管理層發言
Thank you for joining us for FTAI Aviation's First Quarter 2025 Earnings Conference Call. All participants are currently in a listen-only mode. After the presentations, we will have a question-and-answer session. I would now like to turn the call over to Alan Andreini from Investor Relations. Please proceed.
Thank you, Latif. I would like to welcome you all to the FTAI Aviation first quarter 2025 earnings call. Joining me here today are Joe Adams, our Chief Executive Officer; Angela Nam, our Chief Financial Officer; and David Moreno, our Chief Operating Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including EBITDA. The reconciliation of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. Now, I would like to turn the call over to Joe.
Thank you, Alan. I'm pleased to announce our 40th dividend as a public company and our 55th consecutive dividend since inception. The dividend of $0.30 per share will be paid on May 23rd based on a shareholder record date of May 16. Angela is going to take you through the numbers in more detail. But before that, I wanted to highlight a few things. We started the year with momentum, recording another strong quarter in aerospace products with $131 million in adjusted EBITDA at a margin of 36%. With a consistently growing backlog of purchase orders for 2025 and beyond, demand for our aerospace products and services continues to accelerate, strengthening our position as a leader in the engine maintenance aftermarket. Turning to production, we refurbished 138 CFM56 modules this quarter between our two facilities in Montreal and Miami. We anticipate a significant ramp to occur in Q2, particularly in Montreal, as we execute on our growth initiatives and operational throughput to enhance efficiency.
As we expand production of refurbished modules and engines, our core focus is to increase our market share of restorations beyond the current 5% to 25%. Now, let's talk about adjusted free cash flow. In the first quarter, we closed on approximately $234 million of aviation equipment at attractive prices as replacement CapEx for the seed portfolio of aircraft, which are being sold to Strategic Capital Initiative, or SCI. The transition of these aircraft started in Q1, where we sold four aircraft for $59 million, and we are proceeding as planned to have completed the sale of the remaining assets by the end of Q2, generating a significant inflow of approximately $440 million. We expect adjusted free cash flow to be in the range of $300 million to $350 million for the first half of the year, which is in line with our target to achieve $650 million in adjusted free cash flow for all of 2025. For the Strategic Capital Initiative or SCI, it was great to announce one investment management as an equity investor in the partnership.
Since then, we have secured an additional equity partner and expect further closings during Q3 of this year. We remain on track to deploy $4 billion plus in capital by the end of the year through a combination of these commitments and our $2.5 billion secured asset-level financing facility with ATLAS, a wholly-owned affiliate of Apollo and Deutsche Bank. Finally, we've been working extensively on operational plans with our partner IAG Engine Center Europe in Rome and are confident we can ramp up production immediately following the acquisition to support our regional customer base in Europe and the Middle East. We already have five engines in the facility and expect to close the new joint venture very soon. Therefore, overall, we feel increasingly confident in our business segment EBITDA 2025 goal of between $1.1 billion to $1.15 billion, excluding corporate and other, rising to approximately $1.4 billion in 2026.
While tariffs create some challenges and opportunities, we do not currently see tariffs having any material negative effect on our business, and we are reiterating our guidance for both 2025 and 2026, as we continue to see growing and accelerating demand for our proprietary set of aerospace products. With that, I'll hand it over to Angela to talk through the numbers.
Thanks, Joe. The key metric for us is adjusted EBITDA. We began the year strongly with adjusted EBITDA of $268.6 million in Q1 2025, which is up 7% compared to $252 million in Q4 2024 and up 64% compared to $164.1 million in Q1 of 2024. During the first quarter, the $268.6 million EBITDA number was comprised of $162 million from our Leasing segment, $130.9 million from our Aerospace Product segment, and a negative $17.4 million from corporate and other, excluding intra-entity eliminations. Turning now to leasing, Leasing continued to deliver strong results, posting approximately $162 million of EBITDA. The pure leasing component of the $162 million came in at $152 million for Q1 versus $128 million in Q4 2024. Included in the $152 million was a $30 million settlement related to Russian assets written off in 2022, which is an additional settlement to the $11 million we received last quarter.
For gains on sales, we began the year with $68 million in book value of assets being sold for a 13% margin gain of $9.8 million, which we expect will significantly increase next quarter as we close out the transition of the seed assets to the SCI. Looking ahead, we remain comfortable assuming leasing EBITDA will be $500 million in 2025 as we pivot our focus towards an asset-light business model. Aerospace products had yet another good quarter with $130.9 million of EBITDA at an overall EBITDA margin of 36%, which is up 12% compared to $117.3 million in Q4 of last year and up 86% compared to $70.3 million in Q1 2024. We continue to see accelerating growth and adoption and usage of our aerospace products and remain focused on ramping up production in both of our facilities in Montreal and Miami as well as commencing operations in Rome. In 2025, we continue to expect to generate $650 million in EBITDA, up from $381 million in 2024 and $160 million in 2023. With that, let me turn the call back over to Alan.
Thank you, Angela. Latif, you may now open the call to Q&A.
分析師問答
Thank you. Our first question comes from Giuliano Bologna of Compass Point. Please go ahead, Giuliano.
Good morning. Congratulations on another successful quarter. My first question pertains to the Aerospace Products segment, where it appears you had about $100 million in revenue associated with the 2025 partnership or the SCI program. I'm curious about this; it seems like it might be a selective approach to help the SCI program launch and acquire assets. Regarding the SCI program, it would be helpful to understand the rationale behind it. Additionally, if you could offer any insights into the third-party or non-SCI business, it seems this could be an opportunistic area with substantial demand from third parties, possibly growing significantly. As you've mentioned, capacity in Montreal has been a limitation, but that is expected to increase notably in the second quarter and beyond. It would be great to hear your thoughts on all of this.
Certainly, that’s an excellent question. Let me address several points. You're absolutely right that currently, there is significant demand, and we anticipate this demand will continue for our rebuilt engines across the entire industry in the coming years. However, our production capacity is currently limited, which means we can sell everything we produce. For these engines, we have several options to sell to third-party customers, and we could achieve similar financial results selling to them as we would selling to SCI. Nevertheless, we chose to prioritize SCI for a couple of key reasons. We are committed to engine exchanges with this partnership and want to see it grow substantially. The engine exchanges provide significant material cost savings for owners and airlines, which is the main rationale for our entire business model with the MRE. This is why there is increasing demand across the industry for these products since they offer time and cost savings, making operations much more efficient.
The creation of SCI was aimed at enhancing its ability to manage these assets effectively. By solidifying these benefits with the partnership, especially with upcoming engine maintenance events for most assets in the near future, SCI stands to become a more profitable owner. Over time, this could lead to them owning more assets, resulting in more committed engine exchanges with FTAI. This will enhance our visibility regarding future engine rebuilding needs, which will improve our efficiency and lower costs, ultimately leading to better margins for us. It’s a cycle that benefits everyone involved, and that was a primary goal of our setup. About 30% of our activities have been directed towards SCI, which reflects the preparation and asset alignment we have engaged in over the past six months given the pent-up demand since we began closing deals. We now own 30 aircraft in this partnership and expect this to represent approximately 20% of our total activity in 2025, a figure we believe will likely hold for subsequent years as both SCI and the broader market expand significantly.
As I noted in my previous remarks, our ambitions are to increase our market share from 5% to 25% of the entire industry. Overall, the developments we’ve seen align perfectly with our expectations for Q1 following the establishment of SCI, and we view this as a major positive for both the immediate and long-term outlook for FTAI and our shareholders.
That is very helpful. I just want to confirm that I understood everything correctly. Looking at the 20% figure, it suggests approximately $130 million of EBITDA growth based on our EBITDA target of $650 million for the year. This indicates that the non-SCI business could see growth in the high 30% to 40% range. It appears to me, and I hope you agree, that this growth is additive and there is no cannibalization occurring; instead, you are meeting demand based on your order book. As you increase your production of the modules, you will fulfill the orders as quickly as possible, supported by your substantial backlog. Thus, this is truly additive to the core business, as the pre-SCI segment is still growing significantly at a strong rate.
Yes. And I think I agree. I think that we would have had growth even without SCI, but even if we didn't sell the SCI, we would have engines available for someone. So we'll have growth without it, but you can't zero it out, because we really do something else for those assets. But no, I agree with the math that you laid out; it's basically right. We see the entire market growing for the products, and there is no cannibalization. These aircraft that are being acquired in SCI, we would not have been doing these engines on this other than the fact that we now own them in the partnership.
That’s very helpful. I really appreciate it, and I’ll jump back in the queue.
Thank you. Our next question comes from the line of Sheila Kahy of Jefferies. Your line is open, Sheila.
Good morning and thank you very much. My first question is maybe on tariffs. If you look at aerospace products, margins improved sequentially to 36% even with a 2-point drag from legacy Montreal in the quarter. So how are you sizing the potential impact and opportunities with tariffs to the business and any work around at your disposal?
We don't see any material negative effect from tariffs on our business. And I think there are three reasons for that. One is it's the nature of our business, which is to rebuild assets. We use a lot of used material, and this is not a new asset that's being delivered into a market. So it's typically not the target of tariffs. The second is we operate in three different geographies. So we have a facility in Canada, one in the United States, and one in the EU. Effectively, we do essentially the same thing in each one of those jurisdictions. So we could deliver products to different markets from different source locations, if we needed to do some optimization. But today, we don't see the need to do that. Lastly, we have the ability to pass on price increases to customers, and we see public comments from OEMs and others indicating a similar philosophy; if their costs go up, they're going to have the power and capability to flex price and pass it on. If that happens, then we would obviously follow suit and we feel like we have a similar capability to pass on as well. Longer-term, ultimately, if these tariffs stick for an extended period of time, you should see the price of new assets go higher, which means ultimately, the price comparison for used assets should be more attractive, resulting in higher demand for us.
Thank you for your response. Joe or Angela, when you provided the $650 million free cash flow guidance for the year, it seemed to be prior to any growth capital expenditures, suggesting that you could achieve the 2026 targets without additional investment. You allocated $127 million for parts in Q1. I'm interested in your perspective on growth capital expenditures and opportunities this year, and how this will influence the ramp-up of aerospace products in the coming years.
Yes, I'll take that. I mean, we are planning to invest about $200 million in parts in the first half of this year as part of our cash flow. I would characterize this as being heavy on parts inventory. We view that because we think the cost of having extra parts inventory is way less than the cost of missing a sale. So we don't want to miss a sale. We're production-constrained, so we are being very heavy leaning towards owning more material than less material at this point. I think we're taking the view that we're ramping up our production; we're going to ramp up our inventory as well. That will level off; it's not a continuing item. But I would say, in the next few months, that's what I would expect. That's in our assumption for 2025 on the cash flow side. So I think we're expecting a roughly $200 million parts increase in the first half of this year. Even with that, we still generate approximately $350 million of free cash flow.
Great. Thank you.
Thanks.
Our next question comes from the line of Kristine Liwag of Morgan Stanley. Please go ahead, Kristine.
Hey, good morning everyone. Joe, just want to follow-up on the commentary you made on cash now. So when you said that the inventory step-up of $200 million in cash for the first half for aerospace product, and that $350 million free cash flow, is that at the same time? Or do you mean $350 million of positive free cash flow for the full year? I guess my question is, ultimately, trying to understand the cash stream with aerospace product, especially if you're trying to grow from 5% to 20%, how much more inventory investment you need to make? And when does that become a positive working capital event?
Sure. First, I'll outline my cash flow numbers for the first half of the year. We begin with operating cash flow, which is approximately $450 million after accounting for EBITDA, interest, and maintenance CapEx over the six months. Additionally, we expect $500 million from asset sales, primarily to the SCI, bringing the total to $950 million. We anticipate investing around $300 million in total replacement CapEx, as previously projected for 2025, with most of this occurring in the first half of the year. Equity in the SCI is estimated at about $100 million, adjusting the figure to $550 million. After accounting for a $200 million investment in parts inventory during the first half of the year, this results in $350 million of free cash flow for that period. While the inventory investment is slightly higher than expected, we view it as a beneficial choice, and we still expect to meet our targets owing to the growth in free cash flow and EBITDA from the business. Do you have any insights on the anticipated growth rate for parts moving forward?
As we mentioned, we want to provision parts ahead of shop visits. So generally speaking, working capital as far as what we have today, we'd like to maintain that. We provision ahead for the remainder of the year, so we don't see that growing materially quarter-over-quarter.
Great. Thanks. And maybe following up just on this parts thing, the $127 million CFM56 that you acquired at opportunistic attractive prices, can you talk more about how you source that? How you're able to get a deal like that in this environment, where there's a lot of demand, and not enough supply? And also, as you provision ahead of time, are you seeing these prices go up more? I mean, in anticipation of the tariff costs, the engine OEMs have been pretty clear that pricing pass-throughs will be part of their strategy to offset some of the pain they could have on tariffs?
Yes. So, we're sourcing these parts in a number of fashions, but where we have a competitive advantage is we're sourcing these parts unserviceable from asset owners and airlines. So we're buying, for example, LLPs. We have the back shop capabilities in Montreal to repair those. Montreal, just to give you an overall, has repair capability for about 70% of the CFM56 in-house. That includes LLPs, combustors, cases, framings, and other fan blades amongst other parts. We buy these parts as removed and then have special repairs where we can repair these parts to bring them back into service. By doing so, we're able to get into them at a much lower cost, as well as we have salvage repairs that are able to increase yields. We're very knowledgeable about scrap rates in specific parts and then, we can maximize the value through our repair network. Yes, we are starting to see parts starting to increase. Again, as they mentioned, manufacturers are going to be passing through certain tariff surcharges. We're expecting that to flow through like OEM annual escalation. So we do expect that to increase the used parts. Generally speaking, we're in a positive position because prices for replacement parts get more expensive for new parts; that offers us more cost savings. So we're starting to see that unfold. It's early days at the moment.
Thanks. And then a follow-up to that, if I may. On the repair that you're doing in Montreal, it sounds like the tariff duties are on places of manufacture. The value add that you do on repair, does that trigger some sort of tariff piece when you bring it back to the U.S.? Or is that why you're having a lower expected tariff impact? And then as a second question to that, with airlines being more focused on cost, are you seeing more adoption of your PMA parts in engines today?
Yes. On the first part, the answer is no. We don't see a tariff impact on the repair portion. And the second part is, yes, we think the airlines are increasingly focused on engine maintenance costs as they continue to go up for all airlines. So there's a lot of focus on cost-saving techniques, and people are opening any alternative they have regarding PMA, and we see that as tremendous upside for our margins. We think industry adoption will be quite good.
Great. Thank you.
Thanks.
Thank you. Our next question comes from the line of Josh Sullivan of the Benchmark Company. Please go ahead, Josh.
Good morning. Can you provide an update on the approval progress for the remaining PMAs?
I would say that we continue to make excellent progress, and we are very close on approval on the next part, and that's kind of where I stopped.
Got it. Regarding aerospace products, particularly PMAs, can you discuss how airlines and lessors are accepting PMA parts? Additionally, could you provide insights on the adoption metrics and how they affect your margins?
Yes, typically at the start, we focus on putting assets into service, after which people look at their performance. This is what we aim for. People evaluate the quality of the parts and their performance before making decisions. Historically, these parts have delivered exceptional results, and that’s what we're observing with the first two parts that are currently in service. Once the assets are operational and accumulating usage hours, adoption tends to grow. We can significantly boost that adoption rate through SCI, a tool that hasn’t been available before. In the past, PMAs faced challenges because lessors were hesitant to take risks on residual value, but we are a substantial lessor. This situation creates a different market landscape than we have experienced previously. People are more receptive now, especially when presented with data and facts, and the parts show strong performance.
Great. Thank you for the time.
Thanks.
Thank you. Our next question comes from the line of Andre Madrid of BTIG. Please go ahead, Andre.
Hey, good morning everyone. I know we're talking about the free cash flow cadence through the year, and I think this was first mentioned last quarter. But could you give us maybe any more updates about how you're thinking about shareholder-friendly capital deployment moving forward?
Sure. The priorities we've set are growth CapEx, number one, debt repayment number two; and third, shareholder repayments. We expect by the end of this year to be down close to three times debt-to-total EBITDA, which is the low-end of the range of what we've set. If we assume we don't have significant growth CapEx opportunities and we've paid down debt to three times, then we would move to the third bucket, which is shareholder repayment or dividends or stock buybacks. I would say probably towards the end of this year, we should achieve that objective.
Got it. Got it. I'll keep it to one actually. Thanks.
Thank you. Our next question comes from the line of Brandon Oglenski of Barclays. Please go ahead, Brandon.
Good morning, team. Thank you for taking my question. Joe, just to follow up on that, you mentioned targeting three times net leverage this year, correct?
Yes. We've communicated previously our range. We expect it to be in a range of three to 3.5, and we think by the end of this year, we will be at three.
Okay. I mean, maybe this question is really for Angela, but how do we think about the moving pieces with the SCI aircraft out, new assets in impacting the debt profile of the business, and maybe like from a ratings agency perspective, too?
Sure. As Joe mentioned, we had previously said that we're targeting low-threes, 3.5, by the end of this year. With the SCI, we think we can accelerate that and get closer to three, by the end of the year, which would give us a strong BB with the rating agencies, which Dave, we've communicated that's our goal. This is possible due to the fact that in prior years, we've spent a good amount of acquisition CapEx on bonding aircraft, which with the SCI, we are no longer required to do. In addition to that, we'll generate about $500 million of proceeds from the sales of our seed assets. So all those things combined, we think we'll definitely be in a position to be strong BB with the rating agencies by the end of the year.
Okay. Angela, does that give you any opportunity maybe to think about refining things in the future and get your cost...
I think that's definitely possible. Currently, our $3.5 billion debt, which is maturing until 2028, we're at a weighted average interest rate of about 6.5%. So that's something that we can definitely look at, but not something that's a priority given our rates.
Okay. Joe, can you discuss the deal you signed with Pratt last year? Have you implemented any V2500s in that partnership yet, and what are your initial thoughts on the relationship and the profitability of that business?
Yes. We've put quite a few engines through their network, and we're very happy with the relationship and how it's developed. The margins, as I said, would not be dilutive to our aerospace products business, and that's been true in the actual results. We see that as a very important part of our product offering because we are offering to airlines and owners full coverage of 737NGs and A320ceos, no matter what engine they have. It's a very big positive marketing customer relations development for us that we think is going to be in place for many years. We don't see anybody with the market position that we have coming in at this stage, so we feel very good about that market for the next 10 years being the dominant provider for engines in the aftermarket.
Thank you.
Thanks.
Thank you. Our next question comes from the line of Hillary Cacanando of Deutsche Bank. Your question please, Hillary.
Thank you. So Joe, I know you had cited to about 100 modules to be sold per quarter. But now that you're significantly ramping up production through the remainder of the year and you have over 100 customers worldwide, why would you be looking for in order to revise that guidance of 100 modules per quarter?
Well, the original 100 modules per quarter was only Montreal. So when you add in Miami and then soon to be Rome, that total capacity will be, what do you think?
200 plus.
We have a production capacity of 200 modules per quarter. While we are not quite ready to produce that number yet, we are working quickly to reach that capacity. If we consider aiming for a 25% market share, which translates to about 3,000 engines annually, that means we would need around 700 to 800 engines. Currently, I am focusing on engines intended for modules, so please excuse the shift in context. The estimated number stands at around 750. At this moment, we have a physical capacity across our network of approximately 600. We possess the necessary physical capacity to enhance our workforce and supporting assets, and we are advancing this as quickly as possible. David can elaborate more on the situation in Montreal.
Yes, we're keenly focused on output in Montreal. For Q1, we produced 77 modules, which is in line with our plan of 100 modules per quarter on average. It's been just to recap, it's been six months since our acquisition. We acquired the facility in September, really focused on specialization as well as moving out any non-CFM56 work. We're very proud of all the work that's been done in Montreal, and we've officially now completed the specialization effort, which we're going to see significant benefits going into Q2 and the remainder of the year. Just to give you a little more color, for Q2, we're expecting between 90 to 100 modules in Montreal, and we're expecting to grow thereafter. We're very happy with all the process with the team and where we're at right now.
So, the 90 to 100 modules produced, right? As a production number?
Correct. This is production. Yes, 90 to 100, and that's just in Montreal.
Just Montreal.
Got it. Great. That's helpful. Thank you very much. And then just on insurance. You recovered $30 million this quarter, $11 million last quarter. Could you just remind us how much more you expect to recover this year versus how much was written originally and where you are in the settlement process?
Yes, thanks. We had a $30 million recovery in Q1, and we have commitments for $24 million in Q2. The remaining claims total around $100 million, and we don't have clear visibility on when those will be settled. We expect to collect more than what we wrote off related to that $100 million. Overall, we're in a good position, but that $100 million still needs to be settled, recovered, or litigated, though we anticipate collecting in excess of $54 million this year.
That's great. Great. Thank you very much.
Thanks.
Thank you. Our next question comes from the line of Brian McKenna of Citizens. Please go ahead, Brian.
Thanks. Good morning, all. It's great to see that the module factory now has over 100 customers globally. I'm curious though, is there a way to think about the usage or consumption per third-party customer on average at the module factory today and then where this ultimately goes over the next couple of years?
Well, historically, we started with about four modules per customer, and that increased to about six, and we believe it's closer to eight now, which aligns with our original expectation. Our approach has always been to encourage customers to give it a try. If they don’t find it beneficial, they can stop. However, we have discovered that customers enjoy it, leading them to engage with it again and expand its use across more of their fleet. Our aim is clear; we have some customers who have implemented 25 to 30 modules in a single year. While we aspire to attain all of their business, our target is to capture 25% of the market share. Although attaining 100% is not feasible, we do observe an increase in usage per customer, alongside a growing customer base, which is a significant advantage. As we achieve more cost savings through PMA, the margins per module will improve. The original concept was that by doubling the modules per customer, we effectively double the customer count and the margin, leading to an overall multiplication effect. It’s a powerful multiplier, which reinforces our belief in the strength of this business.
Okay. Great. That's helpful. And then maybe just a governance question for you, Joe. You're still the Chairman of the Board of FTAI Infrastructure. So do you plan on being the Chairman of FIP longer term? Or should we expect that role to transition to someone like Ken over time?
We haven't really discussed any changes. I mean, Ken and I have worked together for 20 years, and we have a great relationship. We don’t have any intention of changing that to my knowledge at this point. It's controlled by Fortress, so they could change that equation, but I don't intend to.
Yeah. Got it. That’s helpful. I'll leave it there and congrats on another great quarter.
Thanks.
Our next question comes from the line of Ken Herbert of RBC Capital Markets. Please go ahead, Ken.
Yeah. Hi. Good morning. Joe and team, thanks for the time. I wanted to maybe first ask, Joe, with all the uncertainty just not only from tariffs, but the macro backdrop, can you comment on what you've seen in lease rates on either aircraft or engines in the first quarter around either sort of absolute lease rates year-over-year and what you're seeing there? And I guess also as part of that lease extensions, which had been running incredibly high for the last few years, have you seen any softening in either of these metrics? And can you level set us on just what you're seeing there in terms of the underlying demand?
Sure. No, we haven't seen any softening. I think rates are pretty relatively stable, no deterioration and modest increases. We do see tremendous demand for extensions. When you talk to airlines, virtually every airline in the world would take a 15-year-old 737 NG if you could find it for them. The demand is very high. The number that I always watch in terms of market strength or weakness is the percentage of fleet that's in storage. So I track how many narrowbodies are stored, and a very strong market is 5%; a weaker market is 10%. It kind of tends to move between those two numbers. The last number I saw was a little bit under 5%. It’s a very strong market. You can see traffic weakness in the United States, which tends to get a disproportionate amount of headlines. United might retire some A319s, but those assets will probably go to Indonesia or the Philippines or the Middle East or 20 other places they could go. So that ultimately is good for us, because they go out of the hands of the majors into the second or third tier operators, which is usually what happens. There’s a very strong bid globally for assets, and that’s kind of the most important indicator of strength from our point of view.
That's helpful. And coming out of the first quarter, can you just remind us, either in terms of aerospace products, any discrepancies or any underlying geographic exposures we should think about? I know obviously now with the geographic footprint, it helps offset tariff risk from a delivery standpoint. But are you over-indexed to any part of the world as we think about the Aerospace Products segment?
No. We’ve been indicating over the last few quarters that we see the biggest growth in our portfolio being in Southeast Asia, but that’s just because we were underrepresented there previously. We don’t see any weakness or changes significantly. We have talked about China because originally, we thought of China as zero for us. But increasingly, we see that as potentially a big upside since China has significantly under-ordered for the last four years. To maintain their flying levels, they will need to keep older assets longer and older assets flying in China need engines, and we have the ability to do engine exchanges into China. We have the Rome facility that we just acquired, which has a CAAC license, the Chinese equivalent of the FAA. We see China as a potential wildcard on the upside.
Great. Thanks, Joe. I’ll pass the floor.
Thank you. Our next question comes from the line of Myles Walton of Wolfe Research. Please go ahead, Myles.
Thanks. Good morning. Joe, I was wondering if you could comment on the SCI ownership assets. And of the 98 you have either now owned or under MOUs, about what percentage is powered by these versus CFM56? And is that similar to the 30 aircraft you had in the first quarter?
So we currently own in the partnership about 30 aircraft, and under MOUs, it's probably 90% CFM.
Okay. And in terms of your target customer base to acquire the assets from in the $250 million for the year, can you give us some color as to airlines, lessors, other financial sponsors or buyers or owners? What's the target audience and where you're seeing the most activity?
Yes. We're sourcing from two avenues. The first is lessors, where large lessors are looking to keep their fleet young, motivated by maintaining rating agency standards for achieving investment grade. They have mandates to sell older equipment, making us a fantastic buyer. We expect that to continue for the remainder of the year. The second avenue is direct from airlines. Many airlines had expected to receive new orders. When a Tier 1 airline has tired engines that need to operate for longer, we become a source for them to offload maintenance. We've entered into numerous sale-leasebacks with airlines, where we take on maintenance. We're the only ones delivering that service, so we see tremendous opportunities coming from the sale-leaseback side, and we expect that to continue.
Okay. Got it. And maybe one for Angela. The $7 million of profit elims, is that simply your 20% stake on the $100 million of sales to the SCI or about 35% margins? And then what should we expect from the full year corporate and elims sort of contra account to total reported EBITDA?
Yes, that's correct. The $7 million elims is the intra-entity profit from $100 million in aerospace products that we're eliminating. On the corporate and other, included in that are these elims, also a little over $3 million in costs incurred this quarter related to the report, which are not included in the run rate; I would incorporate both of those items.
Okay. Got it. And last one, Joe, just to clarify. Sorry, for the question on cash flow again. Slide 9, you have two different cash flows. You've got one adjusted cash flow on one cash flow from operations less investing. When you talk about the $350 million for the first half, is that comparable to the $54 million of cash flow or the $73 million of cash flow listed on slide 9?
$73 million.
Okay. Got it. Understood. Thanks so much.
Thank you. Our next question comes from the line of Stephen Trent of Citi. Please go ahead, Stephen.
Good morning, everybody, and thanks for taking my question. The first one from me, just sort of keen to follow-up on the geographic color you mentioned Southeast Asia, and I believe in the past, you may have even been considering potential acquisitions in that region. I'm curious whether the noise from tariffs has accelerated or decelerated the extent to which you might still be looking for targets in that market. Thank you.
Sure. I believe that is an option for the long term, something we will consider. However, in the short term, we are focused on finalizing the acquisition of Rome. Our priority is to get that established and well-managed. For now, we are in a good position to serve the market from Rome efficiently. Since it has a CAC license, we can also serve China from Rome. Looking ahead a few years, if we're discussing future facilities, I would say it is likely we would target Southeast Asia.
Okay. That's super helpful, Joe. I appreciate that. And maybe just a quick accounting follow-up for Angela. When we think about the partnership you guys have the SCI from an iconic perspective longer-term, should we think about eventual equity method and inclusion of those earnings, or am I thinking about that incorrectly? Thank you.
I think you're asking, currently, we do pick up our equity income related to the SCI partnership now. If you’re asking whether we will include earnings of that going forward, it depends on materiality that we'll assess every quarter; if it meets the materiality threshold, for that equity investment, then, yes, we are required to include the earnings and assets related to that equity investment.
Yes. Yes. And if I have anything for both, maybe I'll follow-up you guys offline, but that's very helpful. Thanks very much.
I would just add on that as that business grows, the asset side of the business and management fees from that will increase. We will break that out as a separate line item once we reach a certain level of materiality, but that could become a significant source of income for us.
Thank you. I would now turn the conference back to Alan Andreini for closing remarks. Sir?
Thank you, Latif, and thank you all for participating in today's conference call. We look forward to updating you after Q2.
And this concludes today's conference call. Thank you for participating. You may now disconnect.