keep that facility busy over a multi year period. But at this point, we still have one more bay to fill up in Goodyear, we're going stay focused on that, and then we'll focus on Millington. In Roswell, the thing about Millington is we've spent a lot of money building out that facility and we have a lot of credit against future rentals, so we're fine from a cash point of view in Millington even though we're carrying a facility that we're not utilizing at this point. In our Roswell facility, we've just taken a second and third look at Roswell to determine what can Roswell do best, and we think what Roswell does best is aircraft storage because of the vast storage field there and return to service of aircraft coming out of storage or going into storage, and parting out an airplane, whether it be for our own account or for third parties who've been storing aircraft in Roswell. With doing less work and involving fewer mechanics, we can make the same or more money than we could if we're trying to work heavy MRO in Roswell.

We've got the expertise in Goodyear that flow into Millington. Not that we can't do it in Roswell, we just think that Roswell is better suited for storage and aircraft dismantlement. So we feel good about all six of our MRO businesses, whether it be the three on airport or three off airport.

Martin Garmendia (CFO & Treasurer)

If I could add, as Nick noted, Roswell is a perfect example of some of the efficiency measures that we've done, really looking at labor utilization, kind of maximizing our efficiency rates. So we're starting to see that benefit. Roswell is a great example where even though we're doing pretty much half the revenue overall, we're still meeting the gross margin overall requirements. And we've done that for Goodyear as well. As we're seeing that expanded growth, we're getting those benefits, and also in all of our component shops.

So as these new capacity and capabilities come online, we'll start enjoying some of those higher margins as well.

Ken Herbert (Managing Director)

Great. Thanks, Nick. Thanks, Martin. Appreciate all the all the detail there.

Nicolas Finazzo (Chairman & CEO)

Okay. Quite welcome.

Operator (participant)

Thank you. Our next question comes from Sam Straseko Please go ahead.

Samuel Struhsaker (Equity Research Associate)

To start, you guys were kind of just speaking to this a little bit. The ongoing costs kind of cutting initiative and the margin benefit you're seeing from that, how should we think about sort of where you guys are in the trajectory of that effort overall in terms of ongoing or getting close to the end there?

Martin Garmendia (CFO & Treasurer)

I think overall from a cost perspective, we anticipate for the year to be about a $5,000,000 to $6,000,000 overall benefit. Halfway through the year, we kind of realized half of that overall. From a margin perspective, depends on the overall unit, but we're seeing about a 200 basis point overall improvement that we're anticipating. We expect those efficiencies will gain and we'll get better margin improvement also as we get more fixed work. So she had a heavy MROs that'll improve it because we'll have better cost absorption of our fixed costs.

But it's something that we're continuing to look at, there's more opportunities. And I think we did that in a great time as we have this growth kind of in front of us to really be as efficient as possible as we grow.

Samuel Struhsaker (Equity Research Associate)

Great, Derek. Makes good sense. I think kind of staying on the margin line a little bit there. It sounds like the USM is getting somewhat more favorable. How should we think about kind of like the net impact of that on the margin you guys are getting there?

Is it kind of net net the same? Or is there a bit of a positive impact? Or just kind of puts and takes on that?

Martin Garmendia (CFO & Treasurer)

The overall margin on USM will vary depending on product mix. But any new feedstock acquisition that we're acquiring, we are not going away from our 25 IRR. So we expect that to stay overall stable as we continue to buy additional feedstock.

Samuel Struhsaker (Equity Research Associate)

Okay. Got it. Makes good sense. And then I guess final question for me would sort of be Airwear. Are we should we think about any kind of contribution this year from that, or are you guys gonna kinda hold on that because it's a TBD situation?

Nicolas Finazzo (Chairman & CEO)

You know, without without a customer identified at this point, I think it's improbable that we could could get an airwear delivery this even one delivery this year. I guess it's possible if it's for one aircraft. What we're you know, but as far as getting a program, we're not there yet. You know, we're still working on refining the product, even though it's certainly usable in the condition that it's in. But what we need to do is we need to get the system installed on customer aircraft and we know that even if we do so by saying, Look, fly it.

We won't charge you for it. We'll put it on your aircraft, which by the way, we are offering to do. Fly it. Put it on your aircraft. Why why would we do that?

Let let the operator fly for six months. Because we need operational experience. We need the pilots to communicate with the air traffic control and say, Hey, I have this system, allows me to be dispatched to a lower visibility condition than you're allowing other aircraft to be dispatched. So let me use my system, oh I can land, I can see the airport, others can't, so let me land in these conditions where they're diverting others. There clearly is a safety benefit associated with this besides just the ability to dispatch in lesser visibility conditions.

And we expect our customers to start giving us some feedback on that. So even if again, if we can find three, four, or five operators in different portions of the world that will use this system on a trial basis, will start getting operational experience with both the air traffic control systems and the operators. Now there is a ATR operator that's flying in, it's not in Europe, is it in Europe? Europe, too. In Europe that has this system installed in it, and they find it to be extremely beneficial.

But we need somebody flying a seven thirty seven to give us some operational experience with it. So I think that until we start getting that and we can start telling potential customers, look, this is all figured out, the FAA is gonna let you use it, you're gonna get the operational benefit of 50% visual advantage, they know how to implement the system, and again, allow you to get the benefits of it. Because those are the questions that we're getting constantly when we're talking to airlines, which as well, is the FAA gonna allow us to use this system, how do we go about the training? I mean it's still a very complicated system, it takes a lot to get it implemented into an airline. The larger the airline the more difficult.

And I'll tell you candidly, I've said this before, we just missed identifying how long it was going to take for any airline really to get this into it. This is a complex system with new technology and it's just taken much longer than expected now. Having said that, if you look at what's going on in aviation today with near misses, smoke from wildfires, aircraft that are not being tracked by local control towers, collisions, near collisions, recent push by Ted Cruz to mandate ADS B in to be turned on at all times, which may have avoided the accident in DC. And to even mandate ADS B, I'm sorry, ADS B out to be on, and to mandate within five years ADS B in, which as I mentioned earlier, is what's being worked on with our partner to incorporate in the head wearable display. So when you've got all this activity and you've got Congress saying, we need to see new technology to avoid these mishaps.

Now, that's not even to mention the fact that the primary driver for ADS BN, safety aside, I think that's just not a proper statement to say, safety aside. But safety aside, because the FAA wasn't looking at it when it thought about head wearable displays and ADS BN, was to allow an aircraft to track the aircraft in front of it to make following aircraft in a landing pattern faster and more efficient and to take pressure off of air traffic controllers, having to tell the pilots, Hey, speed up, slow down, follow the aircraft in front of you. You get ADS B in working, now you can track the aircraft, you identify whose aircraft it is. Are you approaching it? Are you speeding up and you're actually approaching the airplane faster?

Are you pulling behind and you're going slower? Who is the aircraft? Can I track it? And can I even see it? Well if you have ADS B in on a head wearable display, whether you see it or not, you'll be able to track it, you'll be able to follow it, and you'll be able to set your trailing distance, and that is really why having ADS B in functionality from an aircraft point of view is something that the air traffic control and the FAA sought with the next generation air traffic control system.

So if you've got the technology today available to do that, to me, I guess maybe it does take Congress to scream to say we need this technology implemented in current aircraft, whether we do it now or whether we do it over the next five years. So we've got a system that substantially does everything I just described today. So what just amazes me is with that technology available, why this is taking so long to get somebody to use it. I understand it's complicated but to me safety is overriding. You get so many other benefits with this system that it's hard to understand.

Doesn't mean that we don't feel optimistic that it's going to happen and it's going to happen soon, but I've been saying that now for two years and I'm hesitant to give you a date on when that's going to happen until I know for sure when it's going to happen.

Samuel Struhsaker (Equity Research Associate)

No. That's totally understandable, and everything it all makes good sense. And, yeah, I'm sure it's frustrating for you guys to, get the momentum going, but totally understandable. And, I appreciate all the color, and congrats again on the nice results.

Nicolas Finazzo (Chairman & CEO)

Thanks, Sam.

Operator (participant)

Thank you. We have no further questions at this time. Would like to turn the conference back over to Nicholas Finazzo for any closing remarks.

Nicolas Finazzo (Chairman & CEO)

I want to thank Ken and Sam for their insightful questions and to our listening audience for joining us today. We look forward to keeping you informed at our next earnings call. I hope you all have a good evening. Thank you for listening. Good night.

Operator (participant)

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.