FIRST QUARTER EARNINGS CALL May 3, 2018

Transcription

1 FIRST QUARTER EARNINGS CALL May 3, 2018

2 DISCLAIMER Forward-Looking Statements: This presentation contains certain forward - looking statements within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements may be identified by words such as expects, intends, anticipates, plans, believes, seeks, estimates, will, or words of similar meaning and include, but are not limited to, statements regarding the outlook for FLY s future business, operations and financial performance, including the expected benefits of the AirAsia portfolio transactions (the Transactions ); whether and when the Transactions will be consummated; the amount of cash and stock consideration to be paid by FLY; the type, amount and terms of the acquisition financing to be obtained by FLY; and, the amount of any fees and expenses incurred in connection with the Transactions. Forward-looking statements are based on management s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including risks relating to the satisfaction of conditions to the closing of the Transactions; risks relating to satisfaction of conditions to the financing of the Transactions; risks relating to FLY s ability to obtain additional required financing for the Transactions on favorable terms, or at all; the risk that expected benefits of the Transactions may not be fully realized or may take longer to realize than expected; the risk that business disruption resulting from the Transactions may be greater than expected; and the risk that FLY may be unable to achieve its portfolio growth expectations, or to reap the benefits of such growth. Further information on the factors and risks that may affect FLY s business is included in filings FLY makes with the Securities and Exchange Commission from time to time, including its Annual Report on Form 20-F and its reports on Form 6-K. FLY expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise. Notes: 1. All period end figures are as of March 31, 2018 except as otherwise noted. Any 2018 year-to-date data is as of April 27, Fleet age and lease term are calculated using the weighted net book value of flight equipment held for operating lease, including maintenance rights and investment in finance lease, at period end. 3. In addition to U.S. GAAP financials, this presentation includes certain non-gaap financial measures. These non-gaap financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. We have provided a reconciliation of those measures to the most directly comparable GAAP measures in the Appendix. For further information, please refer to the earnings press release dated May 3, PAGE 1

3 FAVORABLE INDUSTRY FUNDAMENTALS STRONG GLOBAL AIR TRAFFIC GROWTH CONTINUED AIRLINE PROFITABILITY HEALTHY DEMAND FOR AIRCRAFT POSITIVE FINANCIAL MARKETS Passenger traffic growth is robust 6.0% FORECAST IN 2018, ON TRACK YTD Positive airline industry results $38.4 billion FORECAST 2018 PROFITS Strong demand for aircraft UNDERPINNED BY PASSENGER GROWTH Attractive markets for aircraft financing AMPLE CAPACITY AT ATTRACTIVE RATES Source: IATA, December PAGE 2

4 Q FINANCIAL RESULTS AND HIGHLIGHTS FINANCIAL RESULTS HIGHLIGHTS Operating Lease Rental Revenue (In millions) Q Q $89.1 $79.3 Net Income (In millions) Q Q GAAP $9.6 $5.1 Adjusted $12.4 $5.9 Earnings per Share Q Q GAAP $0.34 $0.16 (1) 12.3% operating lease rental revenue growth Strong earnings growth 99% fleet utilization Signed AirAsia portfolio acquisition Closings expected in Q2/Q $384 million unrestricted cash at quarter end Adjusted $0.44 $0.18 (1) (1) Revised to conform to current period presentation. PAGE 3

5 AIRASIA PORTFOLIO ACQUISITION UPDATE Strong pipeline of new technology aircraft driving EPS and ROE growth Q2 / Q INITIAL PORTFOLIO 34 A320ceo aircraft 7 CFM engines leased to AirAsia Group airlines (1) Anticipated to close in Q2/Q AirAsia shareholder approval expected this month 2019 and beyond FUTURE SALE-LEASEBACKS 21 new A320neo family aircraft will be leased to AirAsia Group airlines Delivering NEO OPTIONS 20 new A320neo family aircraft Delivering as early as 2019 No obligation to exercise options (1) One aircraft from the Initial Portfolio is on lease to a third-party airline. PAGE 4

6 PROJECTED LEVERAGE AND FINANCING STRATEGY INITIAL PORTFOLIO FINANCING Initial Portfolio of 34 aircraft will be financed by: CASH AND EQUITY $300 million of FLY s cash $70 million of newly-issued shares at $15.00 per share (1) SECURED DEBT $580 million of committed financing at anticipated cost of L % $90 million under FLY s Aircraft Acquisition Facility at cost of L % IMPACT ON LEVERAGE Leverage temporarily increases to 4.9x post-acquisition projected to reduce to 3.5x within three years due to: Significant contracted debt amortization Planned aircraft sales FLY S PROJECTED DEBT / EQUITY RATIO 4.9x 4.4x 3.5x (2) Initial Within ~1 Year Within ~3 Years (1) Onex and BBAM s management team will each acquire 666,667 newly-issued FLY shares for total consideration of $20 million and AAB will acquire 3,333,333 newly-issued FLY shares for a consideration of $50 million. (2) Proforma at September 30, 2018 assuming all Initial Portfolio assets have been acquired. PAGE 5

7 AIRCRAFT ACQUISITIONS AND SALES ACQUISITIONS 1 New aircraft acquired in Q year LEASE TERM SALES 2 Aircraft sales closed in April 10.3 years AVERAGE AGE Sales reduce leverage, generate cash, and produce a 16% premium to net book value (1) Further sales anticipated for 2018 (1) Premium includes gain on sale and retained end of lease income for disposed aircraft. PAGE 6

8 FINANCIAL OVERVIEW

9 Q FINANCIAL OVERVIEW (In millions) Net Income Q Q GAAP $9.6 $5.1 Adjusted $12.4 $5.9 91% (In millions) Q Q Operating Lease Rental Revenue $89.1 $79.3 End of Lease Income Amortization of Lease Incentives and Other (2.4) (1.9) Operating Lease Revenue $87.1 $78.7 Finance Lease Income Other Income Total Revenue $88.8 $ % Note: Sums may not foot due to rounding. PAGE 8

10 Q EXPENSE COMPARISON (In millions) Q Q Depreciation $33.7 $32.1 Interest Expense Selling, General and Administrative Loss (Gain) on Derivatives 0.8 (0.1) Loss on Modification and Extinguishment of Debt Maintenance and Other Costs Total Expenses $76.8 $73.1 Total expenses grew by only 5% year-over-year compared to a 12% increase in total revenue Note: Sums may not foot due to rounding. PAGE 9

11 Q FINANCIAL GUIDANCE (In millions) Q Operating Lease Rental Revenue $88 89 Lease Incentives and Other ($2 3) Gain on Sale of Aircraft $3 End of Lease Income (1) $12 15 Depreciation $34 35 Interest Expense $34 35 Maintenance and Other Costs $1 SG&A (2) $8 9 (1) ~$12 million of end of lease income relates to aircraft sold in Q (2) Forecasted SG&A does not consider foreign exchange gains or losses due to the unpredictability of such items. PAGE 10

12 2018 FULL YEAR FINANCIAL GUIDANCE (In millions) FY 2018 (1) Operating Lease Revenue $ Finance Lease Revenue and Other Income $3 Gain on Sale of Aircraft $3 Total Revenue $ Total Expenses $ Pre-tax Net Income $75 80 Weighted Average Shares 30.3 After closing the initial AirAsia portfolio, contracted annual operating lease revenue will be over $460 million assuming no aircraft sales Note: Sums may not foot due to rounding. (1) Assumes Initial Portfolio assets have closed in Q and no AirAsia aircraft sales. PAGE 11

13 APPENDICES

14 CAPITAL STRUCTURE & LIQUIDITY OVERVIEW (In millions) March 31, 2018 December 31, 2017 Unrestricted cash and cash equivalents $384 $329 Unencumbered assets $252 $331 O / S Rate (1) O / S Rate (1) Maturity Securitization $ % $ % Term Loan % % 2023 Nord LB Facility % % 2018 CBA Debt % % 2020 Other Bank Debt Facilities % % Aircraft Acquisition Facility % % 2022 Magellan Acquisition Facility % % 2025 Unamortized Discounts and Loan Costs (28) (29) Total Secured Debt $2, % $2, % 2021 Notes % % Notes % % 2024 Unamortized Discounts and Loan Costs (9) (9) Total Unsecured Debt $ % $ % Total Debt 2, % 2, % Shareholders' Equity Total Capitalization $3,191 $3,190 Debt to Equity 4.7x 4.9x Net Debt to Equity (2) 4.0x 4.3x Secured Debt to Total Debt 77% 77% Total Debt to Total Capitalization 83% 83% (1) Represents the contractual interest rates and effect of derivative instruments and excludes the amortization of debt discounts and debt issuance costs. (2) Represents the ratio of total debt, less unrestricted cash and cash equivalents, divided by shareholders equity. PAGE 13

15 ADJUSTED NET INCOME & ADJUSTED ROE (In thousands) Q Q ( 1) Net Income $9,630 $5,052 Plus: Unrealized foreign exchange loss Deferred income taxes 2,353 1,058 Fair value changes on undesignated derivatives (2) (467) Adjusted Net Income $12,389 $5,862 Average Shareholders' Equity $549,611 $596,072 Adjusted ROE ( 2) 9.0% 3.9% (1) Revised to conform to current period presentation. (2) Percentages have been annualized. PAGE 14

16 DETAILS ON SG&A (In thousands) Q Q Transaction fees and expenses 453 1,605 Unrealized foreign exchange loss Other SG&A 7,749 6,468 Selling, General & Administrative 8,610 8,292 PAGE 15

17 REMARKETING OVERVIEW AIRCRAFT REMARKETING REQUIREMENTS (# of aircraft) FY 2018 FY 2019 FY 2020 % of NBV 2.3% 10.1% 8.6% FLY has a weighted average remaining lease term of 6.2 years PAGE 16