Good morning, and thank you all for joining us for our next East Coast Ideas Conference Presentation. Presenting is Air T, which trades on NASDAQ under the ticker symbol AIRT. Representing the company today is CEO Nick Swenson.
Thank you.
Thank you. Good to be here. It's been a nice conference so far. I'm Nick Swenson, CEO of Air T. Happy to walk you through the Air T story this morning. There's our safe harbor. What does Air T do? We are builders. We're in the business of building aviation businesses for the long term. That's why we're a public company. We like the long-term compounding nature of being a public company. We do start some businesses, and we do mostly acquire businesses in aviation. What drives it all is understanding our customers and delivering good value, good products, and services. We think there's an advantage strategically to having the right structure, the right corporate structure. We are a decentralized holding company, and we really try to apply discernment and coordinated action to make the right kind of investments that compound capabilities and capital.
Organizational design, as I mentioned, is decentralized, which means every business unit leader has the responsibility, the accountability, and the ability to lead their organization without interference from my office. We find people really respond well to that. It also means they need to live in the world and have a P&L that exists away from Air T, corporate, or any of the other businesses in our company. As our kind of motto and strategy, we develop and focus resources to activate growth and overcome challenges. That is our holding company strategy. I mentioned the dynamos and the notion of the allocator-operator partnership is very important to us as well. Here is our corporate leadership team. We have been working together for quite a long time. Some of us have 20-year tenure working together, and we think that is important. The coherence of the leadership team is important.
Here's the 11-year journey since I got a concentrated position and became CEO. We've acquired a number of businesses. We've increased our enterprise value significantly. I like to say we don't have a balance sheet that's a read-at-a-glance balance sheet, and we'll get to that later. You can see that we've been up to quite a few things in the past 11 years. Only just in the last 60 days, 90 days, have we been working on telling our story a little more broadly. Here's our flywheel. We really believe in the idea of ideas. The idea factory there is in the high noon position. We like to then match ideas that we have with capital partnerships, either with our own capital or with outside capital.
We have to secure the right dynamos to run the businesses, and then we really focus on good, strong returns on capital that will build our brand and industrious network. This is a nice list of our acquisitions. I think this is inclusive of all of our acquisitions. You can see over the years we've added quite a few aviation businesses by the nature of our network and the sourcing we can accomplish. We also have, importantly, some non-consolidated companies that are significant. That is another reason that we're complicated. We like to say, "Hey, Air T is not an easy company to understand, but we think it's worth the effort." Here's our consolidated company revenue to adjusted EBITDA for historical numbers. COVID was a tough time for our aviation businesses.
Here are the non-operating companies and what they've contributed or what the proportionate pro-rata interest that Air T claims on those look-through kind of earnings, you might say. We'll talk about these kind of separately as we go along. Here is the recent dividend receipts from those non-consolidated subsidiary or equity method companies. Cadillac Castings is one of those companies founded by the Dodge brothers 100 years ago. Industrial ductile iron foundry. We own almost 20% of it. Historically, it hasn't paid us a whole lot of dividends, but we did buy it at a very good price. Lendway is a different and separate public company. Air T and our group own 38% of it. That company acquired 81% of a tulip growing company that has significant U.S. market share in tulips. It is effectively, I like to say, a compressed golf ball. It is a public LBO.
You can look it up under LDWI. Crestone Asset Management is a very important unconsolidated subsidiary of ours. We spun a team of very experienced aircraft leasing professionals out of Contrail four years ago, and they've been building a leasing business within Air T. This is the result of their work. They have now over $500 million of aircraft leases that they manage for third-party capital providers. That is sort of that second notch on our flywheel where we partner with outside folks to manage their complicated aviation assets for them. It has been a good thing, good growth area for us. This does not run through our P&L because of the unconsolidated nature of it. This is a ChatGPT rundown of the names of the folks who are invested as LPs in the Crestone JVs, just to give you a sense.
I met with several of these folks yesterday here in Midtown. This is the relationship we have with a pension fund. A pension fund has given us non-recourse capital because they appreciate and understand the interesting deals that can be identified in the aviation space and aviation metal. They know we can, I believe they think that we can buy good quality investments in aviation assets and make a good return with downside protection. They have increased that relationship from $15 million 15 months ago. They raised it to $30 million last fall. Now, last week, we announced that they have raised their commitment to $100 million over several years. This is a look at the combined strength of the platform we have in mid-to-end-life aircraft management. We have acquired, looking at this quickly, yeah, we have acquired all these businesses over the past 10 years.
Each of them exists on their own as adults in the world with their own P&L, but they also collaborate where it makes sense. We have a very capable set of experts in various types of aviation. Aviation, a very highly engineered product, requires a lot of regulatory understanding, a lot of technical understanding. Those kind of characteristics add up to niche businesses. Air T Digital, there are two businesses in here, World ACD and Ambry Hill Technologies, each distinct and individual, each with its own leadership team. One is the world reference standard in air cargo data. We bought that business about four years ago. We have also started and invested significant cash into a startup that's called Ambry Hill Technologies that is building out an ERP system focused on MROs, maintenance, repair, and overhaul shops in aviation.
That is annual recurring revenue there that we're showing you. So nice growth. Just another look at our holding company. I would say it is true. We spent a lot of money on corporate overhead. Look at that. Wish it was being absorbed in a bigger company, and someday it will be. It certainly is bigger than it was 11 years ago. Nonetheless, we have to be watching that corporate overhead and the spending we have. We like to think that the folks that we have working with our perhaps finest auditor in the world, Deloitte, and working with all the different aspects of being a public company at that over time will mean a healthy multiple and a good investor base. We certainly have to spend to get there, but we also believe we are generating value per share by doing smart things with our capital.
Our debt, yes, it's not a read-at-a-glance balance sheet. The two pieces I would point out are the non-recourse piece and the recourse piece of our balance sheet. About half and half. We'll get into the detail here in the next slide. That's the idea is that half of our debt, in fact, more than half, is non-recourse. Our balance sheet, this is obviously available in the slide deck that's on our website, so you can read it more closely that way. It shows a multi-year balance sheet look at the end of the fiscal year from right to left, with the left column being the nearest date column. The recourse debt consists of bank debt, which is funding our working capital primarily at our ground equipment sales business, as well as a bit of term debt, and then trust preferred.
Our trust preferred is itself a listed instrument on NASDAQ under the ticker AIRTP. It is currently trading at a very attractive, in my opinion, 12% yield. We have issued most of that when it was yielding like 9%-9.5%. It is a 30-year bullet. It is a pretty nice piece of capital for Air T. Down below the recourse section, you see that Contrail, I guess I will step back, that aviation is not a capital-light industry. There is a lot of capital required to be involved, to own inventory, to deal with aviation assets. On the other hand, they do tend to hold their value or go up in value in time if you buy right. Contrail has had this year, its 25-year anniversary. They acquire engines for tear down and then sell the parts to overhaul shops. Been doing that with the same management team for 25 years.
You can see they had to take on a Main Street loan during COVID, pretty natural thing given that the whole aviation industry ground to a stop. They have since done a great job of deleveraging, and that management team is just fantastic. They do a wonderful job. Acquisition 22-1, 22.1 is related to a non-recourse acquisition financing of a business that we bought back in 2022. We have a mortgage on our corporate headquarters that is non-recourse. We have a Main Street loan for one of our subsidiaries. We have a seller note, and we have the Honeywell relationship, which is a non-recourse piece. You can see, you can think about our business and go through that balance sheet on your own.
Sorry for the important digression to try to understand this because I think people look at our EBITDA and say you've got a lot of debt, and the story is more involved than that. There's the AIRTP, the Air T preferred security. We think we're really aligned with shareholders. I own 49% of the company. Our largest independent board member owns 17% of the company, and other of our management team own 3% of our company. Super aligned. Unfortunately, that creates a small nano cap company without much free float. Hopefully that changes someday with a higher price. We're looking for the right kind of shareholders at this point. We do have a renewed emphasis on shareholder communications and interactions. We're happy to take calls from anyone at any time.
We offer on our website a Q&A section under Slido that allows us to understand what people want to know about and answer their questions in the investor deck in the next quarter. Those are the ways you can invest with Air T. Some of you might be qualified investors that can invest in our LP interests. We are also developing a possible, maybe someday endeavoring to find a way of giving people access directly to our aviation cash flowing assets directly through another security. I'll take questions at this point. There are the brand names and so forth of our companies. Yeah.
There seems to be a supply-demand imbalance in the aviation industry with more demand for planes and greater demand than Airbus and Boeing to the supply boom as quickly as that.
That's right.
How will your company benefit from that?
Yeah, that's absolutely true. Of course, I've heard it expressed as how many seats were in deficit as compared to plan and what was required. And it's like 850,000 seats divided across however many different aircraft types. Yes, there's a very good bid for parts for whole airplanes. People are flying their aircraft longer. There are also people that are doing innovative and new business models in this context, like an FTAI or a Setna that are really leaning into the acquisition of assets. This is also a bid coming through. It sort of depends on our positioning and which business you're talking about. It certainly makes this probably more sensitive to if there's a slowdown.
Like asset values are so high, it's kind of a couple of things driving it that if there's a slowdown or something, I think in a lot of ways things are priced to perfection. On the other hand, we have to do business every day. I agree very much. There's a bid out there. People are flying their aircraft longer. For example, our Jet Yard solutions business has a subsegment that tears down aircraft that are being retired. That business has not been tearing down as many aircraft. We think that will change over the coming years because they do time out. It's been a heck of a five-year period for aviation. That's no question. I would point out, I like to point out that there's an inexorable rise in the number of seat miles flown in the world.
If you want to look for a number that grows very steadily at a higher than GDP number, you know, 120% of GDP, look at the air miles flown, and you'll see a very steady growth for decades. That's sort of underpinning aviation in general. Yeah.
The software business that focuses on the MRO market.
Yeah.
Just kind of curious if there's competitors in that field and what sort of overall total market is there for that software.
Yeah, that's a great question. I'm not certain. I have some ideas about what the TAM is for that software, but I'm not going to speculate in this forum or any other forum. I do think that it's somewhat general purpose, but there are some incumbent players that are out there, and then there's some new entrants.
We're leading with a very high-quality product that's being developed by people who have been in the industry for many years. Almost everyone on the team came from the largest incumbent. They know the flaws and the more like the customers want this and the current offering doesn't have that. Let's fill in the gap there and let's modernize the software code and the base of the databases. AI, all the things that are happening out there will have definitely an impact on aviation like everything else. We think that company gives us a great position to be super relevant to customers. We have some customers who've benefited greatly by some of the automation that we've provided them. They've seen their revenues grow really, really significantly by adding some of our modules.
It's a very small business at this point, and it has a quite well-developed product, but we've been at that business for seven years now, I believe. Yeah, more to come.
What's the cohesion between all these businesses? I know it's here, but you're the guy running it.
Yeah.
I struggle with, it's a little confusing to me. There's a strategy or something.
Yeah, I'd say so. There's a lot of people. Our business is to build shareholder value and do that by making one good investment at a time. My background and other folks in our corporate office is investment management. We think like portfolio people. If I ask you, what's your cohesion between owning U.S. Steel and HEICO, you might say they're both good stocks, okay? Or whatever.
This is our attitude towards what we're doing is we're trying to make good investments one at a time. We think there's a lot super intangible, but there's a lot to be said for giving leadership teams a place to exist that has permanent nature to it, i.e., not private equity, and that gives them a long-term pathway to build their business and the incentives to do that. That's kind of an intangible thing, but we've made a few acquisitions where the founding individual has wanted to retire and he's had a secondary management team that we then could empower and allow to and give more capital to and give them a domain to grow into. There's some really interesting dynamics we think that go on.
If you're some PE firms will buy a company and then start writing the book to sell the company like literally a month later. We don't do that. We think about building for the long term. I think also the fact that you own a business creates real options. You hear about things, you understand the market better, you have a notion about going in a certain direction with a new product or acquisition. So those real options are significant, also intangible. The allocator operator model is, hey, there are businesses out there and folks who want to run them and they're very good at their business and they might generate excess cash and we help them find a place for that cash that's optimal in our world.
So what's your end game? Twenty years from now, do you want to own 49% and be CEO of simply a larger company? Or how are you thinking about that?
Yeah. I am committed to being the CEO and running this for the very long term as a holding company. I do enjoy the job very much. I think that there's a lot to be done yet. We're not looking to sell. We don't have to sell. There's no, because of the permanent capital being public nature of it, we don't need to. Compounding, proving out the model, giving, I get a lot of personal value out of helping folks, helping leadership teams be all they can be while letting them do their best within the Air T construct. I want to keep doing that, making smart investments. That's part of the fun.
We do want our shareholders to understand that we're in it for the long term, that there isn't a transaction here where we're going to unwind it or something like that. We did sell one of our businesses in the past 12 years, but that's because someone came to us and said several times we want to buy this. The leader of that business wanted to sell to that company, and they're doing great after the acquisition. We do buy and build for the long term.