MicroCap Conference. My name is Michael Mathison. I'm a senior equity analyst here with Sidoti. And it's our pleasure today to have with us Air T, Inc. Joining us is Ben Klimisch, head of FP&A for Air T, and presenting on behalf of the company will be Katrina Philp, Chief of Staff for the company. Katrina, why don't you go ahead?
Thank you, Michael, and thank you for the opportunity to present here today. We're excited to share the Air T story, and we're happy that you're here, that you've taken an interest in us. We know we're probably not the easiest company to understand, but we believe we're worth the effort. Thank you for your time. What does Air T do? Here at Air T, we invest to build aviation businesses for the long term. We start businesses, we acquire businesses, and in each of those businesses, we care deeply about delivering outstanding products and services. We believe we have our coherent strategy as a strength of ours. At the holding company, we have the ability to apply discernment and coordinated action to make investments that we believe will not only compound our capabilities, but also our capital.
Another strength that we believe that we have is our organizational design. Air T is a decentralized portfolio of businesses. Each of our businesses has their own CEO and finance lead. They operate autonomously and are responsible for their own P&L. Though each of our businesses are independent, they are interrelated and often communicate and work together when necessary. We feel it's important to make space for these business leaders. We call them our dynamos. Their localized decision-making is important to us, and we feel is the most effective way for our businesses to succeed. At the holding company, we're responsible for finding, developing, and focusing resources with a focus on activating growth and overcoming challenges. This partnership between the holding company and our businesses, the allocator and the operator, is what we call our allocator-operator partnership. This is our corporate leadership team.
Some of us have been together for coming on 20 years. So we know each other really well, and we know our strategy, and we are working hard and working in concert in order to reach the goals that we've set for ourselves. Back in 2013, early 2014, is when our CEO, Nick Swenson, accumulated a position in Air T and became CEO. This is a snapshot, two snapshots in time, one back in 12/31 of 2013 and closer to today, 12/31 of 2024. This just shows that the growth that Air T has experienced in that timeframe. We've gone from three businesses to 14, and the rest of the chart shows the growth in different metrics. This flywheel is a good picture to help illustrate what we do here at the holding company. So we have our idea factory where we identify good ideas.
We believe that ideas can come from anywhere, which is kind of the idea behind that idea factory. It could come from our business leaders. It can come from our business development team here. It can come from anyone within or outside of the company. We take those good ideas and we match them with capital partners. These are outside capital partners. This could be a bank. It could be on our own balance sheet. As I mentioned before, it's very important to us to have dynamic management teams. We secure those management teams for our businesses, and we empower them to make localized decisions. All of these things work together to theoretically generate extremely attractive returns on our capital. Generating attractive returns builds a brand for us and our companies and a network that then fuels the idea factory and brings in more good ideas.
This slide shows our portfolio. The top part of this slide shows the companies that you see listed in our revenue and EBITDA numbers and the 10-Qs and the 10-Ks. We have the websites listed for each of the businesses. They're informative websites. If you want to learn more about each individual business, those websites are a good place to start. We also have on the bottom portion of this slide our non-consolidated entities. These are our equity method of accounting entities that you don't see in that EBITDA line, but are still meaningful to the company. Here we're showing the financial trends of our consolidated companies. These are the companies that are on the top portion of the slide we just looked at. You can see the growth in revenue and the growth in EBITDA that we've experienced over the last five years.
Our non-operating assets, these are the companies that were at the bottom portion of that previous slide. Our investments that are accounted for under the equity method of accounting. The numbers that you're seeing here are Air T's share based on our ownership percentage. If you're looking at CCI , we own approximately 20% of CCI , and that's 20% of their revenue, 20% of their net income. These businesses are important to Air T because they contribute to our cash. These are the dividends we've received from these equity method investees over the last three years. The next three slides go through those three companies in a little bit more detail. Cadillac Castings , founded over 100 years ago, manufactures high-quality ductile iron castings. They support the automotive industry, agriculture, railroads, industrial, and you can see that kettlebell down in the lower left supporting the consumer fitness markets.
Air T acquired our stake back in 2019, and as I mentioned earlier, we own about 20%. Lendway is a publicly traded company. We acquired a stake in Insignia Systems. It was previously known, Lendway was previously known as Insignia Systems, ISIG. Their focus was in-store marketing. They won a couple of court cases against News Corp, which brought cash into the company. The company sold off their in-store marketing segment and switched their focus to specialty ag and finance. They did their first transaction back in February of 2024 where they acquired bloomia. Then we have Crestone Asset Management. This entity invests in commercial jet aircraft and engines on behalf of capital partners. We buy and sell jet aircraft and engines. We lease engines to lessees, and we manage those engines and aircraft to lessees.
We manage those aircraft for our portfolio and for external clients as well. This team that does this was spun out of Contrail, another one of our businesses. They were the leasing arm, and we saw the opportunity to really grow what they do. As you can see, our aircraft here, JVs, have grown significantly over the last few years. Our assets under management have grown in 2022 from under $100 million to over $500 million today. What we'd like to highlight here is that our investor partners continue to invest with us. They trust us, and they like the deals that we're presenting to them, so they continue to add capital to their investment. With this slide, we asked for help from ChatGPT. We said, "Hey, give us a description of this business." ChatGPT spit out these descriptions of our capital partners.
You can see that they're large companies who are interested in that aviation business but did not have the expertise, and our team provides that expertise for them to make those investments. Aircraft Asset Management 24-1. This is our subsidiary that we set up with the help of Honeywell so that we could invest alongside our JV partners. We like the deals that our team is putting together. They are attractive investments to us as well. We have put together this subsidiary in order to invest alongside our capital partners. The interesting thing about our platform, the thing that really draws our capital partners to us, is the full platform that we have. We have talked about Crestone Air Partners . They are the full-service aviation asset management platform. They do the leasing and the trading.
When the aircraft comes off, is in that last decade of its life cycle, and is ready to be torn down, we have the entire platform to be able to do that all in-house and monetize the metal in that way. We have Contrail, who focuses on the engines. We have Worthington that focuses on the regional aircraft, AirCo, which focuses on the airframes and the parting out of the narrow-body aircraft airframes. We have Jet Yard, which is our 80 acres in the desert. They do storage and maintenance for aircraft and have the ability to disassemble and part out those aircraft. Finally, all the way on the right, we have Landing Gear Support Services, which focuses on that high-value landing gear. In this slide, we are highlighting our corporate and other subcomponents. What you see in here is our corporate overhead.
The cost of being public, the shared services that we offer our businesses, and our business development team are all in here. You can also, in this subcomponent, see our other subsidiaries that do not cleanly fit into our segments, the commercial jet engine parts, overnight air cargo, and ground equipment sales segments. Here is our cap table. This shows our debt. You can see the top section here is the total direct and guaranteed debt. The debt that is recourse to the holding company. In the bottom portion of this, you can see our debt that is non-recourse to the holding company. For example, the debt that we have on our office building here, that is the Wolfe Lake Mortgage. It is tied to an asset, not tied to the holding company.
Things to note here, the Contrail debt, which is in the top portion of that second section, they had a tough COVID. Took on a Main Street loan at that time, but they've been working really hard to pay down their debt, and they have delivered really nicely over the last couple of years. This slide here, I know that that last slide is a tough one to look at, but this is a summary of our debt here. You can see the trust preferred makes up a good chunk of our recourse debt, and we will talk about that in a second. That AAM 24-1 Honeywell note makes up a chunk of our non-recourse debt. That is the note that supports our investments into the JVs alongside our investor partners. AIR TP. This is our preferred security, another way to invest in Air T.
It's got a $25 par value. We pay a dividend, $2 a year. We pay it quarterly. It is another way to get exposure to Air T. We would also like to highlight Air T Digital, which is another way that we support the aviation industry with our businesses at Air T. These two businesses, World ACD and Ambry Hill Technologies, provide business services, digital aviation, and other business services. World ACD is the leading air cargo data provider, and Ambry Hill Technologies has created an ERP to support the MROs and parts trading companies. These two companies together have annual recurring revenue that has grown nicely over the last few years, and we are excited to see where these two companies go from here. One thing that we would like to point out here is our commitment to shareholder alignment.
Our CEO, our board, and our senior management have put skin in the game. We've made open market purchases of shares, and you can see here that our CEO, Nick Swenson, owns 49.1%. Other board and senior management together own 20.4%. None of those numbers, none of those percentages have stock compensation included in them. They are all open market purchases of shares. You have a committed management team here, people who are committed to the success of Air T. Another metric that we're proud of is this long-term decrease in shares outstanding of approximately 22% since we took over 11 years ago. The other thing we're committed to is communicating with our shareholders. We release a quarterly investor deck shortly after our Ks and Qs are filed.
We give access to management through quarterly Q&A that you can ask questions via Slido and we answer them in those investor decks that get published quarterly. We also publish an annual shareholder letter and host an annual shareholder meeting, both virtually and in- person. How do we invest with Air T, or how do you invest with Air T? We have our common stock. We have our trust preferred that we talk about. Qualified investors can become LPs in our aircraft JVs. Also in development is giving access to individuals to aviation investments through an exchange-traded preferred. With that, I would like to open it up to questions.
Yep. I think we have four questions in the chat right now. I'll ask them out loud.
Michael's going to do that.
Oh.
Thank you.
That would help, though. Just before we get to those questions that came up, I wonder if you could quickly review the trends you see in your larger operating businesses, the overnight air cargo business, and the jet engine replacement and aircraft parts businesses.
Sure. Thank you. Our overnight air cargo has the relationship with FedEx. FedEx has been implementing their drive initiative, which they are trying to consolidate costs. We see that segment as a solutions provider to FedEx. While FedEx is trying to consolidate costs, we are also trying to find solutions for them. While that cargo is suffering a bit domestically, we have seen our aircraft count go from 70 to 105 in the last few years. We are a trusted partner to FedEx, and we are working alongside them to right-size their business as they make difficult decisions. In our commercial jets and parts segment, we are in an interesting period right now because we have large companies like FTAI, for example, who are really interested in acquiring assets and are paying prices that our guys are telling us do not make sense to them.
We're having to exercise discipline and creativity when we're looking for deals. We're looking at almost 500 deals a year and only doing a small percentage of them. We're in the single digits for our success. Our teams are being very patient when we're in this interesting market where assets are trading at really high valuations. We're having to be creative in finding parts packages and smaller packages and working on those smaller deals that some of these bigger companies aren't interested in because it's not worth their time. They're so small. The other interesting thing that's happening in that industry is where the new planes are not coming into service. Older planes are flying longer, which also means there's a shortage of parts because those planes aren't being parted out for parts.
There's a lot of different dynamics happening in that industry that our teams are dealing with head-on and doing a great job of navigating these interesting times.
Good. Thank you for that overview. Now, looking at some of the other elements of your business, of course, you have this very large portfolio that you've taken us through. Some of those investments are outside of aviation. Can you explain how that fits into your long-term strategy?
Sure. I think in order to talk about how it comes into our long-term strategy, I'd like to give you a little bit of background. Nick and a couple of other people on the management team met at a Minneapolis-based hedge fund. Nick was a portfolio manager of the Hedged High Yield Fund, and that fund was industry agnostic. I think what I like to say is we are still industry agnostic, but because of the fact that we are in the aviation industry and we have boots on the ground all over the world, those are the deals that we're seeing and hearing about. We're value investors. We're looking for value anywhere. We just see more deals in the aviation industry. We're not afraid to look into different industries. We have the experience and the ability to do that.
It's diversification for us, and it's a way to find value.
Okay. Good. Speaking of deals, you had one that was announced yesterday. One of your subs acquired Royal Aircraft Services. Could you kind of briefly explain the rationale for that as sort of an example of how you approach an acquisition?
Yes. This is a typical acquisition. This has happened a few times where we have people who have worked really hard and spent a good chunk of their lives building a business. They care about their employees, and they care about the legacy of the business. They see Air T as a good home to carry on that legacy and to take care of their employees. That is the case here with Royal Aircraft Services. The other reason that, one good thing is we are a nice home for these companies and for these employees. There is also value in that acquisition because Mountain Air Cargo and CSA Air recently, in the last year and a half, took over additional routes from another FedEx feeder. FedEx gave us additional routes that expanded us into the Northeast .
This Royal Aircraft Services has an MRO shop and a paint shop, and we use them, have been using them for the past few years to paint our planes. It is a company that we know well. Because we are expanding into the Northeast, we needed a place to maintain those planes closer to that area, which means we can maintain them for less and get them flying quicker because we are not flying them to North Carolina, for example, in order to do maintenance. That is why that acquisition made sense to us.
Interesting. So looking at sort of the breadth of the portfolio, and that's a lot of names on the slide there, and I think about your hedge fund background. When you buy into a company or acquire a company, do you see it as sort of a forever holding, or are you selling some things off again from time to time?
Yeah, that's a great question. We see it as a forever holding. We are buying companies with the expectation that we will hold them for 100 years. However, we have sold one company. There were three companies when we first got involved with Air T. One of them was a GSE equipment maintenance company. A few years ago, we got an unsolicited bid that we could not refuse. The transaction made sense for our shareholders, and it made sense for that business as well. The CEO is still there, still working with them, and we are still in contact with him, and they found a good home for that business. We will sell a business if it makes sense and is good for our shareholders. When we make an acquisition, we make it for the long term.
You mentioned that you have these companies as essentially autonomous. Maybe can you speak about then how you prioritize capital allocation to all the good ideas that must reach your desk from all these people that you hold?
Yes. It's a constant struggle because there are lots of areas that could use capital and a lot of opportunities for us to put capital to work. It's constantly looking at what makes the most sense, which investment has the best return for us, or which investments do we need to make in order to allow these companies to continue to grow and to continue to provide the services that they provide. We are asking ourselves those questions every day. Do we buy back stock? Do we invest in this company? Do we make this allocation? We have a great team of people here who do that every day.
Interesting. Now, just coming back to the points you made about sort of the replacement part business being a bit challenged, that everyone wants to keep their planes flying longer, so they need more parts, and yet there are fewer parts kind of coming off from scrapped planes. Can you talk about that and the specifics of Contrail? How are they kind of managing through this dilemma?
Yeah. Contrail is, as you saw on an earlier slide, they've been deleveraging, which means they've been doing a great job of navigating this environment. They've been able to find parts packages that they can sell through and have been selling through the inventory that they have. They've got great relationships with their partners, and they're doing the best that they can to continue to supply parts to them when they need it. They've been really scrappy over there finding inventory that they can sell through. When they have it, they do a great job of selling through that inventory. They've got a sales team of two or three people who are constantly out in the marketplace trying to find those pockets of value and looking in places where some of the bigger companies aren't looking because they're smaller deals.
Speaking of deleveraging at Contrail, do you have anything that you can disclose? I know you're limited in what you can say, but is there anything you can disclose about when they would be completely deleveraged? Do you see that as sort of a steady state where they would be debt-free thereafter?
Contrail uses bank debt to finance the transactions that they do. Contrail will purchase engines and lease them and finance that. I can't speak to what they're going to do in the future, but that is how they have financed these acquisitions in the past. They're using bank debt to make purchases of assets.
Then just matching it off, as you say. Okay. Good.
Yes, exactly.
Good. We have a couple more minutes, and we've kind of burned through the questions that came in. Great questions, by the way. Thank you, everybody.
Yes, thank you.
I wonder if you could kind of look ahead a little bit and think about markets that Air T might consider entering, things that look attractive to you given that you're sort of willing to look at things outside of aviation.
We do like the specialty ag industry. We really like the bloomia transaction that Insignia did. I think there's opportunity there that we find interesting, and it's near and dear to the hearts of the people here. That's one acquisition that was a fun one to do. We like the company and think that there's probably more opportunity there. We're not looking in any particular industry or particular segment. We've got feelers out in all places, and we're looking for value, and we are having fun looking at different companies and learning about different industries and different segments.
Interesting. Staying with that bloomia transaction, most of the flowers offered for sale here in the U.S. are actually grown overseas and then flown in. I noted that you're growing your tulips here in the U.S. I wonder about the reasoning behind that choice. Does that give you a competitive advantage? Are you a day or two fresher? Maybe you could kind of speak to that.
Yeah, certainly. We are definitely a day or two fresher. In the current environment with tariffs, that is not something that we have to be worried about, whereas other companies need to be more concerned with that. The reason that this works for us is we buy all of our bulbs from the Netherlands, and instead of flying them over, we can put them on a ship, and it can come over more slowly. Those bulbs are then grown in the United States hydroponically using robotics. The flowers are then taken from that facility and trucked to Trader Joe's and Wegmans and Whole Foods. Those flowers are a couple of days fresher. They're not coming over on a plane. It is a less expensive way to ship.
Just sort of staying with that model, all three of those retailers that you mentioned have a huge appetite for produce. Is that something that is kind of on your desk as an option to just keep expanding the specialty agriculture business?
I think all options are on the table. There are definitely other applications that the robotics can be applied to. We have not expanded today, but I mean, Lendway is a public company, and they've got their own strategic plan. If you're interested in learning more about Lendway, we'd be happy to put you in touch with the people there.
Okay. Great. We have run ourselves out of questions at a convenient time. We have just hit the 12:45 PM mark. Katrina, thank you so much. You had a lot to tell us. Great presentation. Thank you very much for joining us. Folks, if you have more questions, please get them to your Sidoti rep. We would be happy to run down answers for you. Thanks very much for joining us. Really appreciate that. Look forward to seeing you next time, everybody.
Yeah. Thank you, Michael, and thank you, everyone, for joining.