WILLIS LEASE FINANCE CORP Q1 FY2025 earnings call

• WLFC delivered strong financial performance in Q1, with total revenue $157.7M and pre-tax income $25.2M. Average utilization was 79.9% for the quarter, ending over 86%.
• Returned capital to shareholders with 4th consecutive $0.25/share dividend in April.
• Notable transactions: exercised purchase rights for 30 LEAP engines, announced new ConstantThrust deal with Air India Express, and joint venture to build engine test facility in Florida.
• Portfolio utilization grew from 76.7% at year-end 2024 to 86.4% by end of Q1, driven by deployment of purchased GTF engines.
• Spare parts and equipment sales increased due to demand for surplus material as operators extend engine portfolios.

In the first quarter, total revenue was $157.7 million. Core lease rent revenue was $67.7 million, with interest revenue of $3.9 million, driven by a portfolio size of $2.82 billion. Maintenance reserve revenues were $54.9 million, up 25% from the prior year, with $9.6 million from long-term maintenance reserve revenue and $45.3 million from short-term. Spare parts and equipment sales to third parties increased by 455% to $18.2 million. Gain on sale of leased equipment was $4.8 million, down from prior period. Maintenance service revenue was $5.6 million, slightly up.

• Confident in business model and ability to lead the sector in value creation.
• Leverage ticked lower to 3.31x in Q1 from 3.48x at year-end 2024.
• First quarter spend on sustainable aviation fuel project represents bulk of net anticipated spend in 2025, with U.K. governmental grant expected to offset portion of costs.

• Macroeconomic concerns over tariffs creating market volatility.
• Potential impact on import of parts and leasing, though currently de minimis.

Q: Is WLFC impacted by tariffs?

A: Thus far, impacts have been de minimis on import of parts and leasing. Little impact from tariffs on lease rent revenue related to China.

Q: Thoughts on existing portfolio value and lease rates if tariffs escalate?

A: Hard to predict, but expect some asset inflation; incumbent assets may see appreciation, and less expensive assets could be more attractive.

Q: Spare parts sales and engine repair vs purchase?

A: Step-up in part sales due to demand for used serviceable; decision to repair or purchase engines is based on present value analysis, often able to procure engines at better value than overhauling.

Q: Utilization rate, GTF lease rates, maintenance reserve liability?

A: GTF engines purchased late in 2024 were leased out quickly, impacting utilization. Lease rates not disclosed for competitive reasons. Maintenance reserve liability buildup relates to long-term leases, to be recognized as revenue upon engine return.

Q: Gain on sale of flight equipment and consultant fees for sustainable aviation fuel?

A: Gain on sale varies due to asset packaging; consultant fees for sustainable aviation fuel project are significant in Q1 but less material historically, with U.K. grant expected to offset portion.