Name: FTAI Aviation Ltd. Q1 2025 Earnings Call
Start: 2025-05-01T12:01:00.000Z

Executive Summary

Q1 2025 delivered record Adjusted EBITDA of $268.6M on $502.1M revenue, with Aerospace Products EBITDA of $130.9M at a 36% margin; the quarter continued strong momentum with a module production ramp and >100 Module Factory customers .
Results vs consensus: revenue missed by ~11.6% ($502.1M vs $567.7M est.), but normalized “Primary EPS” beat ($1.02 vs $0.95 est.); GAAP diluted EPS was $0.87 (beat/miss metrics per S&P Global consensus) . Values with asterisks retrieved from S&P Global.
Guidance reiterated: 2025 segment Adjusted EBITDA of $1.10–$1.15B (Leasing ~$500M; Aerospace Products $600–$650M) and 2026 raised previously to ~$1.4B; H1 2025 adjusted FCF guided to $300–$350M; dividend maintained at $0.30 .
Catalysts: SCI scaling to >$4B of capital for on‑lease 737NG/A320ceo (asset‑light for FTAI), Montreal/Miami module throughput ramp with Rome JV to follow, and deleveraging toward ~3.0x by YE25 with potential for buybacks/dividend increases thereafter .

What Went Well and What Went Wrong

What Went Well
- Aerospace Products execution: $130.9M Adjusted EBITDA at a 36% margin; management highlighted accelerating demand and a growing 2025+ backlog, with 138 CFM56 modules refurbished across Montreal and Miami in Q1 .
- Strategic Capital Initiative (SCI) on track: 98 aircraft owned/under LOI; SCI designed to reinforce engine exchange flywheel and margin visibility; Q1 had ~30% of activity to SCI; long‑term mix ~20% expected .
- Cash generation/visibility: H1 2025 adjusted FCF guided to $300–$350M; $500M seed asset sale proceeds concentrated in H1; reaffirmed full‑year ~$650M target .
What Went Wrong
- Top‑line shortfall vs Street: revenue of $502.1M missed S&P Global consensus of $567.7M (~−11.6%); GAAP diluted EPS was $0.87, while the EPS beat was on normalized basis (Primary EPS) rather than GAAP *. Values with asterisks retrieved from S&P Global.
- Mix/one‑offs in Leasing: Leasing EBITDA included a $30M settlement related to Russian assets written off in 2022, complicating clean run‑rate comparisons; corporate had ~$3M of costs tied to a report this quarter .
- Equity line/elim headwinds: Equity in losses of unconsolidated entities was $(7.6)M (includes ~$7.0M intra‑entity profit eliminations related to SCI), partially offset by $43.9M of other income including gains on sales .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($M)	$465.8	$498.8	$502.1
Net Income Attributable to Shareholders ($M)	$78.1	$86.7	$89.9
Diluted EPS (GAAP)	$0.76	$0.84	$0.87
Adjusted EBITDA ($M)	$232.0	$252.0	$268.6
Adj. EBITDA Margin (%)	49.8% (calc from 232.0/465.8)	50.5% (calc from 252.0/498.8)	53.5% (calc from 268.6/502.1)

Results vs S&P Global consensus and prior quarter/year:

Metric	Q4 2024 Actual	Q4 2024 Consensus*	Surprise	Q1 2025 Actual	Q1 2025 Consensus*	Surprise
Revenue ($M)	$498.8	$500.9*	−$2.1M (−0.4%)*	$502.1	$567.7*	−$65.6M (−11.6%)*
Primary EPS ($)	$0.88*	$0.89*	−$0.01*	$1.02*	$0.95*	+$0.07*
Diluted EPS (GAAP) ($)	$0.84	—	—	$0.87	—	—

Values marked with an asterisk (*) are retrieved from S&P Global.

Segment/Revenue composition (Q1 2025):

Revenue Component	Q1 2025 ($M)
Aerospace Products revenue	$365.1
Lease income	$68.5
Maintenance revenue	$49.6
Asset sales revenue	$18.9
Total revenue	$502.1
Aerospace Products Adjusted EBITDA	$130.9
Aerospace Products Adj. EBITDA Margin	36%

Key KPIs and operating items:

KPI	Q1 2025
CFM56 modules refurbished (total, Montreal+Miami)	138
Modules produced – Montreal (Q1)	77
Module Factory customers (global)	>100
SCI aircraft owned or under LOI	98
Other income (incl. $10.9M gain on SCI sales)	$43.9M

Guidance Changes

Metric/Item	Period	Previous Guidance	Current Guidance	Change
Segment Adjusted EBITDA (Aviation Leasing + Aerospace Products)	FY 2025	~$1.10–$1.15B (Leasing ~$500M; AP ~$600–$650M)	Reiterated ~$1.10–$1.15B; Leasing ~$500M; AP $600–$650M	Maintained
Segment Adjusted EBITDA	FY 2026	Prior projection $1.25B; raised to ~$1.4B (in Q4 release)	Reiterated ~$1.4B	Maintained (after prior raise)
Adjusted Free Cash Flow	H1 2025	—	$300M–$350M	New detail
Adjusted Free Cash Flow	FY 2025	~$650M target	Reiterated ~$650M target	Maintained
Dividend per ordinary share	Quarterly	$0.30 (Q4’24)	$0.30 (Q1’25)	Maintained
Leverage (Debt/EBITDA)	YE 2025	Target range 3.0x–3.5x	~3.0x (closer to 3x by YE25)	Tightened toward low end

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’24, Q4’24)	Current Period (Q1’25)	Trend
SCI/asset‑light model	SCI launched; plan to commence in 2025	Partnered with OneIM; >$4B to deploy; 98 aircraft owned/LOI; ~30% of Q1 activity went to SCI; ~20% full‑year mix expected	Scaling; positive flywheel for exchanges/margins
Module capacity/production	AP Adjusted EBITDA >$100M in Q3	138 modules in Q1; Montreal 77; Montreal to 90–100 in Q2; network capacity “200+ modules/quarter” including Miami/Rome	Ramping throughput and capacity
Tariffs/macro	Not emphasized in prior PRs	Tariffs not expected to be a material headwind; ability to pass through; multi‑jurisdiction footprint for optimization	Managed risk; potential pricing tailwind
PMA adoption	—	Progressing approvals; airlines focused on engine cost; SCI helps adoption; margin upside not fully in numbers yet	Building optionality and future margin mix
Rome JV/geography	Announced IAG Engine Center Europe JV; capacity +150 engines/year expected	Confident to ramp quickly; 5 engines already at facility; CAAC license enables China exposure	Execution starting; expands EMEA/China reach
Capital allocation/leverage	—	Deleveraging to ~3x by YE25; post‑deleveraging, potential for buybacks/dividend actions	Improving balance sheet; optionality rising
Insurance recoveries (Russia)	—	$30M in Q1; $24M committed for Q2; ~$100M claims remaining	Incremental cash tailwind pending timing

Management Commentary

“We started the year with momentum, recording another strong quarter in aerospace products with $131 million in adjusted EBITDA at a margin of 36%... demand… continues to accelerate.” — CEO Joe Adams .
“We expect adjusted free cash flow to be in the range of $300 million to $350 million for the first half of the year… in line with our target to achieve $650 million… for all of 2025.” — CEO .
“Leasing… $162 million of EBITDA… included a $30 million settlement related to Russian assets written off in 2022… We remain comfortable assuming leasing EBITDA will be $500 million in 2025.” — CFO Angela Nam .
“We do not currently see tariffs having any material negative effect on our business… we have the ability to pass on price increases to customers.” — CEO .
“We are planning to invest about $200 million in parts in the first half… we’re production‑constrained… better to carry parts than miss a sale.” — CEO .

Q&A Highlights

SCI mix and cannibalization: ~30% of Q1 activity to SCI (pent‑up), ~20% expected for 2025; management views SCI as additive with no cannibalization and a “virtuous circle” improving visibility and margins .
Working capital and inventory: ~$200M parts inventory build in H1 to support throughput; intent is to maintain provisioning ahead of shop visits; not seen growing materially quarter‑over‑quarter thereafter .
PMA trajectory: approvals progressing; airlines increasingly focused on maintenance cost; SCI can accelerate adoption; margin upside not yet fully reflected .
Lease rates/market strength: no softening; modest increases; narrowbody storage under ~5% supports strong demand and extensions .
Insurance recoveries: $30M in Q1; ~$24M committed for Q2; ~$100M remaining claims—net recoveries expected to exceed write‑offs .
Leverage and capital returns: targeting ~3.0x by YE25; after growth CapEx and debt paydown, potential for buybacks/dividend actions toward year‑end .

Estimates Context

Q1 2025 vs S&P Global consensus: revenue $502.1M vs $567.7M (miss ~11.6%); Primary EPS $1.02 vs $0.95 (beat ~$0.07). GAAP diluted EPS was $0.87. Management cited strong AP margins and SCI progress; Leasing included a $30M settlement, which contributed to EBITDA . Values with asterisks retrieved from S&P Global.
Q4 2024 vs S&P Global consensus: revenue $498.8M vs $500.9M (slight miss); Primary EPS $0.88 vs $0.89 (in‑line/slight miss) . Values with asterisks retrieved from S&P Global.
Implications: Street may revise revenue trajectories to reflect mix/timing and intra‑entity eliminations, while maintaining or modestly lifting normalized EPS on AP margin strength and SCI scale; reiterated full‑year segment EBITDA and FCF targets anchor FY25/26 estimates .

Key Takeaways for Investors

Normalized EPS beat despite revenue miss; AP profitability and margin quality remain the core bull point (AP EBITDA $130.9M at 36% margin) .
Reiterated FY25 segment EBITDA ($1.10–$1.15B) and FY26 ($~1.4B) with H1 FCF of $300–$350M and full‑year FCF target ~$650M—supports deleveraging to ~3x and potential capital returns late 2025 .
SCI scaling (> $4B) structurally enhances the engine exchange flywheel and visibility; Q1’s ~30% SCI activity should normalize to ~20% for 2025, with no cannibalization of third‑party demand per management .
Near‑term working capital heavy (parts inventory front‑loaded in H1), but management prioritizes production and sales capture; inventory growth expected to level as throughput scales .
Tariff risk appears manageable given used‑material focus, multi‑region footprint, and pricing power; potential long‑term relative tailwind for used assets and PMA adoption .
Watch Q2 for Montreal module ramp (90–100 modules) and continued SCI asset transitions; monitor insurance recoveries ($24M committed in Q2) as incremental cash tailwinds .
Trading setup: positive narrative on AP margin durability, capacity ramp, SCI scaling, deleveraging path; temper with revenue estimate reset risk given Q1 miss and mixed one‑offs (settlement gains) .