AerSale Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

BUSINESS SEGMENTS

BUSINESS SEGMENTS

9 Months Ended

Sep. 30, 2023

NOTE L — BUSINESS SEGMENTS

Consistent with how our chief operating decision maker (Chairman and Chief Executive Officer) evaluates performance and utilizes gross profit as a profitability measure, the Company reports its activities in two business segments:

●

Asset Management Solutions — comprised of activities to extract value from strategic asset acquisitions through leasing, trading, or disassembling for product sales.

●

TechOps — comprised of MRO activities and product sales of internally developed engineered solutions and other serviceable products.

The Asset Management Solutions segment 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.

The TechOps segment consists of aftermarket support and services businesses that provide maintenance support for aircraft and aircraft components, and sale of engineered solutions. Our MRO business also engages in longer term projects such as aircraft modifications, cargo conversions of wide-body aircraft, and aircraft storage. The segment also includes MRO of landing gear, thrust reversers, and other components. Cost of sales consists principally of the cost of product, direct labor, and overhead. Our engineered solutions revenue consists of sales of products internally developed

as permitted by Supplemental Type Certificates issued by the FAA. These products are proprietary in nature and function as non-original equipment manufacturer solutions to airworthiness directives and other technical challenges for operators. In order to develop these products, the Company engages in research and development (“R&D”) activities, which are expensed as incurred. The TechOps segment also engages in the repair and sale of USM inventory for which it has the overhaul capabilities and relationships to sell.

Gross profit is calculated by subtracting cost of sales from revenue. The assets and certain expenses related to corporate activities are not allocated to the segments. Our reportable segments are aligned principally around the differences in products and services. The segment reporting excludes the allocation of selling, general and administrative expenses, interest income (expense) and income tax expense.

Selected financial information for each segment for the three and nine months ended September 30, 2023 and 2022 is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue
Asset Management Solutions
Aircraft	$	20,888	$	6,503	$	57,836	$	78,343
Engine		44,166		14,088		92,719		131,319
		65,054		20,591		150,555		209,662
TechOps
MRO services		23,154		26,390		78,725		72,258
Product sales		4,276		4,018		10,583		7,888
Whole asset sales		-		-		218		23,605
		27,430		30,408		89,526		103,751
Total	$	92,484	$	50,999	$	240,081	$	313,413

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Gross profit
Asset Management Solutions
Aircraft	$	6,656	$	2,480	$	16,871	$	29,779
Engine		11,881		6,210		31,080		60,439
		18,537		8,690		47,951		90,218
TechOps
MRO services		3,892		5,453		17,078		16,257
Product sales		1,045		1,346		2,600		3,174
Whole asset sales		-		-		376		7,523
		4,937		6,799		20,054		26,954
Total	$	23,474	$	15,489	$	68,005	$	117,172

					September 30, 2023		December 31, 2022
Total assets
Asset Management Solutions					$	382,624	$	233,034
Tech Ops						156,672		141,406
Corporate						14,606		157,139
					$	553,902	$	531,579

The following table reconciles segment gross profit to (loss) income before income tax provision for the three and nine months ended September 30, 2023 and 2022 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Segment gross profit	$	23,474	$	15,489	$	68,005	$	117,172
Selling, general and administrative expenses		(25,403)		(23,983)		(77,724)		(71,252)
Interest (expense) income, net		(250)		393		1,178		15
Other income, net		127		45		498		526
Change in fair value of warrant liability		(55)		(2,029)		1,004		(1,881)
(Loss) income before income tax provision	$	(2,107)	$	(10,085)	$	(7,039)	$	44,580

Intersegment sales include amounts invoiced by a segment for work performed for another segment. Amounts are based on actual work performed or products sold and agreed-upon pricing which is intended to be reflective of the arm’s length value of the contribution made by the supplying business segment. All intersegment transactions have been eliminated upon consolidation. Intersegment revenue for the three and nine months ended September 30, 2023 and 2022, is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Asset Management Solutions	$	168	$	1,705	$	1,241	$	4,886
TechOps		3,761		3,168		13,952		15,771
Total intersegment revenues	$	3,929	$	4,873	$	15,193	$	20,657

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 22
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-22

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-15

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-31

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-42

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-Topic 280
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
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-Paragraph 40
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-40

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-Topic 280
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-26

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-34

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-41

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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-21

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-Section 50
-Paragraph 32
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

+ Details