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FTAI Aviation Ltd. (FTAI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered strong operational execution: revenue rose 43% year over year to $667.1MM, net income attributable to shareholders increased 46% YoY to $114.0MM, and Adjusted EBITDA reached $297.4MM; quarter-over-quarter softness vs Q2 owed to lapping one-time gains .
  • Management raised 2026 segment Adjusted EBITDA guidance to $1.525B (from $1.4B), comprised of ~$1.0B Aerospace Products and ~$525MM Aviation Leasing, reflecting accelerated SCI deployment and MRE scale benefits; dividend increased to $0.35 per share (from $0.30) on strong free cash flow generation .
  • Aerospace Products surged: Adjusted EBITDA of $180.4MM (+77% YoY) at ~35% margin; module production ramp (207 CFM56 modules, +13% QoQ) and operational efficiencies underpin trajectory to 40%+ margin in 2026 .
  • Strategic Capital Initiative upsized to $2.0B of equity commitments (purchasing power >$6B), with 190 aircraft closed or under LOI and mid-2026 full deployment target; serves as multi-year committed engine exchange pipeline for Aerospace Products .
  • Stock-relevant catalysts: guidance raise, SCI hard-cap close, dividend hike, and capacity-expanding MRO acquisition (ATOPS) plus accessory JV (Bauer) to insource high-cost repairs, cut per-visit costs by ~$75k, and expand throughput .

What Went Well and What Went Wrong

What Went Well

  • Aerospace Products delivered $180.4MM Adjusted EBITDA (+77% YoY) at ~35% margin; management expects 40%+ margin next year as parts procurement, PMA, and repair verticals mature: “we expect aerospace products margins to grow to 40% plus next year” .
  • SCI vehicle upsized to $2.0B equity (>$6B purchasing power): “expanded partnership… portfolio size of ~375 aircraft… full deployment… by mid-2026” and 190 aircraft closed/under LOI, securing multi-year engine exchange demand .
  • Free cash flow and capital returns: Q3 adjusted FCF of $268MM; YTD $638MM and 2025 target $750MM; dividend raised to $0.35 per share on surplus cash and strong trajectory to $1B adjusted FCF in 2026 .

What Went Wrong

  • Sequential decline vs Q2 on non-recurring items: Q3 total Adjusted EBITDA ($297.4MM) below Q2 ($347.8MM), with CFO noting Q2 had $24MM settlement on Russian assets and seed portfolio sale gains; pure leasing EBITDA fell to $122MM in Q3 vs $152MM in Q2 .
  • Leasing revenue normalization as seed portfolio transitioned to SCI: gains on sale contributed $50.1MM to 2025 leasing EBITDA at 10% margin; ongoing pivot to asset-light reduces on-balance sheet leasing income near term .
  • Elevated interest expense persists: Q3 interest expense was $60.8MM; while manageable, the higher rate backdrop remains a headwind until refinancing or deleveraging dynamics change .

Financial Results

Consolidated Results (YoY, QoQ, and vs. prior periods)

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$465.8 $676.2 $667.1
Net Income Attributable ($USD Millions)$78.1 $161.7 $114.0
Diluted EPS ($)$0.76 $1.57 $1.10
Adjusted EBITDA ($USD Millions)$232.0 $347.8 $297.4

Notes:

  • Q3 2025 vs Q3 2024: strong YoY growth across revenue and profitability; net income attributable +46% YoY per press release .
  • Q3 2025 vs Q2 2025: sequential decline driven by lapping Q2 one-time settlement and seed portfolio sale gains in leasing .

Segment Adjusted EBITDA

Segment ($USD Millions)Q2 2025Q3 2025
Aerospace Products$164.9 $180.4
Aviation Leasing$152.0 (incl. $24MM settlement) $134.4
Corporate & Other (incl. inter-segment eliminations)N/A-$17.4

Segment/Mix and Operating Metrics

KPIQ3 2024Q2 2025Q3 2025
Aerospace Products Revenue ($USD Millions)$303.5 $420.7 $459.2
Leasing Income ($USD Millions)$65.5 $62.4 $55.1
Maintenance Revenue ($USD Millions)$59.9 $73.1 $52.4
Asset Sales Revenue ($USD Millions)$35.0 $47.9 $38.5
MRE Contract Revenue ($USD Millions)—$69.6 $58.7

Operational KPIs

KPIQ2 2025Q3 2025FY 2025 Target
CFM56 Modules Refurbished (units)184 207 750
Aerospace Products EBITDA Margin (%)N/A~35% 40%+ (2026 view)
Adjusted Free Cash Flow ($USD Millions)$400+ (Q2 commentary) $268 $750 (2025 target)
Dividend per Ordinary Share ($)$0.30 $0.35 Ongoing capital returns evaluation

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Business Segment Adjusted EBITDA ($USD Billions)FY 2026$1.4 $1.525 Raised
Aerospace Products Adjusted EBITDA ($USD Billions)FY 2026Not explicitly broken out~$1.0 Provided (higher margin trajectory)
Aviation Leasing Adjusted EBITDA ($USD Millions)FY 2026Not explicitly broken out~$525 Provided
Business Segment Adjusted EBITDA ($USD Billions)FY 2025$1.25–$1.30 $1.25–$1.30 Maintained
Adjusted Free Cash Flow ($USD Billions)FY 2026N/A~$1.0 New disclosure
Dividend per Ordinary Share ($)Q3 2025$0.30 $0.35 Raised

Rationale:

  • SCI upsizing and committed MRE pipeline support higher Aerospace Products volume and margin; leasing mix shifts to asset management model with servicing fees and equity pickup .
  • Dividend increase reflects strong adjusted free cash flow generation and surplus cash post growth investments .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Strategic Capital Initiative (SCI)98 aircraft under LOI by Q1; on track to deploy $4B in 2025, 145 aircraft owned/LOI; target 250 aircraft Upsized to $2.0B equity, >$6B purchasing power; 190 aircraft closed/LOI; full deployment by mid-2026; ~375 aircraft target Accelerating scale and committed demand
Module Production & CapacityModule production ramp to 184 in Q2 (+33% QoQ) 207 modules in Q3 (+13% QoQ); ATOPS acquisition adds ~150 module capacity; targeting 1,000 modules in 2026 Capacity and throughput expanding
Margin Expansion (Aerospace Products)Q1 margin 36% on $131MM Aerospace EBITDA ~35% margin in Q3; path to 40%+ in 2026 via PMA, repair verticals, parts procurement Sustained margin trajectory higher
Asset-Light Pivot & Leasing MixTransition of seed portfolio to SCI; continued gains on sale; strong cash position Leasing EBITDA normalizes; servicing fees and 19% equity pickup grow; asset management fees at market (≈1%+ mgmt fee; low double-digit incentive) Pivot progressing; fee streams rising
Airline Programs & Partnerships>100 customers; focus on full-fleet programs Finnair multi-year Perpetual Power Agreement covering 36 engines; more large programs expected Larger, multi-year customer programs
Technology & TrainingJoint venture PMA efforts; Montreal facility scale VR and AI-enabled training; >100 trainees; operational efficiencies across Montreal/Rome/Miami Process innovation improving productivity

Management Commentary

  • Joe Adams, CEO: “Our business had a strong quarter underpinned by continued growth in Aerospace Products allowing us to increase guidance for 2026 and raise our ordinary dividend… purchase over $6 billion of aircraft…” .
  • Joe Adams on SCI and committed volume: “The MRA agreement… establishes a multi-year contractual pipeline of demand… full deployment of capital now anticipated by mid-2026” .
  • Joe Adams on margin trajectory: “we expect aerospace products margins to grow to 40% plus next year as we optimize our parts procurement and repair strategies… PMA Part Number 3… approval… in the very near term” .
  • Angela Nam, CFO: “Adjusted EBITDA of $297.4 million in Q3… comprised of $180.4 million Aerospace, ~$134.4 million leasing, and -$17.4 million corporate and other… pure leasing came in at $122 million for Q3 versus $152 million in Q2… Q2 included a $24MM settlement and seed portfolio revenue” .
  • David Moreno, COO, on ATOPS and Bauer JV: “ATOPS… ability to process 150 modules… raises overall production… Lisbon facility… run our field service… Bauer JV… expected to deliver up to $75,000 in average savings per shop visit… ~350 engines per year when ramping in 2026” .

Q&A Highlights

  • SCI implications: Analysts probed asset availability, pricing, and returns; management highlighted lessor and airline supply, sale/leasebacks as shop-visit alternatives, and superior risk-adjusted returns from MRE-driven engine exchanges; fee structure market-based (~1%+ mgmt fee, low double-digit incentive over hurdle) .
  • Segment accounting and EBITDA treatment: Equity pickup for the 19% SCI stake appears in equity income; servicing revenue in leasing; all included in Adjusted EBITDA .
  • Capacity and M&A strategy: Smaller, high-return acquisitions (e.g., ATOPS) add meaningful capacity at modest cost; Bauer JV insources high-cost accessory repairs to reduce turnaround times and improve margins .
  • Free cash flow outlook and capital deployment: Targeting ~$1.0B adjusted FCF in 2026; growth investments prioritized, with continued evaluation of shareholder returns; maintenance capex expected around ~$125MM and replacement capex manageable under exchange model .
  • V2500 program and demand: About halfway through 100 full-performance restorations; strong demand persists given GTF grounding dynamics; continued engagement and potential extension .

Estimates Context

  • Q3 2025 vs S&P Global consensus:
    • Revenue: $667.064MM actual vs $657.666MM estimate → modest beat *
    • EPS (Primary): $1.1604 actual vs $1.2417 estimate → miss; diluted EPS in 8‑K was $1.10 *
    • EBITDA: $263.755MM actual vs $280.750MM estimate → miss; company-reported Adjusted EBITDA was $297.381MM (non-GAAP definition) *
MetricConsensus EstimateActual (S&P basis)Company-Reported
Revenue ($USD Millions)657.7*667.1*667.1
Primary EPS ($)1.2417*1.1604*Diluted EPS $1.10
EBITDA ($USD Millions)280.8*263.8*Adjusted EBITDA $297.4

Values retrieved from S&P Global. Differences reflect S&P normalization vs company non‑GAAP definitions and share count methodologies.*

Implications:

  • Revenue beat is modest; EPS and S&P EBITDA lag consensus, while company’s Adjusted EBITDA (non-GAAP) was stronger. Focus for models: reconcile S&P’s EBITDA basis with company’s Adjusted EBITDA and non-GAAP adjustments, and incorporate normalized equity pickup and intercompany eliminations .

Key Takeaways for Investors

  • Aerospace Products is the growth engine: accelerating volumes, improving margins, and a committed SCI pipeline support the raised 2026 EBITDA guidance to $1.525B; monitor PMA approvals, repair vertical ramps, and module throughput scaling to 1,000 in 2026 .
  • Leasing mix shifts to asset management: servicing fees and equity pickup offset lower on-balance sheet leasing; fee economics (≈1%+ mgmt and low double-digit incentive) position the segment for durable, higher-multiple earnings streams .
  • Free cash flow trajectory strengthens: Q3 adjusted FCF $268MM; 2025 target $750MM; 2026 target ~$1.0B supports ongoing dividend growth and potential capital returns while funding high-return capacity and repair initiatives .
  • Near-term modeling updates: Normalize Q2 one-time items (settlement, seed gains), reflect Q3 leasing EBITDA reset, and incorporate SCI upsizing timeline (mid-2026 full deployment) into Aerospace Products demand assumptions .
  • Watch execution milestones: ATOPS integration (Miami/Lisbon), Bauer accessory JV ramp (end of year start), Montreal/Rome productivity gains, and Finnair program rollout; these are key to margin and throughput targets .
  • Estimates likely to adjust: modest revenue beat but EPS and S&P EBITDA miss suggest consensus tweaks; reconcile S&P vs company non-GAAP and equity/servicing flows to avoid double-counting *.
  • Tactical catalyst stack: guidance raise, SCI hard-cap close, dividend increase, and visible capacity expansions underpin positive narrative momentum despite QoQ normalization from lapping Q2 non-recurring items .