AerSale Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

BUSINESS SEGMENTS

BUSINESS SEGMENTS

12 Months Ended

Dec. 31, 2023

NOTE P - 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, we report our 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 provides short-term and long-term leasing solutions of Flight Equipment to passenger and cargo operators worldwide. Assets considered to be at or near the end of their useful lives, supplied by our leasing portfolio or acquisitions, are analyzed for return maximization to assess whether they will be sold as whole assets or disassembled and sold as individual spare parts and components.

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 revenues consist 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, we engage in research and development activities. Periodically, our TechOps division will engage in the repair and sale of used serviceable materials through their ability to overhaul existing inventory.

The accounting policies for the segments are the same as those described in Note B. Gross Profit is calculated by subtracting cost of sales from revenues. 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 expense, interest income, other income, net, unrealized loss on investment, change in fair value of warrant liability, and income tax expense.

Selected financial information for each segment is as follows (in thousands):


	Year ended December 31,
	2023		2022		2021
Revenue
Asset Management Solutions
Aircraft	$	80,877	$	101,511	$	87,461
Engine		134,290		176,096		144,549
		215,167		277,607		232,010
TechOps
MRO services		102,535		95,258		99,899
Product sales		16,583		11,942		8,528
Whole asset sales		218		23,737		—
		119,336		130,937		108,427
Total	$	334,503	$	408,544	$	340,437

	Year Ended December 31,
	2023		2022		2021
Gross profit
Asset Management Solutions
Aircraft	$	22,739	$	36,156	$	30,157
Engine		44,916		82,075		59,389
		67,655		118,231		89,546
TechOps
MRO services		20,428		21,111		28,133
Product sales		3,761		4,397		1,713
Whole asset sales		577		7,655		—
		24,766		33,163		29,846
Total	$	92,421	$	151,394	$	119,392


	2023		2022
Total Assets
Asset Management Solutions	$	372,326	$	233,034
TechOps		163,883		141,406
Corporate		17,729		157,139
	$	553,938	$	531,579


	2023		2022		2021

Total Depreciation and Amortization Expense
Asset Management Solutions	$	6,043	$	7,807	$	10,163
TechOps		3,549		2,609		2,506
Corporate		867		568		329
	$	10,459	$	10,984	$	12,998
Total Capital Expenditures
Asset Management Solutions	$	488	$	8,288	$	2,383
TechOps		9,206		6,078		1,224
Corporate		1,665		1,229		284
	$	11,359	$	15,595	$	3,891

The following table reconciles segment gross profit to net income from continuing operations for the years ended December 31, (in thousands):


	Year Ended December 31,
	2023		2022		2021
Segment gross profit	$	92,421	$	151,394	$	119,392
Selling, general and administrative expenses		(103,191)		(96,348)		(77,498)
Payroll support program proceeds		-		-		14,768
Interest (expense) income, net		155		1,093		(980)
Other income, net		666		2,268		458
Unrealized loss on investment		-		-		(5,421)
Change in fair value of warrant liability		2,270		(525)		(2,945)
(Loss) income before income tax provision	$	(7,679)	$	57,882	$	47,774

The following table presents revenues based on the customers’ geographic location and long-lived assets located in the United States, our country of domicile, for the years ended December 31, (in thousands):


Revenues	2023		2022		2021
Domestic	$	145,076	$	169,878	$	133,911
Foreign		189,427		238,666		206,526
Total revenues	$	334,503	$	408,544	$	340,437


Long-lived assets	2023		2022
Domestic	$	96,013	$	87,898
Foreign		-		-
Total long-lived assets	$	96,013	$	87,898

For the year ended December 31, 2023, the Company had two customers from which revenues generated exceeded 10% of total sales. Total sales to these two customers amounted to $82.2 million, of which $35.7 million was included in TechOps segment and $46.5 million was included in the Asset Management Solutions segment. As of December 31, 2022, the Company had one customer from which revenues generated exceeded 10% of total sales. Total sales to this customer amounted to $77.2 million, which was included in the Asset Management Solutions segment.

Intersegment sales includes 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 contribution made by the supplying business segment. All intersegment transactions have been eliminated upon consolidation. Intersegment revenue is as follows (in thousands):


	Year ended December 31,
	2023		2022		2021
Asset Management Solutions	$	1,599	$	4,978	$	6,822
TechOps		21,359		22,783		21,932
Total intersegment revenues	$	22,958	$	27,761	$	28,754

- 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

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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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+ Details