Yet Another Value Podcast - Carriage House's Will Cleary on $FTAI

Episode Date: March 9, 2026

Host Andrew Walker speaks with Will Cleary of Carriage House Fund about FTAI Aviation and its rapidly expanding jet engine aftermarket platform. Will explains how FTAI transformed from a traditional aircraft leasing company into a vertically integrated provider of engine maintenance, repair, and module swaps for commercial airlines. The discussion examines the economics of engine maintenance, why FTAI’s model reduces costs and turnaround times for airlines, and how its growing ecosystem of engines and modules creates competitive advantages. They also address the Muddy Waters short report, valuation considerations, and FTAI’s new power initiative converting retired jet engines into turbines for data centers. ___________________________________________________________[00:00:00] Andrew introduces guest Will Cleary[00:03:35] Overview of FTAI business model[00:04:05] Vertical integration into engine maintenance[00:05:58] Aviation engine supply shortage context[00:07:05] Why module swap model works[00:09:32] Cost savings from engine module swaps[00:13:58] Network effects in module ecosystem[00:17:15] Adoption by larger airline operators[00:18:41] Strategic capital initiative explained[00:22:35] Risks of off-balance sheet financing[00:25:51] Muddy Waters short report discussion[00:30:23] Evaluating short seller claims[00:32:06] Growth outlook and valuation debate[00:37:09] Framework for valuing FTAI[00:41:21] Data center power turbine initiative[00:43:20] Economics of repurposed jet engines[00:47:05] Potential index inclusion and visibility[00:48:17] Management ownership and alignmentLinks:Yet Another Value Blog - https://www.yetanothervalueblog.com See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimerProduction and editing by The Podcast Consultant - https://thepodcastconsultant.com/

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Many promotions are available both in-store and online, though some may vary. Hello and welcome to the Yet Another Value Podcast. I'm your host, Andrew Walker. Today, we've got a great episode. I've got Will Clearyon from Carriage House Fund. He will is a, I say this about everyone, but Will is a real guy, and you're going to hear this really quickly when we start diving into it. He does, he runs a concentrated value book, just the type of guy I like to talk to.

We're going to talk about FTAI today. It's got a cult following, I'd say, and also a little bit of a short interest there. But Will has done great work on there. And I think what's really going to jump out to you when you listen to this is. is I ask a question. He instantly knows the answer, and this is what I love, when someone's already, they've thought about something so much that they already know the answer to things,

and he's just pulling stats, you know, left and right, like really impressive stats, because he knows the space cold and knows the company cold. You're really going to enjoy it. You're going to learn a lot from it. I think it's awesome, and I can't wait to have Will on for the second time. So we'll get there in one second, but first word from our sponsor. This podcast is sponsored by me.

Okay, okay. It's sponsored by opposites, but it's also sponsored by me. I'm going to be doing a live webinar with AlphaSense's Director of TMT Research, Michelle Brophy, on March 10th at 1 p.m. Eastern. We're going to be talking about all things media. You know, if you're a long time follower of this podcast, you're a long time follower of the blog. You know, I love media. I love telecom. I love communication.

I love it all. So we're going to be talking about all things media. I am recording this advertisement on February 27th. We just had within the past 24 hours, Paramount Outbid Netflix for Warner Brothers. Netflix backs off. I bet you were going to be talking about it. how that reshapes the media landscape a little bit. Disney's got a new CEO. Sports rights are always in the news. Video games, remember them? Those are pretty interesting. That's evolving quickly.

What about AI content? We're going to be talking about all of it. And the best part is, it's a live webinar. So if you come join, and I'd love for you to come join and listen live, we're going to be taking questions live for listeners. So you can hear me ramble like a madman in real time if you ask the right question. So if you're interested, there'll be a link in the show notes or you know what? Go to get another value blog.com. You can find it there. Go to alpha dash sense.com Y-A-V-P. That's Alpha-Sense.com slash Y-A-V-P.

I did that off the cuff of my head. That's how much I know the referral link. So go there. You can sign up, all that sort of stuff. We'd love to have you. March 10th, 1 p.m. Eastern. And of course,

there'll be a replay if you want to catch it on replay instead. See you soon. All right, hello, and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm happy to have on for the first time.

Will, how's it going? It's going great, Andrew. Thanks again for having me. Excited to be here. Well, you've got to tell the guests. Just get it out the way. You got to tell the guest. What are you drinking?

Andrew saw me drinking a cherry Coke. And so he's making fun of me. I'm not making fun of you. This is all, I mean, you just got to let the people know. That is value bonafides when you drink the drink of the literal investing gods. So channeling my inner Buffet. I hope, I hope, you know, the returns are as commensurate. Yeah, right.

Will is from Carach House. I'm super excited to talk to him about. He does great work on stuff. So we're going to get there in one second, but first, just a reminder, nothing on this podcast is investing advice. There's a full disclaimer at the end of the podcast. So you can see that. Legal disclaimer in the show notes, all sort of that. So please remember, not investing advice to your own work.

Well, the company we're going to talk about here is FTAI, FTA aviation. This is Jacob Rubin did such a press call. I wish everyone had held on forever when he did the call because even before the spinoff, he did the call on FTA a long time. But, you know, that was a long time ago, a lot of podcasts ago. company has evolved a lot. So I'm just going to pause here and ask, what is FTAI and why are they so interesting? Yeah, look, Jacob did, by the way, do a fantastic job. The story has changed, you know, a lot. And by the way, it's a complicated story, Andrew. When you look at it on the surface, there's a lot of moving pieces. It gets more complicated by the day. You know, there's this new

aerod derivatives angle, right? I started prepping for this podcast yesterday afternoon. I had four hours blocked out and then I was like, oh boy, there's a lot more pieces and, you know, the pieces just keep moving, but that's what I've got you here on to explain it all for. Exactly. And look, so, you know, I want to focus first on like the core of FTIE's business, which is really what, you know, got us excited about it in the first place, right? So look, from a high level at its core, FTI is a leading provider of aftermarket jet engine power for the commercial aviation industry. And it has a differentiated model, right, for delivering that power that saves its customers time and money and also generates outsized profitability for FTI itself.

And all of this stems from a decision the company made, you know, really only a couple of years ago, right, where it was, in essence, this, you know, sort of run-of-the-mill jet engine lessor, an owner of those assets. And it made the decision to vertically integrate in to engine maintenance and repair. And that decision, right, that vertical integration, combining the ownership of the assets with the maintenance of the assets all under one roof created this powerful platform, right? That platform sources and acquires run out engines. It then repairs those engines in-house.

And then it offers those engines to airline customers, either for an outright sale, for lease or for exchange for a customer's run-out engine, right? And that exchange, right, which the company calls a module swap, is really what differentiates F-Tai's platform. Now, that platform is, it's growing rapidly and it's getting more powerful as it scales. It's continuing to vertically integrate, right? So it's getting more profitable. And it's also pursuing an asset light transition, such the returns on capital are inflecting in the right direction. That's perfect. Now, let me ask, there's a lot to dive into, a lot to talk about here, but I just want to

ask, I know a little bit about the aircraft space and jets and all that. And it's not balsomey that over the past two to three years, there's been this huge engine storage, right? Largely caused by, I can't remember who was having the tainted powder, what specific engine was having the tainted powder metal issues. The GTF. Yes, yes. I was having the tainted.

So it's not lost to me. Like, this stock goes on this, you know, parabolic run and returns get great. And the company says, and probably rightly so, they made a great decision to vertically integrate. But I do have to wonder, like, how much of what they're experiencing is company brilliance versus how much is industry factors? Because I kind of, I've always worried in the back of my head, like, hey, at some point, the powder metal issues probably get resolved.

And do you all of a sudden switch from, oh my God, we're super short engines to? I don't think we'd be in a glut, but all of a sudden it neutralizes. And then this company that looked brilliant, it turns out, oh, it was more industry wave than actual their brilliance, if that makes sense. Look, I think that's all very fair. And I'll touch on some of the dynamics around the supply demand and balance. But look, at its core, like, I think it's the value proposition that this module swap, you know, offering of FTIES brings compared to, like, the traditional MRO model. Right. That's what's really driving the growth here. And you can see it in the numbers. I mean, this company went from doing zero module swaps in 2020 to, you know, that business being a $1.1 billion business for them in 2024 with 5% market share.

Today, it's a $2 billion business. They have 10% market share. It's really the cost and time savings for the airline customers that are driving the adoption of this model. There is no question a component of, you know, obviously their core leasing business, right? that's sort of propped up by, you know, demand for these midlife assets. You know, I think there's been a lot of things that have been pretty well publicized about problems with the next generation of aircraft that are coming through. You know, we have the issues with the 737 max, right? You know, that's been impacting the leap engine that's on that aircraft. We've got the GTF issues.

But I think there's a really long, runway for the CFM 56, which is the core engine that F-Tai is focused on, to continue to be in circulation for quite some time. This is a prolific engine. There's 20,000 of these things out there. And although it's not a brand new platform, right, most of these engines haven't even gone through their first shop visit yet. About 40% of them haven't.

The interesting thing is, as F-Tai continues to iterate on its model and lower the cost of ownership for this asset itself, it actually elizabeth. elongates the life cycle of the CFM-56 in utilization, right? If you can save 30 or 40% of the cost of a shop visit, right, by doing this work with F-Ti as opposed to doing it through a traditional MRO, and engine maintenance is the third largest expense for an airline behind fuel and labor, right? You can own those engines for a longer period of time. It's not technological disruption that puts these things on the sidelines.

it's the economics of running them. And the economics of doing this engine maintenance and repair work through FTIE make owning that very efficient and reliable engine all the more compelling. So why does working with FTI lower the cost of engine maintenance? I think it's best to sort of give you like the textbook example that kind of bring this out together. I would love it. Yes, please. Yeah. So like imagine, well, maybe I'll go on a quick tangent.

Because I think this is important to understand sort of the engineering behind this, this specific engine that F-Ti is focused on, the CFM-56, right? What planes is this on, by the way, just so people know what types of planes is the CFM-56? Yeah. The CFM-56 is it powers all of the 737 NGs in the entire world. It powers probably 60% of the 8-320 CEOs in the world. These are narrow-body aircraft, like very prolific. This is the most prolific, like, ubiquitous engine platform maybe that's ever existed in commercial aviation history.

There's 20,000 of these things in operation, 600 different owners of these things. But what's most important about the CFM engine, it's a module engine. And what I mean by that is there are three distinct modules, the core, the fan, and the turbine that combine to create the engine itself. And each one of those things has, you know, life limited parts in it, only a certain number of cycles. So if you own this engine and one of those modules runs out of cycle time, green time, needs to go in for a shop visit. So imagine you're like a smaller mid-sized airline, Andrew. That's like the core customer for F-Tai's modular swap. You own this engine, you know, one of those modules runs out of green time needs to go in for a shop is that you cannot do this work yourself.

Okay. of the 600 people that own this engine, you know, airlines, lessors, there are five that actually have internal MRO capabilities, right? It's like Delta, Lufthansa, American, the big guys, the big operator. So your alliance is a small or mid-sized airline on this network of third-party MRO shops. You send that engine out to the shop. It'll take like a month and a half or two months just for that engine to get inducted into the shop. in the first place, right? And then it makes its way to the shop floor.

The typical MRO model is to instruct that technician to tear the entire engine down to like the piece part level, right? Remember, only one of my modules had to be repaired on it. The typical MRO model will tear that down to the nuts and bolts, the entire engine, looking for ways to expand the scope of work, right? That's how these guys make their margin. So I get my engine inducted two months, turn around times another two months, four to six months from me is that small or medium-sized airline to get my engine back.

It's going to cost me $7 million per shop visit. Compare that to the F-Tai model. F-Ti has engines that have already been refurbished and modules that have already been refurbished sitting in their inventory. They can send that smaller mid-sized airline, the module that they need, like over the overnight, right? It collapses the turnaround times to basically zero. I send you the new model, module. You take the old one off with the new one on, you're back up and running in the course of a couple of weeks versus months. But most importantly, it cuts down the cost of this maintenance

materially because first, we're addressing the problem, the module that needs repair, as opposed to allowing the work scope to creep, right? But secondly, because F-Tai is able to maintain, to repair these modules in-house, right? They can allow that smaller mid-sized airline as part of the consideration paid to them for that new module they're sending to send them their old run-out module, which they'll then repair and remark it to somebody else, right? And so, you know, four to six months goes to two to three weeks and seven million dollars goes to four and a half million bucks. So the last what I want to make here, Andrew, this was not a, novel concept, this module swap business that FTI established, right? Those larger operators with

their own internal MRO capabilities have been used for a long time themselves. But for the first time, right, this model, this module swap model was available to everybody, right? And, you know, cheaper and quicker is a pretty compelling value proposition, hence the explosive growth they've seen. That was a great. And I want to push on one. So would I be right in thinking, hey, you'd do kind of get a network effect business here, right? Because you and I, my first question was going to be, why can't everybody do the same MRO module replacement? You and I could start it up, but we don't have,

we don't have people working with us to swap the modules quickly, and that's probably important. And B, we don't have the inventory. And then once you kind of got everybody in there, if we came and we came along, we said, hey, we've got 100 modules come trade with us. I'm sure people will be interested, but our inventory would move a lot slower.

Am I thinking about it correctly that there's probably a little bit of a network effect dynamic going on now that they've kind of got it and kind of sucked up all the smaller players, or is that incorrect? No, I think it's absolutely the case, right? And by the way, these guys have been at this at a long time now. And so, like, have sort of this commanding control over the CFM ecosystem, right? I think it'd be very difficult for somebody else to come in and do this, but you're hitting on something very important, right?

Think about all the different advantages this company has, right? But if you were a traditional, like, we'll call it airline lessor, I like to think of these companies, and you know this business very well. As, you know, these are asset management businesses, right? They're leasing, but they're also buying and selling and swapping and trading, right? What value am I going to have from a runout, like, you know, singular engine module? I don't know the other two, like, right? F-Tai does because they can pick up, you know, they pick up a turbine from one person.

But they've also picked up a core from another person. And they've picked up a fan from another person. They can combine those into an engine, right? And then market that into the ecosystem. Can they really? I mean, I guess they had the turban. So yeah. Okay.

I was going to say, it'd be a little weird to me if they were just like kind of Star Wars style, like, hey, we're the Tuscan Raiders. We got a bunch of things. And now we've got a whole new airplane or something, you know? No, I hear exactly what you're saying. It's, look, they did spend at the onset a lot of money to make sure they had the feedstock to be able to do this. That's a big, you know, competitive barrier here is, okay, somebody wants to come in to this market. They're going to have to spend like the two billion

dollars of capital. F-Tai has already spent on, you know, setting up this, this, this, sort of this module ecosystem, buying that feedstock, right? So if you're a lesser, or you want to come into this business, right? Well, you also have to buy MRI, right? You have to go and find a shop that's going to be able to do this. It's hard to find labor. You're adding sort of this operational complexity to, in essence, but to financing business. If you're a traditional MRO, you know, to adopt this model FTI has, you know, established where they don't like work scope creep, right? They want to just focus on what the core problem is.

You've got to throw your old model out, right? This workscope creep model. Then, you know, you've got to figure out how to set up an asset management arm. You've got to go and buy all this feedstock. And when you're buying that feedstock in the market, guess who's bidding against that feedstock? right? It's F-Ti. And they already have this sort of structural cost advantage to, you know, to outbid you and make a whole lot more money on that engine component.

You mentioned that the larger players, the Delta Airlines, the American Airlines, already have their kind of own internal repair. So they do not use F-Tai. You know, what's really funny is early in the life cycle of the story, people thought this was just, you know, something for the small and mid-sized airlines. But as F-tie has gotten bigger, and by the way, they're very, they're very scaled now, right? They're doing 750 these module swaps a year. They're going to power the data centers now.

I think we're going to get to that too. Yeah, I mean, they're actually starting to do a lot more work with the larger airlines. Now they're becoming a better counterparty, a much more reputable counterparty for the large airlines. They've talked about this. I think on the second quarter earnings called this year, they announced, you know, for the first time, hey, we just did a big deal with one of the major carriers. So I think that, you know, cost and time savings is a pretty universal, compelling value proposition. And if it fits in with the plans of the larger operators, F ties there as a significant counterparty.

I think we've done a nice job framing the core business at this point. I have a lot of questions I want to follow up on and build off that framing. But I just want to pause here to make sure. Is there anything on kind of the core business that you want listeners to know about before I kind of dive into different aspects of the story? Well, I don't know if you're going to touch on this. I think we may touch on it, but maybe this sort of this strategic capital initiative. That would be a great one.

I think they launched at the beginning of 2025, and that's what's really taking them asset light. So why don't you start there and we can kind of build off that? You know, as I sort of talked about, right, it's this explosive growth. But, you know, to get more modules, what do you know? need to do is you to go and buy more modules using your balance sheet, you know, debt capacity to do that. F-Tai then made this very important sort of strategic decision to begin to utilize, in essence, other people's balance sheets to fuel the growth of this high-margin aerospace products module swap business, right?

So what they did, initially they went out with the expectation of raising, you know, $3 billion of private debt. right, and then they were going to acquire on-lease aircraft. Those on-lease aircraft would be owned like off-balance, cheap, non-recourse to the company, but then contractually they would have all of their services done by the module factory, by the module swap business, you know, saving those investors, you know, a lot of time on the maintenance of those assets, right? So a compelling offering there, and then combining this capability that these guys had to, you know,

you know, to purpose fit these engines, you know, 5,000 cycles here. If you need 10,000 cycles over there, it actually derrised this, this game of aircraft financing, right? You know this from your experience in the aircraft leasing business. A lot of your equity returns are embedded in that in monetizing, you know, the residual value. Not just every rental, every leasing business, it's like, you look at them, they're like, we're so good at rent. We're so good at renting. We've got such great customers like, hey, guys, I think like all of the embedded gains and losses are in how you can sell this thing. So it's a big assumption.

These guys do not have easy jobs when it comes to this. No, it's super hard. You have no idea what the market's going to look like when you go out to market and try and, you know, sell these things, right? So if you kind of just think about this, like imagine, you know, there's an airplane as a five-year, you know, lease term. and two and a half years into it, there's a major engine event. What would typically happen is that airline would be responsible for putting five years of cycles

on that engine, right? What F-Tai can do is basically say, okay, instead of putting five years of cycles on an engine, so at the end of it, you're left with a two-and-a-half-year engine, we'll module swap and give you a two-and-a-half-year purpose-built engine, right? So that's less money that, you know, you need to put up, which obviously increases your returns. And by the time that engine runs out of cycles, at the end of that lease, you know,

the residual value will be all like it'll be part out value, right? So you're in essence sort of lower capital contribution, which maximizes returns and then lower risk. I think the company always says, like, look, if you're a private debt investor, that's the quadrant you want to get into. So as a result of that, they started marketing this thing, and they upsized it from, you know, $3 billion to $6, right? They've almost deployed all of that capital. They just announced an SCI, you know, two partnerships.

So what's happening here is the leasing component of this business is getting super asset light. This is this is captive business for the high margin aerospace products segment, right? They don't have to go and try and win this market share in the marketplace. They are buying it and guaranteeing it. And then, you know, the thing begins to, you know, you have $6 billion of assets under management, then 12, you know, 350 airlines, airplanes become seven. You're one of the largest owners of narrow body, you know, airplanes in the world. So there are a lot of other benefits accrued to you.

So I think, you know, one worry, and I think this will nicely dive into some of the other things we're going to talk about, that does, it sounds wonderful. And I do think to some extent, and this can be the answer, the proof is in the returns, right? If fund one is $6 billion and then fund two is $9 or $12 billion and all the people from fund one are definitely are desperate to get into fund two, like that says a lot. But I do think there's a worry like, hey, you know, when you start saying, hey, we're going to raise third party off balance sheet money to buy these assets that are going to be dedicated, that are going to have guaranteed service and, you know, business from our high

margin, our high margin products. Like I think you start running into, hey, like this is what short sale, anytime you see a company that does this, there's going to be a short seller here. And that's why I was saying, we'll probably talk short a second, but, you know, off balance sheet, captives are things? You start saying, how are you managing those conflicts of interest? You start saying, hey, like, at some point, do you start having the urge to pull returns into one bucket or another? You know, hey, maybe we sell these at a little bit of a lower margin a little bit so that we can raise some more money over here. Or, hey, those private equity investors seem

happy with the returns, maybe shift a little more, more. And then you start saying, hey, I mean, going from zero to 700, as you said, all of a sudden, they're one of the biggest leasing firms, aircraft owners in the world. That seems to have some interesting knock on effect. So I just want to say, like, how do you think about kind of the risks and the murkiness associated with that? Look, you know, it's hard for me. First, I trust the management team. I think they're above board more broadly. You know, the second thing is, you know, obviously they are a, they're an investor in the equity of these vehicles too. So, you know, their interests are sort of aligned with the success of those vehicles. And then I think it's just like, okay, you know, if the returns are

commensurate with what they've been marketing and they're able to continue to upsize it, it sort of speaks to, you know, what's really kind of going on beneath the surface here. But could they, you know, move assets, monetize assets too quickly? I don't really see, you know, that being much different than what, you know, a traditional aircraft leasing vehicle might be doing, you know, on the books of an air cap or an air lease, for example. I think, you know, if everybody's aligned and, you know, we're trying to maximize returns, we're making the best decisions, you know, for the collective whole. Completely fair. Speaking of, you know, again, one of the first questions I always like to ask is what is the market seen that, what is the market missing that you're

seen? I think we've already addressed a lot of that, but I do want to ask, there was a high profile short report from Muddy Waters in January of 2025, which, you know, I think sent the stock down from memory from like 100 to 70. And I know a lot of my friends who are pretty thankful for that report because I think they thought it was, but I think they thought it was quite the opportunity. And hindsight has perhaps revealed it was quite the opportunity given the stock price today. But I want to ask you, money waters is probably the name and shorting. They released a detailed report. It's got a lot of concerns. It mentions hiring a former to do a lot of work on this. What did you think about the muddy water short report there? And I guess there is still short

interest in general in FTII. So what do you think kind of the shorts are looking at here? Yeah. Look, I wish you hadn't even thrown the name out because I think you're giving him like, you know, free press. I'm just kidding. No, I mean, look, it was, it was a, when I first saw the short report, I mean, it was a very pretty presentation. But like when you actually get underneath the surface, I think there was, it was a little bit intellectually lazy, you know, when you, when you break the analysis down to its core. What were the, the two core claims that that Muddy Waters was making? The first claim was, okay, the margins in the aerospace products business are fake, okay? Typical MRO businesses make 15% margins. F-Tai makes, you know, right now, you know, third,

35% margins in its aerospace products business. Why? Well, it's because they're playing games with depreciation. Okay. What they're doing is they're taking these assets that they're purchasing through their leasing business, and they're hyper depreciating them, and then transferring those assets over to the aerospace products business to inflate the margins of the aerospace products business, which is a higher multiple business, right? If you're doing some of the parts, then the leasing business. okay fine well for everybody that that's out there like this claim if you believe this claim still on the back of Ernst & Young signing off on the company's 10k in 2024 then KPMG signing off in the company's 10k in 2025 then the company on its own accord at the risk of delaying its own 10k filing hiring a forensic accounting firm to do a full investigation of these claims and coming

back with nothing, if you still believe these claims, like, okay, like more power to you, I think it gives me a lot of comfort that those things happened. But in essence, the short report was kind of talking up the competitive advantage of FTI itself. FTI can go with its leasing arm and buy these runout engines that nobody wants that are in essence fully to put. What's the depreciable life of a 15, 17-year-old engine that needs to go through a $7 million dollar shop visit before it can be attached to an engine, right, to the wing of an airplane. It's pretty low, right? This is the strength of this, you know, vertically integrated model where you can take this asset management arm going by those very, you know, low input cost components that nobody else

wants in the market and then turn them around and sell them for a tidy profit through the MRO business, right? That's the crux of it. Plus, from a depreciation perspective, you know, the lease terms are a whole lot shorter at F-time than they are at someplace like an air cap, four, five, six years versus what we're talking about at air cap, like eight, nine, ten, twelve types of years. So all of these things explain that sort of that depreciation difference. The second thing that they were claiming was, okay, well, you know, they're not really selling modules, they're selling full engines. Yes.

I'm flipping through that exact piece right now, yeah. It's like, okay. Like, who cares? Right? Like you want one module, you want two modules, you want three modules. Like, you know, it's dependent upon the airline. Okay. The other explanation for that is, uh, when you get a fully cycled engine back to you, like it's fully refurbished, there are 20,000 cycles on the core. There are 25,000 cycles on the turbine and there are 30,000 cycles on the fan. Okay. The core is the most expensive thing to repair. Okay. And obviously, you know, you have to repair that more

frequently because it only has 20,000 cycles on it. That's super interesting. When those engines come in with no core on it, most of the time the airline's like, all right, fine, do the rest of the work, right? If one of the customers wants F-Ti to sell them a core, they'll sell them a core, but most people decide, no, we're going to do like a full rest of it. So F-Ti will just give them a full engine and then take those three modules in, right? The other angle, too, this is just a one-off is F-Ti also does do work on the V-2500, which

is an engine model that is, again, a Pratt Whitney, like the, it's the predecessor to the GTF. That's not a module engine. So, anytime you swap that engine with FTI, it is a full engine swap as opposed to a module swap. But the point is, like, okay, you know, you want one module, you want two modules, you want three modules, like, who cares? So that was the Muddy Water Short Report. Perhaps I'm biased by the results, and I've got a lot of respect for what you are, was perhaps I'm hindsight biased by, you know, stock price bro.

But the thing that jumps out to me is they say, hey, we have a consultant, a former FTI executive. And the consultant that has basically says, hey, yeah, we did the MRO thing because we thought we would get a better multiple if we switched to MRO versus engine leasing. And then that's it. Like the FTI executive doesn't really at any point question any of the business model. And I was like, you have a former. And like, most time when I see a short-selling report, they're like, we have a former. He was there for four months. He left to be a whistleblower, right?

Like red flags, there's no cash in the balance sheet. The executives have like go bags packed and houses in non-extradition countries. And here it was just like, hey, we thought we could improve our multiple. And I was just always, again, it might be hindsight, fives, but I was surprised by that. Yeah. Let me ask you the second thing that I think would be interested in. you're talking and you're describing FTI as a great business at this point, right? And I think the market kind of agrees with you.

If I'm just looking at Bloomberg, I don't have my full model built out or anything here, but Bloomberg says EV right now $30 billion, EBITDA $1.5 billion. Yes, they are switching to much more asset light, but there is still a real DNA component here. But, you know, EPS $7 stock price, EPS in $226, $7 stock price right now, $27. So I might say, hey, this is great, but like, how much greater is, the market started trading and seeing this as a great business. Like, how much greater can be the business be that this is kind of a risk-adjusted alpha opportunity? Look, I mean, unequivocally, I would have loved to have been here a year or two years ago,

pitching the stock or back when Jacob was here is pitching the stock. But look, I still think that there's a ton of upside in this business. The quality of this business, like if you compare it, you know, a lot of people will say, okay, and they'll use this as, you know, a comp. It's a different business. You know this business very well, but HICO, right? Like, look, these high-quality aerospace businesses like this can trade very, very lofty multiples. HICO is a business that trades it 30 times forward EVE-a-DOT today, even though it's kind of come off a little bit over the past couple of months. This is a company that's, I mean, you know, compared to what F-Tai is doing from a growth perspective, from a

margin perspective, from a return on capital perspective, I mean, today the returns on capital are twice that of HICOs. The growth is, I don't know, more than doubled out of HICOS on a forward basis. EBITDA margins are, you know, at least, you know, 30% higher than HICOS. And then returns on capital are poised to improve very significantly. There's a ton of runway for continued growth here.

We think about what 2027 looks like versus 2026, even setting aside the contribution that this new Aero Derivatives business is going to make. I mean, this is a company that in 2026 is going to grow the modules have produced by 39 or 40% based off of their current guidance. I call it a thousand plus modules in 2026. Let's think about this SCI. This is, you know, this is captive growth that they are going to be able to deploy. If they raise $6 billion in SCI 2, okay, they can then go and buy 350 aircraft that are dedicated to the module. business. 350 aircraft, that's 700 engines. An engine comes in for, you know, a heavy shop visit

once every five years. You know, there's probably one to two modules that get swapped out, you know, every time that happens. You're basically guaranteeing just with the SCI deployment, another 25% growth in 2007 off of what they're going to do in 2026. That sets aside any, you know, contribution from organic growth from outside of the SCI. So, There is a long runway here for growth. And then what people aren't understanding is that the margins are poised to increase materially from here. If you look at consensus estimates, they're building in, you know, call it high 30% EBITDA margins. These guys have PMA coming in that's going to take, I mean, millions of dollars worth of cost savings and just pump it to the bottom line.

They have, you know, all of these initiatives they're doing with Palantir in terms of like inventory optimization, maintenance scheduling. They have a bunch of agreements for used serviceable materials, just constantly taking down the cost of maintaining these engines. I can envision this company in a couple of years, not doing 35% margins, but 45% margins, 50% margins. So you combine all these things, explosive growth, margin expansion. By the way, their balance sheet is starting to get really, really clean. So there's going to be return on capital to shareholders, right? Returns on invested capital are going to go like through the roof over the next couple of years they begin to do these SCI.

And they're going to do one of these every year, $6 billion of capital growing this asset base on somebody else's balance sheet and using that as feedstock for their high margin aerospace products business. It's a pretty amazing thing that I think deserves to trade at a much higher multiple than call it 20 times forward EBITDA. That's all on the core business. And I know we're going to talk about our derivatives. We're going to go there in one second.

I wanted to make one comment. As, you know, one thing I'm struck by is to prep, I was reading some. There's some old notes on value investors clubs.com. I'm sure most listeners heard it. And the most recent write-up, I believe, was from 2024, late 2024. The stock was 169. Somebody added the tag again. But the person said, look, this has been written up previously twice.

once at $20, and the analyst had a $94 stock price target, once at $37, and I had, you know, an $80 stock price. It's blown through both of our targets. It looks expensive on the surface, but it always looks expensive on the surface. The stock's a tremendous value. This thing's growing like crazy, and I think it's going to be worth 550 to 700 in about three years. So I just think it's interesting, like, you know, sometimes you find a great business that's got great tailwinds and a great setup.

and the number is just higher, higher, higher, higher, higher, higher. Like, think about Nvidia. I always think a friend had told me five years ago, the moment you will know AI is here is when Nvidia has a quarter that's a massive beat and all your friends are all your smartest tech friends are just buying call options on it because GPU demands going through the roof.

And like here, it kind of, it's got a rhyme to me, I guess. Look, it feels that way to us. I mean, look, the way that we think about, you know, valuation, We call it a discounted price, but it's not necessarily if the stock is trading at an optically low multiple, right, in the marketplace. This is not. I'm not here to say that it is. It's just if you extrapolate what this business is going to most likely look like in a couple of years time and discount that probabilistically back to present, is that reflected in the price of the stock on a per share basis. And I personally think, we think internally that the answer to that question is no. What do you think a fair value would be? I can put, you know, look, I think, I want to tackle sort of like the valuation component here

because I think a lot of people do this thing where it's like, okay, let's some of the parts this business, right? We've got this aerospace products business, which is, you know, deserves a high multiple, you know, like aerospace multiple, like a HICO or like a, you know, a helmet, HECL, Woodward, any of these types of businesses that traded, you know, high 20s. I mean, some of them, you know, low 30s types of forward EBITDA multiple. And then they look at the leasing business. Let's set the error derivatives business aside for a second.

Then they look at the leasing business and they apply like a leasing multiple to it, you know, eight, nine, ten, you know, times, you know, forward EBITDA. Two things that you're missing when you do that, right? The first is, look, the leasing business is becoming an asset management business. Okay. A low asset intensity, recurring revenue stream, alternative asset manager. Up until a couple of weeks ago, before we had this private credit debacle, all of which is, by the way, focused on, you know, like tech stocks, not on aerospace assets. These businesses traded it 20 to 25 times forward evita.

Okay. I can make a very good argument as to why the consolidated core business, this high quality aerospace business, plus this, you know, in essence, alternative asset manager, to collectively trade at a high multiple of forward earnings to the tune of 20, 20, 25%, and I don't think FTAI has any private software credit exposure. So, you know, probably they still deserve that more. They don't. So look, then you can start putting numbers on that, right? And I kind of talked about what I think about.

People are valuing this business off of 2027 because what we're going to talk about, this error derivatives business. But look, 2027 is going to be another explosive year of. growth. And most of that growth is if they're able to raise what they're expected to raise from this new vehicle, it's captive and guaranteed. And so you can start to extrapolate. I can see at least, you know, potentially $2 billion worth of core EBITDA from this business. And then what type of a multiple do you want to ascribe to that? I'd prefer to do it not in the some of the parts way. Andrew, that's my take. That's my take. Is it some of the parts of it? Yeah, I've kind of come around

to that point of you. Well, I've had my head beat in one too many times. So put it on, you know, put it on, you know, put it 20 times multiple on it. 20 times, you know, 20 times, there's $3 billion worth of debt on the balance sheet, right? You know, they're going to generate a billion dollars of free cash flow, which I hope doesn't accrue to the balance sheet, but theoretically it could. There's 103 million shares outstanding. That's a $385 stop for us.

Slap a 25 times multiple on that, right? And this is, by the end of 2026, this is what we're going to be looking at. Is it, you know, a company that has the potential of the core of the business to earn, you know, close to $2 billion worth of EBITDA. We're going to have to end by, we've alluded to it a few times, but we have to end by talking about, you know, Christmas came a little late for FTI shareholders. They end right at the end of 2025, they announced that they're announcing FTAI power where they're going to, I believe, well, I'll let you just describe what they're going to do and kind of what you think about the upside. Because I think it's really fascinating. And you go from one area of shortage engines to an even bigger and more important shortage.

But I'll let you describe it and stop rambling. Look, this is, I want to like full disclaimer is this is a new thing for me as an investor in the stock. So I'm like, I'm still getting smart on it myself. But in essence, what the company is going to do. We know that there's a massive shortage of power for all these data centers that are coming on the line, but there's whatever, $6 trillion of capital. It's going to be spent on building these things out in the United States. And it's very difficult to get these things plugged into the grid.

Plus, there's arguments as to whether or not they should be plugged into the grid in the first place and, you know, drive up the cost of energy for, you know, all the consumers out there. What FTI is doing is they're taking these end-of-life engines, you know, either from their own feedstock, they have owned assets on the balance sheet or they can go and buy these things. And it's different than runout engines. It's like it's part out engines, right? A lot of people talk about, okay, well, if you're taking these engines out of circulation or you're not cannibalizing an existing business, F-Tai is not buying typically part-out engines. They're buying run-out engines. The difference there is this engine is so old and it's not fit for the wing anymore. So we're going to

just take it down to the piece part level, see what we can salvage and the rest of it's basically scrap, they're going to take these engines, and they're going to turn them into turbines for data centers, gas-powered turbines for data centers. They've been working on this for, you know, call it a year and a half. And the expectation is that by 2027, they'll be able to produce about 100 of these units. These units are 25 megawatt units. They're like stackable, they're portable. Typical rule of thumb is, you know, as I've learned over the past couple of months since this announcement, is like, it's like a million dollars per megawatt. So we're talking like purchasing this is like, you know, $25 million purchase price.

They expect this new era derivatives business, the power business, to be able to generate the same type of EBITDA margin that their high margin aerospace products business does. Why? So are they going to be renting it out? They're going to rent it out. No. They are going to sell the engine to a data center.

and then they're going to use the same service model that they currently have, the module swap model, to service that through the life of that turbine, right? But it's high margin, again, for the same reason that Muddy Waters is missing, right, for the same reason that the aerospace products business margins are so high is because you're taking, you know, this basically trash, right? This stuff would be scrapped and you're adding 10 to 20 years of useful life on it. And so your input cost, right? The turbine itself is about as low as it can get in the industry.

There are people like GE, Vernova, that, you know, offer similar products into the market, but their backlogs are full, right? You can't get delivery of one of these units until, I mean, at least 2030. Well, the beauty of FTI having the input, right, the turbine already on their balance sheet and being able to, you know, procure these things in the market as well is they can deliver this, you know, by 2027. It's why it's so fascinating, right? you've got this company that owns all these engines.

And at the end of their life, I mean, as you're saying, they're basically scrap. And all of a sudden it's like, oh, they don't need to be in the air. We can just go put them into some data center in, you know, probably Northern Virginia, put them in some data center. I bet they're going to make a pretty penny on selling them. Because as you said, I think a million of meg is about right. I have no clue. But their costs of goods there has to be extremely low.

I have no clue. And then they've got a natural ability to service these things. So it's just like, it. It's just, as I was saying earlier, sometimes you've got these great companies and they just keep stumbling and stumbling and stumbling into these great businesses. Somebody had a quote, you know, I find buying great businesses easy because they just keep finding great opportunities, you know. One of the great things about owning a sports teams is just when you think there's not another thing that they can get sponsored by is, oh, it's the crypto arena now. Or, hey, we need a prediction market sponsor. Or, hey, there's a new energy drinks are our big sponsor.

now, like, there's always something new that wants to get sponsored. And here's just like, there's always some new demand for power for power from old gen engines, I suppose. Absolutely. Look, this management team is like very, very smart. And they're constantly thinking of ways to continue to monetize this platform. I mean, this is just another way. It also extends, you know, the longevity of the platform, you know, monetizing.

Yeah, as you said, sort of these end-of-life assets and adding, you know, a lot of years to their utility. Well, look, I think we've done a really nice job covering and breaking down a lot of different aspects of FTI. I would be remiss if I didn't ask, you know, is there anything else that we should have hit or anything else that people should be thinking about before we kind of wrap this up? Look, I think we've hit, Andrew, like most of the stuff here. I had a list of notes.

It looks like I had 17 different bullet points and we hit them all. Yeah, hope I didn't go too fast overall. No, I would say like, the only thing that I can think of is, I'm kind of interestingly, you know, this is becoming very quickly in a real aerospace products business, right? And, you know, they are changing their GICS classification in March, which I don't know if it ever makes any difference, but sometimes when I screen, I'll screen for like industries on these sorts of things. Everybody always gets through.

People that are missing this that are screening in the aerospace products. business because when I tell this story to folks, it's a big business, 30 billion dollar market cap type of a business. No one's ever heard of it before. You know, I will say, people always get really excited for the GICS and I'm always like, I don't know, man. I had trouble, believe me. But on the other hand, I would have told you four years ago that the European market to U.S. market relistings, I would have said, hey, like investors, if they want, hey, there's plenty of investors over in Europe and U.S. investors can go buy, buy the stock or a lot of these had ADRs.

And man, every single relisting, to my knowledge, basically works swimmingly, and all of them got huge multiple rereading. So maybe I'm being too cavalier with dismissing, like, hey, this matters. You know what else, FDI? They're $30 billion. They're going to be in the S&P 500 soon. That was the second thing I was going to mention is, look,

I don't know if it's going to happen or not. And it's like, I'm not a, you know, that type of a prognosticator. So, but just look, just watch out for it because I think, I think it's a distinct possibility. But I guess the last thing that I would say is like the alignment of the management team here, right? I mean, this guy's, the CEO, Joe Adams, who I think is spectacular and really knows more about after market engine maintenance than pretty much anybody I've come across. But this guy owns a lot of stock. He owns like about $150 million worth of stock.

When the stock goes up literally 100x, it turns out that all of a sudden you're like, oh, I'm a big equity owner now. And we're talking about alignment of incentives. I think that's a pretty good alignment of incentives. the C-O-O owns like, you know, he's, I don't know, 40 years old. He owns, you know, a good $80 million worth of stock. Actually, funny about the CEO. I think this was back in May. He used his in, you know, he was a fortress investment group, you know, managing partner

for years. I presume he has other assets outside of his ownership in F-Ti. But he used his, I think this is true. Don't quote me on it, but he used his like his $14 million lifetime, like, gift exemption in his dynasty trust to put shares of F-Tai into. Didn't put a single share of anything else into it. So he's got like, he believes in the story here. And he's certainly aligned with investors.

You know, I would also, when I was prepared for this, it wasn't, I love insider buying, obviously. And there wasn't enough where I was like screaming like here. But if you go look at the list of insider buying, I mean, again, this is after the stocks had a huge run. May 2025, all up and down the C-suite, people are buying, you know, it's just a just, quote-unquote, a couple hundred thousand shares, but people are buying November, 2025, all up and down the C-suite, with the stock at 150, people are buying stock.

You know, you go back to 2024, the CEO, you mentioned, buying five million of stocks at 82. But, like, I guess more than the insider buys, it's actually that, generally when you see a stock going up like this, you'd expect to see, like, a bunch of, in my thing, cells are red. You'd expect to see a bunch of red, and there's basically no red. It's all green or nothing, you know? So I think that speaks to kind of the conviction

and the insider alignment here, too. Absolutely. Cool. Well, Will, this has been great. People can find, I'll give you a quick plug. People can find carriagehouse LP.com. There's nothing on the website, though. The front page is very pretty, and it has the way to reach out to it.

Well, any other way people should reach out to you if they want to chat or anything? Yeah, info at Carriagehouse LP.com. I don't know much of a Twitter presence, but maybe you'll find me out there someplace. Well, it obviously does great work, and this has been a lot of fun. So, Will, thank you so much for coming on,

and I can't wait to have you on again. Thanks again, Andrew. I really appreciate it. A quick disclaimer, nothing on this podcast should be considered an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast.

Please do your own work and consult a financial advice. Thank you.