FTAI Aviation Ltd. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand FTAI Aviation Ltd. (the “Company,” “we,” “our” or “us”). Our MD&A should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes, and with Part II, Item 1A, “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q. Overview We own, lease and sell aviation equipment. We also develop and manufacture through a joint venture, and repair and sell, through our maintenance facilities and exclusivity arrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We target assets that, on a combined basis, generate strong cash flows with potential for earnings growth and asset appreciation. We believe that there is a large number of acquisition opportunities in our markets and that our expertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities. As of September 30, 2024, we had total consolidated assets of $3.7 billion and total equity of $118.5 million. Internalization of Management On May 28, 2024, the Company entered into definitive agreements with the Former Manager and Master GP to internalize the Company’s management function. As part of the termination of the Management Agreement, the Company (i) agreed to pay the Former Manager (for itself and on behalf of the Master GP, as applicable) the Cash Consideration, the compensation accrued and payable, but not yet paid, under the Management Agreement and the expenses that were reimbursable, but not yet reimbursed, under the Management Agreement; (ii) issued to the Former Manager (for itself and on behalf of the Master GP, as applicable) the Share Consideration; (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $30. Following the Internalization, the Company no longer pays management fees or incentive distributions to the Former Manager and Master GP. In connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former Manager. Under the Transition Services Agreement, the Former Manager was required to continue to provide the Company and its affiliates with all of the Services for a transition period until October 31, 2024, during which the Company procured replacements for the Services. The Services were provided to the Company for a fee equal to the Former Manager’s cost of providing the Services, including the allocated cost of, among other things, overhead, employee wages and compensation, rent and related real estate expenses and actually incurred out-of-pocket expenses, plus a mark-up of ten percent (10%). The Company was required to use commercially reasonable efforts to make available to the Former Manager certain employees of the Company who were previously employees of the Former Manager to provide the Reverse Services, subject to certain exceptions. In addition, the Former Manager is required to continue to provide the services that are reasonably required by the Company to prepare its quarterly and annual financial statements until May 31, 2025. The Company is required to continue to provide the Reverse Services until the later to occur of the dissolution or sale of the entities receiving Reverse Services. The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following written notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days. Impact of Russia’s Invasion of Ukraine Economic sanctions and export controls against Russia and Russia’s aviation industry were imposed due to its invasion of Ukraine during the three months ended March 31, 2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines. We determined that it is unlikely that we will regain possession of the aircraft and engines that had not yet been recovered from Ukraine and Russia. As a result we recognized an impairment charge totaling $120.0 million, net of maintenance deposits, to write-off the entire carrying value of leasing equipment assets that we did not expect to recover from Ukraine and Russia. As of September 30, 2024, eight aircraft and seventeen engines were still located in Russia. Our lessees are required to provide insurance coverage with respect to leased aircraft and engines, and we are named as insureds under those policies in the event of a total loss of an aircraft or engine. We also purchase insurance which provides us with coverage when our aircraft or engines are not subject to a lease or where a lessee’s policy fails to indemnify us. The insured value of the aircraft and engines that remain in Russia is approximately $210.7 million. We intend to pursue all of our claims under these policies. However, the timing and amount of any recoveries under these policies are uncertain. The extent of the impact of Russia’s invasion of Ukraine and the related sanctions on our operational and financial performance, including the ability for us to recover our leasing equipment in the region, will depend on future developments, including the duration of the conflict, sanctions and restrictions imposed by Russian and international governments, all of which remain uncertain. 36 Operating Segments The key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services. Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers. The Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity arrangements, develops and manufactures, repairs/refurbishes and sells aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. During the fourth quarter of 2023, the Company changed the composition of its operating segments to include product offerings for V2500 engines within the Aerospace Products segment. Prior periods have been restated to reflect the change in accordance with the requirements of ASC 280, Segment Reporting . Corporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, and management fees. Additionally, Corporate and Other also includes offshore energy related assets, which consist of vessels and equipment that support offshore oil and gas activities and production which are typically subject to operating leases. Results of Operations Adjusted EBITDA (Non-GAAP) The chief operating decision maker (“CODM”) utilizes Adjusted EBITDA as the key performance measure. Adjusted EBITDA is not a financial measure in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). This performance measure provides the CODM with the information necessary to assess operational performance and make resource and allocation decisions. We believe Adjusted EBITDA is a useful metric for investors and analysts for similar purposes of assessing our operational performance. Adjusted EBITDA is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for (benefit from) income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, depreciation and amortization expense, dividends on preferred shares and interest expense, internalization fee to affiliate, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities and (c) to exclude the impact of equity in earnings (losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA. 37 Comparison of the three and nine months ended September 30, 2024 and 2023 The following table presents our consolidated results of operations: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2024 2023 2024 2023 Revenues Lease income $ 65,450 $ 45,622 $ 19,828 $ 189,365 $ 161,141 $ 28,224 Maintenance revenue 59,917 63,925 (4,008) 156,894 141,131 15,763 Asset sales revenue 34,953 61,400 (26,447) 145,993 246,927 (100,934) Aerospace products revenue 303,469 118,675 184,794 737,726 296,513 441,213 Other revenue 2,005 1,474 531 6,104 12,447 (6,343) Total revenues 465,794 291,096 174,698 1,236,082 858,159 377,923 Expenses Cost of sales 219,496 116,707 102,789 568,157 366,909 201,248 Operating expenses 26,858 33,887 (7,029) 81,274 81,218 56 General and administrative 4,045 3,015 1,030 10,697 10,270 427 Acquisition and transaction expenses 9,341 4,261 5,080 23,539 10,195 13,344 Management fees and incentive allocation to affiliate — 4,577 (4,577) 8,449 13,137 (4,688) Internalization fee to affiliate — — — 300,000 — 300,000 Depreciation and amortization 56,775 43,959 12,816 163,386 123,399 39,987 Asset impairment — — — 962 1,220 (258) Total expenses 316,515 206,406 110,109 1,156,464 606,348 550,116 Other (expense) income Equity in (losses) earnings of unconsolidated entities (438) 46 (484) (1,799) (1,669) (130) Interest expense (57,937) (40,185) (17,752) (160,840) (117,976) (42,864) Loss on extinguishment of debt — — — (13,920) — (13,920) Other income 2,909 461 2,448 3,045 877 2,168 Total other expense (55,466) (39,678) (15,788) (173,514) (118,768) (54,746) Income (loss) from before income taxes 93,813 45,012 48,801 (93,896) 133,043 (226,939) Provision for (benefit from) income taxes 7,331 3,705 3,626 (130) 7,586 (7,716) Net income (loss) 86,482 41,307 45,175 (93,766) 125,457 (219,223) Less: Dividends on preferred shares 8,335 8,334 1 25,005 23,460 1,545 Net income (loss) attributable to shareholders $ 78,147 $ 32,973 $ 45,174 $ (118,771) $ 101,997 $ (220,768) 38 The following table sets forth a reconciliation of net income (loss) attributable to shareholders to Adjusted EBITDA: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2024 2023 2024 2023 Net income (loss) attributable to shareholders $ 78,147 $ 32,973 $ 45,174 $ (118,771) $ 101,997 $ (220,768) Add: Provision for (benefit from) income taxes 7,331 3,705 3,626 (130) 7,586 (7,716) Add: Equity-based compensation expense 1,430 510 920 2,578 1,128 1,450 Add: Acquisition and transaction expenses 9,341 4,261 5,080 23,539 10,195 13,344 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — 13,920 — 13,920 Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — 962 1,220 (258) Add: Incentive allocations — 4,274 (4,274) 7,456 12,540 (5,084) Add: Depreciation and amortization expense (1) 69,453 59,380 10,073 194,384 157,084 37,300 Add: Interest expense and dividends on preferred shares 66,272 48,519 17,753 185,845 141,436 44,409 Add: Internalization fee to affiliate — — — 300,000 — 300,000 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) (382) 642 (1,024) (1,547) 96 (1,643) Less: Equity in losses (earnings) of unconsolidated entities 438 (46) 484 1,799 1,669 130 Less: Non-controlling share of Adjusted EBITDA — — — — — — Adjusted EBITDA (non-GAAP) $ 232,030 $ 154,218 $ 77,812 $ 610,035 $ 434,951 $ 175,084 ________________________________________________________ (1) Includes the following items for the three months ended September 30, 2024 and 2023: (i) depreciation and amortization expense of $56,775 and $43,959, (ii) lease intangible amortization of $3,720 and $3,726 and (iii) amortization for lease incentives of $8,958 and $11,695, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) depreciation and amortization expense of $163,386 and $123,399, (ii) lease intangible amortization of $11,482 and $11,325 and (iii) amortization for lease incentives of $19,516 and $22,360, respectively. (2) Includes the following items for the three months ended September 30, 2024 and 2023: (i) net (loss) income of $(438) and $46, (ii) depreciation and amortization expense of $56 and $367, and (iii) acquisition and transaction expenses of $0 and $229, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) net loss of $1,799 and $1,669, (ii) depreciation and amortization expense of $252 and $1,202, and (iii) acquisition and transaction expenses of $0 and $563, respectively. Revenues Comparison of the three months ended September 30, 2024 and 2023 Total revenues increased by $174.7 million, driven by the following: • Aerospace products revenue increased by $184.8 million, primarily due to a $164.3 million increase in CFM56-7B, CFM56-5B and V2500 engine and module sales, a $9.6 million increase in parts inventory sales, and other sales revenue of $7.7 million from the QuickTurn and LMCES acquisitions. • Lease income increased by $19.8 million, primarily due to increases in aircraft lease revenue of $10.0 million, engine lease revenue of $7.2 million, and a decrease in lease incentive amortization of $4.1 million. Aircraft and engine revenue both increased due to an increased number of assets on lease in Q3 2024 compared to Q3 2023. This was partially offset by a decrease of $1.5 million in the Offshore Energy business driven by one of our vessels in the Offshore Energy business having fewer days on-hire in 2024 compared to 2023. • Asset sales revenue decreased by $26.4 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines. Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023. • Maintenance revenue decreased by $4.0 million. Aircraft maintenance revenue decreased by $14.8 million from Q3 2023 to Q3 2024, due to $18.2 million of higher maintenance reserves taken into revenue in Q3 2023, partially offset by an increased number of aircraft on lease in Q3 2024 generating maintenance revenue as compared to Q3 2023. This decrease in aircraft maintenance revenue was partially offset by increased engine maintenance revenue of $10.8 million, driven by an increased number of engines on lease in Q3 2024 generating maintenance revenue as compared to Q3 2023. 39 Comparison of the nine months ended September 30, 2024 and 2023 Total revenues increased by $377.9 million, driven by the following: • Aerospace products revenue increased by $441.2 million, primarily due to a $387.2 million increase in CFM56-7B, CFM56-5B and V2500 engine and module sales, a $26.0 million increase in parts inventory sales, and other sales revenue of $22.5 million from the QuickTurn and LMCES acquisitions. • Lease income increased by $28.2 million, primarily due to an increase in engine lease revenue of $30.4 million, driven by an increased number of engines on lease, and a decrease in lease amortization of $6.6 million, partially offset by a $7.7 million decrease in the Offshore Energy business due to one of our vessels having fewer days on-hire in 2024 compared to 2023 and a decrease in aircraft lease revenue of $0.9 million. • Maintenance revenue increased by $15.8 million. Engine maintenance revenue increased by $41.2 million, driven by an increased number of engines on lease in 2024 as compared to 2023. This increase was partially offset by a decrease in aircraft maintenance revenue of $25.5 million, primarily due to $20.1 million of higher maintenance reserves taken into revenue in 2023 as well as lower utilization. • Asset sales revenue decreased by $100.9 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines. Specifically, one aircraft and 12 engines were sold in 2024 as compared to 11 aircraft and 18 engines sold in 2023. • Other revenue decreased by $6.3 million, primarily due to a decrease in assets with end-of-lease redelivery compensation. During 2024, one aircraft and six engines had end-of-lease redelivery compensation, as compared to eight aircraft and four engines in 2023. Expenses Comparison of the three months ended September 30, 2024 and 2023 Total expenses increased by $110.1 million, driven by the following: • Cost of sales increased by $102.8 million, driven by a $128.6 million increase in the Aerospace Products segment, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of increases in Aerospace products revenue over the same period. This increase was partially offset by a $25.8 million decrease in the Aviation Leasing segment, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, which is in line with an overall decrease in the corresponding asset sales revenue. Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023. • Depreciation and amortization increased by $12.8 million, primarily driven by an increase in the number of assets owned and on lease, the acquisitions of LMCES and QuickTurn, partially offset by an increase in the number of aircraft redelivered. • Acquisition and transaction expenses increased by $5.1 million, primarily due to higher legal and other professional fees incurred for the acquisition of LMCES on September 9, 2024. • General and administrative expense increased by $1.0 million, primarily due to higher reimbursements to the Former Manager for certain services provided to the Company subsequent to the Internalization effective May 28, 2024. • Operating expenses decreased by $7.0 million, primarily due to a $3.9 million decrease in the Aviation Leasing segment, driven by a decrease in bad debt expense of $5.6 million, partially offset by increases in insurance expense of $0.9 million and repairs and maintenance expense of $0.3 million. The Aerospace Products segment contributed a $3.3 million decrease, primarily due to a $1.1 million decrease in shipping and storage fees, a $0.6 million decrease in professional fees, and a $0.5 million decrease in insurance expense. • Management fees and incentive allocation to affiliate decreased by $4.6 million, due to the absence of any management or incentive fee to the Former Manager in the current quarter, since the Internalization was effective May 28, 2024. Comparison of the nine months ended September 30, 2024 and 2023 Total expenses increased by $550.1 million, driven by the following: • Internalization fee to affiliate increased by $300.0 million relating to the Internalization effective May 28, 2024. • Cost of sales increased by $201.2 million, primarily due to an increase of $278.0 million in our Aerospace Products segment, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of increases in Aerospace products revenue over the same period. This was partially offset by a decrease of $76.8 million in the Aviation Leasing segment primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, which is in line with an overall decrease in the corresponding asset sales revenue. Specifically, one aircraft and 12 engines were sold in 2024 compared to 11 aircraft and 18 engines sold in 2023. 40 • Depreciation and amortization increased by $40.0 million, primarily driven by an increase in the number of assets owned and on lease, partially offset by an increase in the number of aircraft redelivered. • Acquisition and transaction expenses increased by $13.3 million, primarily due to higher professional fees incurred in evaluating and completing strategic transactions and fees associated with the Internalization and the acquisition of LMCES on September 9, 2024. • Management fees and incentive allocation to affiliate decreased by $4.7 million, due to a decrease in management and incentive fees to the Former Manager during 2024, with the Internalization effective May 28, 2024, as compared to fees paid for the full nine months ended September 30, 2023. Other (expense) income Total other expense increased by $15.8 million during the three months ended September 30, 2024, due to the following: • Interest expense increased by $17.8 million, reflecting an increase in the average debt outstanding of approximately $913.0 million, primarily due to increases in the (i) Senior Notes due 2032 of $800.0 million, which were issued in June 2024, (ii) Senior Notes due 2031 of $700.0 million, which were issued in April 2024, and the (iii) Senior Notes due 2030 of $497.0 million, which were issued in November 2023, partially offset by decreases in the (iv) Senior Notes due 2025 of $652.4 million, which were redeemed in April 2024, (v) Senior Notes due 2027 of $269.5 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of $161.7 million. • Other income increased by $2.4 million primarily driven by $1.6 million of interest income earned on financing receivables within our Aviation Leasing Segment and $0.9 million of interest income from the Company’s investments in money market funds. Total other expense increased by $54.7 million during the nine months ended September 30, 2024, due to the following: • Interest expense increased by $42.9 million, reflecting an increase in the average debt outstanding of approximately $694.8 million, primarily due to increases in the (i) Senior Notes due 2030 of $496.9 million, which were issued in November 2023, (ii) Senior Notes due 2031 of $466.7 million, issued in April 2024, and (iii) Senior Notes due 2032 of $355.6 million, which were issued in June 2024, partially offset by decreases in the (iv) Senior Notes due 2025 of $435.4 million, which were redeemed in April 2024, (v) Senior Notes due 2027 of $119.7 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of $68.9 million • Loss on extinguishment of debt increased by $13.9 million driven by the redemption of Senior Notes due 2025 and a partial redemption of Senior Notes due 2027. • Other income increased by $2.2 million primarily driven by $1.6 million of interest income generated from the Company’s investments in money market funds and $0.6 million of interest income earned on financing receivables within our Aviation Leasing Segment. Provision for (benefit from) income taxes The provision for income taxes increased by $3.6 million during the three months ended September 30, 2024. This increase is primarily attributable to an increase in income generated from leasing and aerospace activities in jurisdictions subject to taxes. As the Company’s operations in these areas grew, so did the corresponding tax obligations, resulting in a higher provision for income taxes. The benefit from income taxes increased by $7.7 million during the nine months ended September 30, 2024. This increase was primarily attributable to a substantial tax benefit arising from the Internalization fee paid to the affiliate. The fee provided a favorable impact on the Company's overall tax position, despite being partially offset by higher income from leasing and aerospace activities. As the Aviation Leasing and Aerospace Products segments experienced growth, the associated income increased, leading to a greater tax expense that reduced the tax benefit received from the Internalization fee. Net income (loss) Net income increased by $45.2 million and decreased $219.2 million for the three and nine months ended September 30, 2024 as compared to prior years, primarily due to the changes noted above. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased by $77.8 million and $175.1 million during the three and nine months ended September 30, 2024, respectively, primarily due to the changes noted above. 41 Aviation Leasing Segment As of September 30, 2024, in our Aviation Leasing segment, we own and manage 393 aviation assets, consisting of 96 commercial aircraft and 297 engines, including eight aircraft and seventeen engines that were still located in Russia. As of September 30, 2024, 86 of our commercial aircraft and 184 of our engines were leased to operators or other third parties. Aviation assets currently off lease are either undergoing repair and/or maintenance, being prepared to go on lease, or held in short term storage awaiting a future lease. Our aviation equipment was approximately 79% utilized during the nine months ended September 30, 2024, based on the percentage of days on lease in the quarter, weighted by the monthly average equity value of our aviation leasing equipment, excluding airframes. Our aircraft currently have a weighted average remaining lease term of 45 months, and our engines currently on lease have an average remaining lease term of 21 months. The table below provides additional information on the assets in our Aviation Leasing segment: Aviation Assets Widebody Narrowbody Total Aircraft Assets at January 1, 2024 5 91 96 Purchases — 27 27 Sales — (1) (1) Transfers — (26) (26) Assets at September 30, 2024 5 91 96 Engines Assets at January 1, 2024 32 235 267 Purchases 4 86 90 Sales (9) (1) (10) Transfers — (50) (50) Assets at September 30, 2024 27 270 297 The following table presents our results of operations for our Aviation Leasing segment: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2024 2023 2024 2023 Revenues Lease income $ 57,322 $ 35,981 $ 21,341 $ 168,927 $ 132,978 $ 35,949 Maintenance revenue 59,917 63,925 (4,008) 156,894 141,131 15,763 Asset sales revenue 34,953 61,400 (26,447) 145,993 246,927 (100,934) Other revenue 74 82 (8) 199 6,773 (6,574) Total revenues 152,266 161,388 (9,122) 472,013 527,809 (55,796) Expenses Cost of sales 20,684 46,511 (25,827) 111,542 188,343 (76,801) Operating expenses 9,995 13,944 (3,949) 26,984 28,610 (1,626) Acquisition and transaction expenses 2,620 2,329 291 7,350 4,960 2,390 Depreciation and amortization 52,455 41,141 11,314 151,211 114,994 36,217 Asset impairment — — — 962 1,220 (258) Total expenses 85,754 103,925 (18,171) 298,049 338,127 (40,078) Other income (expense) Equity in losses of unconsolidated entities — (108) 108 (207) (242) 35 Other income 1,982 444 1,538 1,440 860 580 Total other income 1,982 336 1,646 1,233 618 615 Income before income taxes 68,494 57,799 10,695 175,197 190,300 (15,103) Provision for income taxes 8,898 2,332 6,566 20,224 4,414 15,810 Net income attributable to shareholders $ 59,596 $ 55,467 $ 4,129 $ 154,973 $ 185,886 $ (30,913) 42 The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2024 2023 2024 2023 Net income attributable to shareholders $ 59,596 $ 55,467 $ 4,129 $ 154,973 $ 185,886 $ (30,913) Add: Provision for income taxes 8,898 2,332 6,566 20,224 4,414 15,810 Add: Equity-based compensation expense 176 105 71 409 232 177 Add: Acquisition and transaction expenses 2,620 2,329 291 7,350 4,960 2,390 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — 962 1,220 (258) Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense (1) 65,133 56,562 8,571 182,209 148,679 33,530 Add: Interest expense and dividends on preferred shares — — — — — — Add: Internalization fee to affiliate — — — — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) — (45) 45 (123) (53) (70) Less: Equity in losses of unconsolidated entities — 108 (108) 207 242 (35) Less: Non-controlling share of Adjusted EBITDA — — — — — — Adjusted EBITDA (non-GAAP) $ 136,423 $ 116,858 $ 19,565 $ 366,211 $ 345,580 $ 20,631 ________________________________________________________ (1) Includes the following items for the three months ended September 30, 2024 and 2023: (i) depreciation expense of $52,455 and $41,141, (ii) lease intangible amortization of $3,720 and $3,726 and (iii) amortization for lease incentives of $8,958 and $11,695, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) depreciation expense of $151,211 and $114,994, (ii) lease intangible amortization of $11,482 and $11,325 and (iii) amortization for lease incentives of $19,516 and $22,360, respectively. (2) Includes the following items for the three months ended September 30, 2024 and 2023: (i) net loss of $0 and $108 and (ii) depreciation and amortization of $0 and $63, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) net loss of $207 and $242 and (ii) depreciation and amortization of $84 and $189, respectively. Revenues Comparison of the three months ended September 30, 2024 and 2023 Total reven ues de creased by $9.1 million, driven by the following: • Asset sales revenue decreased by $26.4 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines. Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023. • Maintenance revenue de creased by $4.0 million. Aircraft maintenance revenue decreased by $14.8 million from Q3 2023 to Q3 2024 , due to $18.2 million of higher maintenance reserves taken into revenue in Q3 2023, partially offset by an increased number of aircraft on lease in Q3 2024 as compared to Q3 2023. This decrease in aircraft maintenance revenue was partially offset by increased engine maintenance revenue of $10.8 million, driven by an increased number of engines on lease in Q3 2024 generating maintenance revenue as compared to Q3 2023 . • Leas e income increased by $21.3 million, due to increases in aircraft lease revenue of $10.0 million, engine lease revenue of $7.2 million, and a decrease in lease amortization of $4.1 million . Aircraft and engine revenue both increased due to an increased number of assets on lease in Q3 2024 as compared to Q3 2023. Comparison of the nine months ended September 30, 2024 and 2023 Total reven ue decreased by $55.8 million, driven by the following: • Asset sales revenue decreased by $100.9 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines. Specifically, one aircraft and 12 engines were sold in 2024 as compared to 11 aircraft and 18 engines sold in 2023. • Other revenue decreased by $6.6 million, primarily due to a decrease in assets with end-of-lease redelivery compensation. During 2024, one aircraft and five engines had end-of-lease redelivery compensation, as compared to eight aircraft and four engines in 2023. 43 • Lease income increased by $35.9 million, due to an increase in engine lease revenue of $30.4 million, driven by an increased number of engines on lease, and a decrease in lease amortization of $6.6 million. This increase was partially offset by a slight decrease in aircraft lease revenue of $0.9 million. • Maintenance revenue increased by $15.8 million. Engine maintenance revenue increased by $41.2 million, driven by an increased number of engines on lease in 2024 as compared to 2023. This increase was partially offset by a decrease in aircraft maintenance revenue of $25.5 million, primarily due to $20.1 million of higher maintenance reserves taken into revenue in 2023 as well as lower utilization . Expenses Comparison of the three months ended September 30, 2024 and 2023 To tal expenses decreased by $18.2 million, driven by the following: • Cost of sales decreased by $25.8 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, and is in line with an overall decrease in the corresponding asset sales revenue. Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023. • Operating expenses decreased by $3.9 million, primarily driven by a decrease in bad debt expense of $5.6 million in connection with the termination of four aircraft leases in Q3 2023, partially offset by increases in insurance expense of $0.9 million and repairs and maintenance expense of $0.3 million. • Depreciation and amortization expense increased by $11.3 million, driven by an increase in the number of assets owned and on lease, partially offset by an increase in the number of aircraft redelivered. Comparison of the nine months ended September 30, 2024 and 2023 Total exp enses decreased by $40.1 million, driven by the following: • Cost of sales decreased by $76.8 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, and is in line with an overall decrease in the corresponding asset sales revenue. Specifically, one aircraft and 12 engines were sold in 2024 compared to 11 aircraft and 18 engines sold in 2023. • Operating expenses decreased by $1.6 million, primarily driven by a decrease in bad debt expense of $5.9 million, partially offset by increases in legal fees of $1.5 million, repairs and maintenance expense of $1.1 million, technical consulting expense of $1.0 million and payroll-related expenses of $0.7 million. • Depreciation and amortization expense increased by $36.2 million, driven by an increase in the number of assets owned and on lease, partially offset by an increase in the number of aircraft redelivered. • Acquisition and transaction expenses increased by $2.4 million, primarily due to higher legal fees incurred in evaluating and completing strategic transactions. Other income Total other income increased by $1.6 million and $0.6 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to interest income earned on financing receivables during 2024. Provision for income taxes The provision for income taxes increased by $6.6 million an d $15.8 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to increases in income from leasing activities in jurisdictions subject to taxes. As the Company’s operations in these areas grew, so did the corresponding tax obligations, resulting in a higher provision for income taxes. Net income Net income increased by $4.1 million and decreased by $30.9 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to the changes noted above. Adjusted EBITDA (Non-GAAP) Adjusted EBITD A in creased by $19.6 million and $20.6 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to the changes noted above . 44 Aerospace Products Segment The Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity arrangements, develops and manufactures, repairs/refurbishes and sells aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines . Our engine, module and parts sales are facilitated through a dedicated commercial maintenance program, designed to focus on modular and parts repair and refurbishment of CFM56-7B and CFM56-5B engines. In September 2024, we acquired LMCES to further enhance this business and establish permanent engine and module manufacturing capabilities. Refer to Note 3 “Acquisition of Lockheed Martin Commercial Engine Solutions”, for additional information. In addition, other serviceable used modules and parts are sold through our ex clusive partnership, who is responsible for the teardown, repair, marketing and sales of parts from our CFM56 engine pool. In December 2023, we acquired the remaining interest in Quick Turn Engine Center LLC or “QuickTurn” (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. Refer to Note 4 “Acquisition of QuickTurn”, for additional information. We also hold a 25% interest in the Advanced Engine Repair JV which focuses on developing new cost savings programs for engine repairs. The following table presents our results of operations: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2024 2023 2024 2023 Aerospace products revenue $ 303,469 $ 118,675 $ 184,794 $ 737,726 $ 296,513 $ 441,213 Expenses Cost of sales 198,812 70,196 128,616 456,615 178,566 278,049 Operating expenses 2,617 5,947 (3,330) 16,510 12,838 3,672 Acquisition and transaction expenses 2,100 110 1,990 2,871 1,137 1,734 Depreciation and amortization 1,306 115 1,191 3,177 298 2,879 Total expenses 204,835 76,368 128,467 479,173 192,839 286,334 Other (expense) income Equity in (losses) earnings of unconsolidated entities (438) 154 (592) (1,592) (1,427) (165) Total other (expense) income (438) 154 (592) (1,592) (1,427) (165) Income before income taxes 98,196 42,461 55,735 256,961 102,247 154,714 Provision for income taxes 4,408 1,131 3,277 11,865 2,631 9,234 Net income attributable to shareholders $ 93,788 $ 41,330 $ 52,458 $ 245,096 $ 99,616 $ 145,480 45 The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2024 2023 2024 2023 Net income attributable to shareholders $ 93,788 $ 41,330 $ 52,458 $ 245,096 $ 99,616 $ 145,480 Add: Provision for income taxes 4,408 1,131 3,277 11,865 2,631 9,234 Add: Equity-based compensation expense 156 70 86 154 155 (1) Add: Acquisition and transaction expenses 2,100 110 1,990 2,871 1,137 1,734 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 1,306 115 1,191 3,177 298 2,879 Add: Interest expense and dividends on preferred shares — — — — — — Add: Internalization fee to affiliate — — — — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) (382) 687 (1,069) (1,424) 149 (1,573) Less: Equity in losses (earnings) of unconsolidated entities 438 (154) 592 1,592 1,427 165 Less: Non-controlling share of Adjusted EBITDA — — — — — — Adjusted EBITDA (non-GAAP) $ 101,814 $ 43,289 $ 58,525 $ 263,331 $ 105,413 $ 157,918 ________________________________________________________ (1) Includes the following items for the three months ended September 30, 2024 and 2023: (i) net (loss) income of $(438) and $154, (ii) depreciation and amortization expense of $56 and $304, and (iii) acquisition and transaction expenses of $0 and $229, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) net loss of $1,592 and $1,427, (ii) depreciation and amortization expense of $168 and $1,013, and (iii) acquisition and transaction expenses of $0 and $563, respectively. Revenues Tot al Aerospace produ cts revenue increased by $184.8 million during the three months ended September 30, 2024 as compared to 2023, primarily due to a $164.3 million increase in CFM56-7B, CFM56-5B and V2500 engine and module sales, a $9.6 million increase in parts inventory sales, and other sales revenues of $7.7 million from the QuickTurn and LMCES acquisitions. Total Aerospace products revenue increased by $441.2 million during the nine months ended September 30, 2024 as compared to 2023, primarily due to a $387.2 million increase in CFM56-7B, CFM56-5B and V2500 engine and module sales, a $26.0 million increase in parts inventory sales, and other sales revenues of $22.5 million from the QuickTurn and LMCES acquisitions. Expenses Comparison of the three months ended September 30, 2024 and 2023 Tota l expenses increased by $128.5 million, due to the following: • Cost of sales increased by $128.6 million, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of increases in Aerospace products revenue over the same period. • Acquisition and transaction expenses increased by $2.0 million, primarily driven by higher professional fees incurred in evaluating and completing strategic transactions. • Depreciation and amortization increased by $1.2 million due to the acquisitions of LMCES in Q3 2024 and QuickTurn in Q4 2023. • Operating expenses decreased by $3.3 million, primarily due to a $1.1 million decrease in shipping and storage fees, a $0.6 million decrease in professional fees, and a $0.5 million decrease in insurance expense. Comparison of the nine months ended September 30, 2024 and 2023 Tota l expenses increased by $286.3 million, due to the following: 46 • Cost of sales increased by $278.0 million, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of increases in Aerospace products revenue over the same period . • Op erating expenses increased by $3.7 million, primarily driven by a $2.0 million increase in compensation and benefits expense and a $1.3 million increase in insurance expense. • Depreciation and amortization increased by $2.9 million due to the acquisitions of LMCES in Q3 2024 and QuickTurn in Q4 2023. • Acquisition and transaction expenses increased by $1.7 million, primarily driven by higher professional fees incurred in evaluating and completing strategic transactions. Provision for income taxes The provision for income taxes increased by $3.3 million and $9.2 million during the three and nine months ended September 30, 2024, respectively, primarily due to an increase in income from aerospace activities in jurisdictions subject to taxes. As the Company’s operations in these areas grew, so did the corresponding tax obligations, resulting in a higher provision for income taxes. Net income Net income increased by $52.5 million and $145.5 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to the changes noted above. Adjusted EBITDA (Non-GAAP) Adjusted EBITD A increased by $58.5 million and $157.9 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to the changes noted above. 47 Corporate and Other The following table presents our results of operations: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2024 2023 2024 2023 Revenues Lease income $ 8,128 $ 9,641 $ (1,513) $ 20,438 $ 28,163 $ (7,725) Other revenue 1,931 1,392 539 5,905 5,674 231 Total revenues 10,059 11,033 (974) 26,343 33,837 (7,494) Expenses Operating expenses 14,246 13,996 250 37,780 39,770 (1,990) General and administrative 4,045 3,015 1,030 10,697 10,270 427 Acquisition and transaction expenses 4,621 1,822 2,799 13,318 4,098 9,220 Management fees and incentive allocation to affiliate — 4,577 (4,577) 8,449 13,137 (4,688) Internalization fee to affiliate — — — 300,000 — 300,000 Depreciation and amortization 3,014 2,703 311 8,998 8,107 891 Total expenses 25,926 26,113 (187) 379,242 75,382 303,860 Other (expense) income Loss on extinguishment of debt — — — (13,920) — (13,920) Interest expense (57,937) (40,185) (17,752) (160,840) (117,976) (42,864) Other income 927 17 910 1,605 17 1,588 Total other expense (57,010) (40,168) (16,842) (173,155) (117,959) (55,196) Loss before income taxes (72,877) (55,248) (17,629) (526,054) (159,504) (366,550) (Benefit from) provision for income taxes (5,975) 242 (6,217) (32,219) 541 (32,760) Net loss (66,902) (55,490) (11,412) (493,835) (160,045) (333,790) Less: Dividends on preferred shares 8,335 8,334 1 25,005 23,460 1,545 Net loss attributable to shareholders $ (75,237) $ (63,824) $ (11,413) $ (518,840) $ (183,505) $ (335,335) The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2024 2023 2024 2023 Net loss attributable to shareholders $ (75,237) $ (63,824) $ (11,413) $ (518,840) $ (183,505) $ (335,335) Add: (Benefit from) provision for income taxes (5,975) 242 (6,217) (32,219) 541 (32,760) Add: Equity-based compensation expense 1,098 335 763 2,015 741 1,274 Add: Acquisition and transaction expenses 4,621 1,822 2,799 13,318 4,098 9,220 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — 13,920 — 13,920 Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — — — — Add: Incentive allocations — 4,274 (4,274) 7,456 12,540 (5,084) Add: Depreciation and amortization expense 3,014 2,703 311 8,998 8,107 891 Add: Interest expense and dividends on preferred shares 66,272 48,519 17,753 185,845 141,436 44,409 Add: Internalization fee to affiliate — — — 300,000 — 300,000 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — — Less: Equity in losses (earnings) of unconsolidated entities — — — — — — Less: Non-controlling share of Adjusted EBITDA — — — — — — Adjusted EBITDA (non-GAAP) $ (6,207) $ (5,929) $ (278) $ (19,507) $ (16,042) $ (3,465) 48 Revenues Comparison of the three months ended September 30, 2024 and 2023 Total revenues decreased by $1.0 million, primarily due to a $1.5 million decrease in Lease income, partially offset by a $0.5 million increase in Other revenue. Lease income declined primarily due to one of our vessels in the Offshore Energy business having fewer days on-hire in 2024 compared to 2023. The increase in Other revenue is driven by higher victualling income for one of our vessels from a new lessee that required additional operational support services in 2024 compared to 2023. Comparison of the nine months ended September 30, 2024 and 2023 Total revenues decreased by $7.5 million, primarily due to a $7.7 million decrease in the Lease income. Lease income declined primarily due to one of our vessels in the Offshore Energy business had fewer days on-hire in 2024 compared to 2023. Expenses Comparison of the three months ended September 30, 2024 and 2023 Total expense s decreased by $0.2 million, due to the following: • Management fees and incentive allocation to affiliate decreased by $4.6 million, due to the absence of any management or incentive fee to the Former Manager in the current quarter, since the Internalization was effective May 28, 2024. • Acquisition and transaction expense increased by $2.8 million, primarily due to higher legal and other professional fees incurred for the acquisition of LMCES on September 9, 2024. • General and administrative expense increased by $1.0 million, primarily due to reimbursements to the Former Manager for certain services provided to the Company subsequent to the Internalization effective May 28, 2024. Comparison of the nine months ended September 30, 2024 and 2023 Total expenses increased by $303.9 million, due to the following: • Internalization fee to affiliate increased by $300.0 million for the Internalization effective May 28, 2024. • Acquisition and transaction expense increased by $9.2 million, primarily due to higher legal and other professional fees incurred for the Internalization on May 28, 2024 and the acquisition of LMCES on September 9, 2024. • Management fees and incentive allocation to affiliate decreased by $4.7 million, due to a decrease in management and incentive fees to the Former Manager during 2024, with the Internalization effective May 28, 2024, as compared to fees paid for the full nine months ended September 30, 2023. • Operating expenses decreased by $2.0 million, primarily due to decreases in the Offshore Energy business, driven by decreases in project costs of $7.0 million and crew expenses of $6.0 million as a result of one of our vessels having fewer days on-hire in 2024 compared to 2023. This decrease was partially offset by an increase in bad debt expense of $2.1 million. The decrease was also offset by increases in Corporate expenses, including payroll-related expenses of $2.8 million, IT, marketing, and subscription expenses of $2.7 million and professional fees of $2.1 million. Other (expense) income Total other expense increased by $16.8 million during the three months ended September 30, 2024, due to the following: • Interest expense increased by $17.8 million, reflecting an increase in the average debt outstanding of approximately $913.0 million, primarily due to increases in the (i) Senior Notes due 2032 of $800.0 million, which were issued in June 2024, (ii) Senior Notes due 2031 of $700.0 million, which were issued in April 2024, and the (iii) Senior Notes due 2030 of $497.0 million, which were issued in November 2023, partially offset by decreases in the (iv) Senior Notes due 2025 of $652.4 million, which were redeemed in April 2024, (v) Senior Notes due 2027 of $269.5 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of $161.7 million. • Other income increased by $0.9 million, driven by interest income generated from the Company’s investments in money market funds. Total other expense increased by $55.2 million during the nine months ended September 30, 2024, due to the following: • Interest expense increased by $42.9 million, reflecting an increase in the average debt outstanding of approximately $694.8 million, primarily due to increases in the (i) Senior Notes due 2030 of $496.9 million, which were issued in November 2023, (ii) Senior Notes due 2031 of $466.7 million, issued in April 2024 (iii) Senior Notes due 2032 of $355.6 million, which were issued in June 2024, partially offset by decreases in the (iv) Senior Notes due 2025 of $435.4 million, which were redeemed in April 2024, (v) Senior Notes due 2027 of $119.7 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of $68.9 million. • Loss on extinguishment of debt increased by $13.9 million, driven by the redemption of Senior Notes due 2025 and a partial redemption of Senior Notes due 2027. 49 • Other income increased by $1.6 million, driven by interest income generated from the Company’s investments in money market funds. Benefit from income taxes The benefit from income taxes increased by $6.2 million and $32.8 million during the three and nine months ended September 30, 2024, respectively, primarily due to the tax benefit from the Internalization fee paid to affiliate. The Internalization fee created a substantial tax benefit, which led to an improved tax position for the Company. The impact of the fee was notable in both the quarterly and year-to-date financials, as it provided a meaningful offset against taxable income from the leasing and aerospace segments. Net loss Net loss increased by $11.4 million and $333.8 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to the changes noted above. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased by $0.3 million and $3.5 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to the changes noted above. Liquidity and Capital Resources We believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during various environments. This includes limiting discretionary spending across the organization and re-prioritizing our investments as necessary. Our principal uses of liquidity have been and continue to be (i) acquisitions of aircraft and engines, (ii) dividends to our ordinary and preferred shareholders, (iii) expenses associated with our operating activities, and (iv) debt service obligations associated with our investments. • Cash used for the purpose of making investments was $1.0 billion and $562.8 million during the nine months ended September 30, 2024 and 2023, respectively. • Distributions to shareholders, including cash dividends, were $115.8 million and $113.2 million during the nine months ended September 30, 2024 and 2023, respectively. • Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities. Uses of liquidity associated with our debt obligations are captured in our cash flows from financing activities. Our principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our aviation assets (including maintenance reserve collections) net of operating expenses, (ii) proceeds from borrowings or the issuance of securities and (iii) proceeds from asset sales. • Cash flows used in operating activities, plus Principal collections on finance leases and Receipt of maintenance deposits under operating lease agreements were $108.7 million during the nine months ended September 30, 2024. Cash flows from operating activities, plus Principal collections on finance leases and Receipt of maintenance deposits under operating lease agreements were $143.1 million during the nine months ended September 30, 2023. • During the nine months ended September 30, 2024, additional borrowings were obtained in connection with the (i) Senior Notes due 2031 of $800.0 million, (ii) Senior Notes due 2030 of $700.0 million and (iii) Revolving Credit Facility of $590.0 million. We made total principal repayments of (i) $650.0 million related to the Senior Notes due 2025, (ii) $440.0 million relating to the Revolving Credit Facility and (iii) $269.5 million related to the Senior Notes due 2027. During the nine months ended September 30, 2023, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $430.0 million and $330.0 million, respectively. • Proceeds from sales of assets were $542.9 million and $366.1 million during the nine months ended September 30, 2024 and 2023, respectively. • Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs, were $61.7 million during the nine months ended September 30, 2023. On May 28, 2024, we entered into definitive agreements with the Former Manager and Master GP to internalize our management function. As part of the termination of the Management Agreement, we agreed to pay $150.0 million to the Former Manager. Following the internalization of management on May 28, 2024, we no longer pay a management fee or incentive distribution to the Former Manager or Master GP. Consequently, we have assumed general and administrative, and compensation and benefit expenses directly. We anticipate a savings in operation costs as a result of the Internalization. We are currently evaluating several potential transactions and related financings, including, but not limited to, certain additional acquisitions of assets and operating companies in the aviation section or debt and equity financings, which could occur within the next 12 months. None of these potential transactions, negotiations, or financings are definitive or included within our planned 50 liquidity needs. We cannot assure if or when any such transaction will be consummated or the terms of any such transaction or related financing. Historical Cash Flow Comparison of the nine months ended September 30, 2024 and 2023 The following table compares the historical cash flow for the nine months ended September 30, 2024 and 2023: Nine Months Ended September 30, (in thousands) 2024 2023 Cash Flow Data: Net cash (used in) provided by operating activities $ (146,153) $ 116,766 Net cash used in investing activities (442,731) (191,092) Net cash provided by financing activities 610,016 74,140 Net cash used in operating activities increased $262.9 million, which primarily reflects an increase in (i) Net loss of $219.2 million and certain adjustments to reconcile net loss to cash provided by operating activities including an increase in (ii) Gain on sale of assets of $133.8 million and decreases in (iii) Changes in net working capital of $126.6 million, (iv) Change in deferred income taxes of $8.4 million and (v) Provision for credit losses of $3.8 million, partially offset by increases in (vi) Non-cash termination fee to affiliate (issuance of ordinary shares) of $150.0 million and (vii) Depreciation and amortization of $40.0 million, a decrease in (viii) Security deposits and maintenance claims included in earnings of $21.0 million and an increase in (ix) Loss on extinguishment of debt of $13.9 million. Net cash used in investing activities increased $251.6 million, primarily due to increases in (i) Acquisition of business, net of cash acquired of $143.6 million, (ii) Deposits for acquisitions of aircraft and engines of $152.2 million, (iii) Acquisition of leasing equipment of $115.4 million and (iv) Investments in financing receivable of $63.9 million partially offset by higher (v) Proceeds from the sale of assets of $176.9 million, decreases in (vi) Investment in unconsolidated entities of $19.5 million, (vii) Acquisition of lease intangibles of $11.6 million and (viii) Investment in promissory notes of $11.5 million and higher (ix) Proceeds (refunds) from deposits on sale of aircraft and engines of $3.1 million. Net cash provided by financing activities increased $535.9 million, primarily due to increases in (i) Proceeds from debt of $1.6 billion and (ii) Receipt of maintenance deposits under operating lease agreements of $12.8 million, partially offset by an increase in (iii) Repayment of debt of $1.0 billion, a decrease in (iv) Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs of $61.7 million, and increases in (v) Payment of deferred financing costs of $9.0 million and (vi) Release of maintenance deposits under operating lease agreements of $6.2 million. Contractual Obligations Our material cash requirements include the following contractual and other obligations: Debt Obligations — As of September 30, 2024, we had outstanding principal and interest payment obligations of $3.3 billion and $1.3 billion, respectively, of which only interest payments of $216.4 million are due in the next twelve months. See Note 8 to the consolidated financial statements for additional information about our debt obligations. Lease Obligations —As of September 30, 2024, we had outstanding operating and finance lease obligations of $19.6 million, of which $2.1 million is due in the next twelve months. Other Cash Requirements —In addition to our contractual obligations, we pay quarterly cash dividends on our ordinary shares and preferred shares, which are subject to change at the discretion of our Board of Directors. During the last twelve months, we declared cash dividends of $120.9 million and $33.3 million on our ordinary shares and preferred shares, respectively. We expect to meet our future short-term liquidity requirements through cash on hand, unused borrowing capacity or future financings and net cash provided by our current operations. We expect that our operating subsidiaries will generate sufficient cash flow to cover operating expenses and the payment of principal and interest on our indebtedness as they become due. We may elect to meet certain long-term liquidity requirements or to continue to pursue strategic opportunities through utilizing cash on hand, cash generated from our current operations and the issuance of securities in the future. Management believes adequate capital and borrowings are available from various sources to fund our commitments to the extent required. Critical Accounting Estimates and Policies There were no material changes to our critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2023. Recent Accounting Pronouncements See Note 2 to our Consolidated Financial Statements for recent accounting pronouncements. 51