Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. You should read the following management's discussion and analysis and the accompanying financial statements and related notes with AerSale's Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K"). This discussion contains forward-looking statements about AerSale's business, operations and industry that involve risks and uncertainties, such as statements regarding AerSale's plans, objectives, expectations and intentions. AerSale's future results and financial condition may differ materially from those currently anticipated because of the factors described in the section titled "Risk Factors" in the 2025 Form 10-K, in the section of this Quarterly Report titled "Forward-Looking Statements" and in any of AerSale's subsequent reports filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, actual outcomes, including the future results of AerSale's operations, may vary materially from those indicated.

The Company

We operate as a platform for serving the commercial aviation aftermarket sector. Our top executives have on average over 30 years of experience in aircraft and engine ("Flight Equipment") management, sales and maintenance services, and are supported by an experienced management team. We have established a global purpose built and fully integrated aviation company focused on providing products and services that maximize the value of Flight Equipment in the middle to end of its operating life cycle.

We are a worldwide provider of aftermarket commercial aircraft, engines, and their parts to passenger and cargo airlines, leasing companies, original equipment manufacturers ("OEM"), government and defense contractors, and maintenance, repair and overhaul ("MRO") service providers. We report our activities in two business segments: Asset Management Solutions, comprised of activities that extract value from strategic Flight Equipment acquisitions either as whole assets or by disassembling for used serviceable material ("USM"), and TechOps, comprised of MRO activities for aircraft and their components, sales of internally developed advanced technical repairs, modifications and products, which we market under the tradename "Engineered Solutions", and other serviceable products.

Our Asset Management Solutions segment focuses on mid-life Flight Equipment. Asset Management Solutions' 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. We accomplish this by utilizing deep market and technical knowledge related to the management of Flight Equipment sales, leasing and MRO services. To extract value from the remaining flight time on whole assets, we provide flexible short-term (generally less than five years) leasing solutions of Flight Equipment to passenger and cargo operators across the globe. Once the value from the Flight Equipment's flight time has been extracted, Flight Equipment is considered to be at or near the end of its useful life and is analyzed for return maximization as either whole asset sales or disassembled for sale as USM parts. Revenue from this segment is segregated between Aircraft and Engine depending on the asset type that generated the revenue. Lease revenue and the related depreciation from aircraft and engines installed on those aircraft are recognized under the Aircraft category. Revenue from sales of whole aircraft and related cost of sales are allocated between the Aircraft and Engine categories based on the allocated cost basis of the asset sold.

Our TechOps segment provides internal and third-party aviation services, including internally developed Engineered Solutions, full heavy aircraft maintenance and modification, component MRO, as well as end-of-life disassembly services to all Flight Equipment. Our MRO business also engages in longer-term projects such as aircraft modifications, cargo and tanker conversions of aircraft, and aircraft storage. The TechOps segment also includes MRO services for landing gear, thrust reversers, hydraulic systems, and other aircraft components.

We utilize these capabilities to support our customers' Flight Equipment, as well as to maintain and improve our own Flight Equipment, which is subsequently sold or leased to our customers. These processes require a high degree of

expertise on each individual aircraft or component that is being serviced. Our knowledge of these processes allows us to assist customers to comply with applicable regulatory and OEM requirements. A significant amount of skilled labor is required to support this process, which the Company has accumulated through its diversified offerings.

In addition to our aircraft and USM parts offerings, we develop Engineered Solutions consisting of Supplemental Type Certificates ("STCs") that can be installed on existing Flight Equipment to improve performance, comply with regulatory requirements, or improve safety. An example of these solutions is the AerSafe® product line, which we designed and for which we obtained Federal Aviation Administration ("FAA") approval to sell as a solution for compliance with the FAA's fuel tank flammability regulations. Another example of these solutions is our AerAware™ product, an industry-leading, next generation Enhanced Flight Vision System that has received approval by the FAA for the Boeing B737NG product line. These products are proprietary in nature and function as non-OEM solutions to regulatory requirements and other technical challenges, often at reduced delivery time and cost for operators. In order to develop these products, we engage in research and development ("R&D") activities that are expensed as incurred.

We source parts and components for our business from various suppliers around the world. Current geopolitical conditions, including trade restrictive actions and strained intercountry relations, and potential shutdowns of the U.S. government could cause significant materials and parts shortages, disruptions to government contracts such as delayed payments or halted projects, effects on supply chains due to reduced staffing for customers, inspections and transportation authorities, or delays in regulatory approvals, distribution issues, energy cost increases and price increases. Furthermore, the U.S. government's adoption of new approaches to trade policy and imposition of tariffs on certain foreign goods (as well as the possibility of imposing significant, additional tariffs in the future) may make it more difficult or costly for us to procure components and other material supplies and, in turn, may increase the cost to our customers, which may materially and adversely impact demand for our products and services, our results of operations or our financial condition. In addition, these U.S. actions have, and could in the future, result in other countries imposing retaliatory tariffs on our goods and services provided to foreign customers, which similarly could materially and adversely impact demand for our products and services. We continue to monitor the current economic environment and its potential impact on our business, results of operations and financial condition, as well as the potential impact on our end customers whose demand for our products and services may be adversely impacted as a result of increased geopolitical instability or changes in policies by the U.S. or other governments, and closely manage our costs and capital resources so that we can respond appropriately as circumstances change. Our estimates may change as new events occur and additional information is obtained. Actual results could differ from these estimates under different assumptions or conditions.

Recent Accounting Pronouncements

The most recently adopted and to be adopted accounting pronouncements are described in Note B of our condensed consolidated financial statements included in this Quarterly Report, as well as in Note B within our consolidated annual financial statements in Part II, Item 8 of the 2025 Form 10-K.

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Results of Operations

Three months ended June 30, 2026 compared to the three months ended June 30, 2025

Revenue and gross profit for AerSale's two business segments for the three months ended June 30, 2026 and 2025 were as follows:

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Total revenue for the three months ended June 30, 2026 decreased $36.5 million, or 33.9%, compared to the three months ended June 30, 2025, driven by a decrease of $39.1 million, or 51.3%, in revenue within Asset Management Solutions, and an increase of $2.7 million, or 8.7%, in revenue within TechOps.

Asset Management Solutions

Revenue in the Asset Management Solutions segment decreased $39.1 million or 51.3%, to $37.1 million for the three months ended June 30, 2026, due to a $39.8 million, or 60.4%, decrease in revenue from Engine, partially offset by $0.6 million, or 6.0%, increase in revenue from Aircraft. The decrease in Engine revenue is primarily attributable to lower activity in the PW4000 and CF6-80 product lines due to lower Flight Equipment sales in the amount of $33.0 million, and lower USM sales of $9.6 million, partly offset by higher leasing activity driven by growth in the engine leasing portfolio. The increase in Aircraft revenue is due to higher leasing revenue from B757 freighters in the amount of $1.0 million driven by additional assets deployed.

Cost of sales in Asset Management Solutions decreased $24.8 million or 50.3%, to $24.5 million for the three months ended June 30, 2026, compared to the prior year period. The decrease in cost of sales was primarily due to the sales decrease discussed above. Gross profit in the Asset Management Solutions segment decreased $14.4 million, or 53.3%, to $12.6 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025.

The gross profit decrease is mainly attributable to lower revenue generated for the three months ended June 30, 2026, as noted above.

Aircraft gross profit margins decreased to 26.0% for the three months ended June 30, 2026, from 42.0% for the three months ended June 30, 2025 due to lower margin contribution from leasing revenue and USM sales. Engine gross profit margin was 37.3% for the three months ended June 30, 2026, an increase from 34.3% for the three months ended June 30, 2025, which was primarily the result of changes in the revenue mix, mainly higher leasing revenue which, historically, tend to generate higher margins.

TechOps

Our revenue from TechOps increased by $2.7 million or 8.7%, to $33.8 million for the three months ended June 30, 2026, compared to the prior year period. The increase was driven by higher volume in our heavy MROs as our facility in Millington, Tennessee expands operations. Additional revenue growth also came from our component MROs as a result of higher volume at both our AeroStructure facility in Hialeah Gardens, Florida and our Landing Gear shop in Rio Rancho, New Mexico.

Cost of sales in TechOps increased $7.4 million or 32.5%, to $30.1 million for the three months ended June 30, 2026 compared to the prior year period, driven by the sales increase discussed above. Gross profit in TechOps decreased $4.7 million, or 56.1% for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, driven by lower margin generated from our heavy MROs, as a result of higher labor costs, which includes non-recurring hiring and training expenses associated to the return to service of Millington, Tennessee. Gross profit margin decreased to 10.9% for the three months ended June 30, 2026 compared to 26.9% for the prior year period, which was largely attributable to lower margin on service revenue of 2.0% for the three months ended June 30, 2026 compared to 23.6% for the prior year period, driven by the gross profit reduction from our heavy MROs noted above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $1.8 million, or 7.9% to $21.0 million for the three months ended June 30, 2026, compared to the prior year period. The decrease was mainly related to lower sales commissions, as well as lower rent expense for our AeroStructures business unit, which incurred rent expense for two locations in the 2025 period until the completion of its expanded Hialeah Gardens, Florida facility.

Change in Fair Value of Warrant Liability

We accounted for private warrants as a liability at their fair value, with changes in fair value recognized in our results from operations for the period. The fair value of our private warrants was determined using the Black-Scholes option pricing model. For the three months ended June 30, 2025, we recorded a $0.1 million change in fair value of warrant liability expense. The Private Warrants expired unexercised during the year ended December 31, 2025.

Interest Expense, Net

Interest expense, net was $2.5 million for the three months ended June 30, 2026 and 2025. The interest expense is primarily driven by borrowings under our debt facilities.

Income Taxes

The effective tax rate for the three months ended June 30, 2026 was 22.6% compared to 17.0% for the three months ended June 30, 2025. The difference between the effective tax rate and the statutory tax rate of 21.0% for the three months ended June 30, 2026 is primarily due to the impact of state income taxes, offset by the foreign derived intangible income deduction and foreign tax credits. The difference between the effective tax rate and the statutory tax rate of 21.0% for the three months ended June 30, 2025 is primarily due to the impact of state income taxes, offset by the foreign derived intangible income deduction and R&D tax credits.

Six months ended June 30, 2026 compared to the six months ended June 30, 2025

Revenue and gross profit for AerSale's two business segments for the six months ended June 30, 2026 and 2025 were as follows:

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Total revenue for the six months ended June 30, 2026 decreased $31.6 million, or 18.3%, compared to the six months ended June 30, 2025, driven by a decrease of $35.2 million, or 30.5%, in revenue within Asset Management Solutions, partially offset by an increase of $3.6 million, or 6.2%, in revenue within TechOps.

Asset Management Solutions

Revenue in the Asset Management Solutions segment decreased $35.2 million or 30.5%, to $80.3 million for the six months ended June 30, 2026, due to a $37.2 million, or 38.1%, decrease in revenue from Engine; offset by a $2.0 million, or 11.1%, increase in revenue from Aircraft. The decrease in Engine revenue is primarily attributable to lower activity in the PW4000 and CF6-80 product lines due to lower Flight Equipment sales of $29.5 million and lower USM sales of $13.7 million, partly offset by higher leasing revenue in the amount of $6.0 million. The increase in Aircraft revenue is primarily attributable to increased leasing activity of our B757 freighters in the amount of $2.0 million, partially offset by lower USM sales.

Cost of sales in Asset Management Solutions decreased $25.7 million, or 33.7%, to $50.7 million for the six months ended June 30, 2026, compared to the prior year period. The decrease in cost of sales was primarily driven by the sales decrease noted above. Gross profit in the Asset Management Solutions segment decreased $9.5 million, or 24.3%, to $29.5 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The gross profit decrease is mainly attributable to lower Flight Equipment sales, as well as lower USM for the six months ended June 30, 2026.

Aircraft gross profit margin decreased to 28.1% for the six months ended June 30, 2026, from 33.5% for the six months ended June 30, 2025, due to lower USM margins as a result of fluctuations in product mix. Engine gross profit margin was 39.6% for the six months ended June 30, 2026, an increase from 33.8% for the six months ended June 30, 2025, which was primarily due to changes in our revenue mix, mainly from higher leasing revenue which, historically, tends to generate higher margins.

TechOps

Our revenue from TechOps increased by $3.6 million, or 6.2%, to $61.3 million for the six months ended June 30, 2026, compared to the prior year period. The increase was primarily driven by higher volume in our heavy MROs, as our Millington, Tennessee facility continues to expand its services.

Cost of sales in TechOps increased $12.3 million, or 28.3%, to $55.7 million for the six months ended June 30, 2026, compared to the prior year period, driven by the higher revenue discussed above. Gross profit in TechOps decreased $8.7 million, or 60.6%, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, driven by lower margin generated from our heavy MROs, as a result of higher labor costs, which include non-recurring hiring and training expenses associated with the return to service of Millington, Tennessee. Gross profit margin decreased to 9.2% for the six months ended June 30, 2026 compared to 24.8% for the six months ended June 30, 2025, and was largely attributable to lower margins on service revenue of 1.5% for the six months ended June 30, 2026 compared to 21.4% for the prior year period, driven by gross profit reduction from our heavy MROs noted above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $4.2 million, or 8.9%, to $43.2 million for the six months ended June 30, 2026, compared to the prior year period. The decrease was mainly related to lower sales commissions, lower legal fees, and lower rent expense in our AeroStructures business unit, which incurred rent expense for two locations in the 2025 period until the completion of its expanded Hialeah Gardens, Florida facility.

Change in Fair Value of Warrant Liability

We accounted for private warrants as a liability at their fair value, with changes in fair value recognized in our results from operations for the period. The fair value of our private warrants was determined using the Black-Scholes option pricing model. For the six months ended June 30, 2025, we recorded a $0.1 million change in fair value of warrant liability expense. The Private Warrants expired unexercised during the year ended December 31, 2025.

Interest Expense, Net

Interest expense, net was $4.6 million for the six months ended June 30, 2026, compared to $3.6 million for the six months ended June 30, 2025. The increase was primarily related to higher outstanding borrowings under our debt facilities during the current year period compared to the prior period related to the timing of changes in working capital and feedstock acquisitions.

Income Taxes

The effective tax rate for the six months ended June 30, 2026 was 22.6% compared to 23.8% for the six months ended June 30, 2025. The difference between the effective tax rate and the statutory tax rate of 21.0% for the six months ended June 30, 2026 is primarily due to the impact of state income taxes, offset by the foreign derived intangible income deduction and foreign tax credits. The difference between the effective tax rate and the statutory tax rate of 21.0% for the six months ended June 30, 2025 is primarily due to the impact of state income taxes, offset by the foreign derived intangible income deduction and R&D tax credits.

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Financial Position, Liquidity and Capital Resources

As of June 30, 2026, we had $2.2 million in cash and cash equivalents. We finance our growth through cash flows generated from operations and borrowings secured by our assets. We had $146.2 million outstanding under the Revolving Credit Agreement (as defined below) as of June 30, 2026, with $31.8 million of availability thereunder. We used cash in operations of $33.5 million for the six months ended June 30, 2026, primarily for feedstock acquisition and improvements to flight equipment, and used cash in investing activities of $4.4 million for the six months ended June 30, 2026.

We believe our equity base, internally generated funds, and existing availability under our debt facilities are sufficient to maintain our level of operations over the next twelve months. Any projections of future cash needs and cash flows beyond the next twelve months are subject to substantial uncertainty, but we believe our sources of liquidity, as discussed above, will be sufficient to meet our long-term cash requirements. The Company does not typically engage in long-term purchase commitments for the acquisition of feedstock; as a result, the Company has generally been able to manage its liquidity by managing the timing of its feedstock acquisitions so as to deploy funds when advantageous to the Company. However, if an event occurs that affects our ability to meet our capital requirements, our ability to continue to grow our asset base consistent with historical trends could be impaired and our future growth limited to that which can be funded from internally generated capital.

We may, from time to time, purchase our outstanding shares of common stock through cash purchases and/or exchanges for equity or debt, open-market purchases, privately negotiated transactions or otherwise, including, but not limited to, privately negotiated transactions with certain stockholders who have rights to require us to file a registration statement covering shares of our common stock. Such purchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, legal and regulatory considerations, contractual restrictions and other factors. Purchases, if any, will be funded through our available cash and cash equivalents. The amounts involved may be material.

On March 18, 2025, the Company repurchased, directly from a selling stockholder, 6,428,571 shares of the Company's common stock, par value $0.0001 per share, at a price of $7.00 per share for total consideration of $45.0 million.

Cash Flows- Six months ended June 30, 2026 compared to the six months ended June 30, 2025

Cash Flows from Operating Activities

Net cash used in operating activities was $33.5 million for the six months ended June 30, 2026, compared to cash used of $25.4 million for the same period in 2025. The increase in cash deployed of $8.0 million was primarily due to lower results from operations and the timing of changes in working capital levels during the six months ended June 30, 2026 compared to the prior year period.

Cash Flows from Investing Activities

Net cash used in investing activities was $4.4 million for the six months ended June 30, 2026, compared to cash used of $3.8 million in the same period for 2025. The increase in cash used in investing activities was driven by cash generated from the sale of assets during the six months ended June 30, 2025.

Cash Flows from Financing Activities

Net cash provided by financing activities was $35.7 million for the six months ended June 30, 2026, compared to cash provided of $30.2 million in the same period for 2025. Cash provided by financing activities during the six months ended June 30, 2026 resulted from net borrowing under our Revolving Credit Agreement. Cash provided by financing activities during the six months ended June 30, 2025 resulted from net borrowing under the Revolving Credit Agreement, offset by cash used in the repurchase of common stock.

Debt Obligations and Covenant Compliance

Wells Fargo Senior Secured Revolving Credit Facility

Effective July 25, 2023, we amended our revolving credit agreement (as amended, the "Revolving Credit Agreement") to increase our maximum commitments under the Revolving Credit Agreement to $180.0 million in the aggregate, expandable to $200.0 million, subject to conditions and the availability of lender commitments and borrowing base limitations, and to extend the maturity date to July 24, 2028, subject to certain conditions.

The maximum amount of such commitments available at any time for borrowings and letters of credit is determined according to a borrowing base calculation equal to the sum of eligible inventory and eligible accounts receivable reduced by the aggregate amount, if any, of trade payables of the loan parties, as defined in the Revolving Credit Agreement, and is subject to contractual restrictions. Extensions of credit under the Revolving Credit Agreement are available for working capital and general corporate purposes.

As of June 30, 2026, there was $146.2 million outstanding under the Revolving Credit Agreement and we had $31.8 million of availability thereunder. We were in compliance with our debt covenants for the Revolving Credit Agreement as of June 30, 2026.

CIBC Equipment Loan

On November 22, 2024, the Company entered into a property and equipment term loan (the "CIBC Equipment Loan") with a total advance commitment of $10.0 million for the purpose of financing capital expenditures on property and equipment. Advances made by the lender are convertible into term loans at the option of the lender at a rate of the Secured Overnight Financing Rate ("SOFR") plus 3.0% and have a maturity date of 36 months from the term loan conversion date. Advances under this loan are collateralized by the property and equipment it finances and require interest only payment until converted to a term loan, at which point, principal and interest payments are required.

Effective November 30, 2025, we amended the CIBC Equipment Loan to extend the term of the advance commitment until November 30, 2026 and reduce the total advance commitment to $2.5 million.

During the six months ended June 30, 2026, the Company repaid $0.5 million under this facility, and $1.8 million remained outstanding as of June 30, 2026.

We were in compliance with our debt covenants for the CIBC Equipment Loan as of June 30, 2026.

Off-Balance Sheet Arrangements and Contractual Obligations

We did not have any off-balance sheet arrangements as of June 30, 2026. Refer to Note Q - Leases, within our consolidated annual financial statements in our 2025 Form 10-K for a summary of our non-cancelable contractual obligations under operating leases.

Critical Accounting Policies and Estimates

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. A summary of our critical accounting estimates is included in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the 2025 Form 10-K. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a material impact on our financial results. During the six months ended June 30, 2026, there were no material changes in our critical accounting estimates and policies.