Earnings call transcript: Willis Lease Q1 2025 revenue beats forecast, stock drops

Willis Lease Finance Corporation reported its Q1 2025 earnings, revealing a notable revenue increase that surpassed forecasts. The company, currently valued at $1.04 billion, missed earnings per share (EPS) expectations, which contributed to a significant stock price decline of 13.59% in pre-market trading. The reported EPS of $2.21 fell short of the forecasted $4.01, while revenue reached $157.7 million, exceeding the anticipated $142.11 million. According to InvestingPro data, the company maintains impressive gross profit margins of 91.51%, though it operates with a significant debt burden.

Key Takeaways

• Revenue for Q1 2025 was $157.7 million, a 33% increase from the previous year.
• EPS of $2.21 missed the forecasted $4.01.
• Stock price dropped by 13.59% following the earnings release.
• Portfolio utilization improved to 86.4% from 76.7%.
• The company exercised purchase rights for 30 additional LEAP engines.

Company Performance

Willis Lease Finance Corporation demonstrated strong revenue growth in Q1 2025, with a 33% increase compared to the same quarter last year, building on its impressive last-twelve-months revenue growth of 36.04%. The company attributed this growth to higher core lease rent revenue and increased maintenance reserve revenues. Portfolio utilization saw a significant boost, indicating improved operational efficiency. Despite these positive indicators, the company’s EPS fell short of expectations, impacting investor sentiment. InvestingPro analysis indicates the stock is trading slightly above its Fair Value, with 13 additional exclusive insights available to subscribers.

Financial Highlights

• Revenue: $157.7 million (33% increase YoY)
• Earnings per share: $2.21 (missed forecast of $4.01)
• Pretax income: $25.3 million
• Net income attributable to common shareholders: $15.5 million
• Core lease rent revenue: $67.7 million

Earnings vs. Forecast

Willis Lease reported an EPS of $2.21, significantly below the forecasted $4.01, representing a surprise miss of approximately 44.9%. In contrast, the company exceeded revenue expectations, reporting $157.7 million against a forecast of $142.11 million, a positive surprise of 11%.

Market Reaction

Following the earnings release, Willis Lease’s stock experienced a sharp decline of 13.59%, reflecting investor disappointment over the EPS miss. The stock’s last close was at $156.24, and has seen a considerable drop in value post-announcement, trading at a P/E ratio of 8.4x. This movement contrasts with the broader market trend, highlighting concerns specific to Willis Lease’s earnings performance. Get comprehensive valuation analysis and discover similar investment opportunities with a InvestingPro subscription, which includes detailed Pro Research Reports for over 1,400 US stocks.

Outlook & Guidance

Looking forward, Willis Lease remains confident in its business model despite economic uncertainties, including potential tariffs. The company anticipates continued demand for its leasing solutions and is focused on services and innovative solutions to drive future growth. Guidance for future quarters indicates a cautious yet optimistic outlook, with expected EPS improvements in the coming quarters.

Executive Commentary

Austin Willis, CFO, expressed confidence in the company’s resilience, stating, "We remain confident in our business model and ability to continue to lead the sector in value creation." He also highlighted the company’s strategic positioning to manage economic challenges, noting, "Our platform is remarkably well structured to manage [tariffs]."

Risks and Challenges

• Economic uncertainties, including potential tariffs, could impact asset values.
• The tight used serviceable material (USM) market may affect supply chain dynamics.
• Fluctuations in demand for leasing solutions due to macroeconomic conditions.
• Balancing engine repair versus parts sales remains a strategic focus.
• Maintaining a balanced mix of long-term and short-term leases is critical.

Q&A

During the earnings call, analysts inquired about the impact of tariffs and the company’s strategy for asset value management. Executives reassured minimal direct impact from current tariffs and emphasized their focus on balancing engine repair with parts sales to optimize revenue streams.

Full transcript - Willis Lease Finance Corporation (WLFC) Q1 2025:

Conference Operator: Day, and welcome to the Willis Lease Financial Corporation First Quarter twenty twenty five Earnings Call. Today’s conference is being recorded. We would like to remind you that during this conference call, management will be making forward looking statements, including statements regarding our expectations related to financial guidance, outlook for the company and our expected investment and growth initiatives. Please note that these forward looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect WLFC’s views only as of today.

They should not be relied upon as representative of views as many as of any subsequent date, and WLFC undertakes no obligation to revise or publicly release the results of any revision to these forward looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risks and other important factors that could affect WLFC’s financial results, please refer to its filings with the SEC, including, without limitation, WLFC’s most recent quarterly report on Form 10 Q, annual report on Form 10 ks and other periodic reports, which are available on the Investor Relations section of WLC’s website at httpshttps:www.wlfc.globalinvestorrelations. At this time, I’d like to turn the conference over to Austin Willis, Chief Financial Officer. Please go ahead.

Austin Willis, Chief Financial Officer, Willis Lease Financial Corporation: Thank you, operator, and thank you all for joining us. On our call today, I am joined by Scott Flaherty, our Chief Financial Officer and Brian Hull, our President. In our first quarter, WLFC continued to deliver strong financial performance underpinned by the growth of our core leasing business. While average utilization for the quarter was 79.9, we ended the quarter at over 86%, evidencing our ability to produce revenue from off lease engine purchases in a timely manner. For the first quarter, our total revenue was $157,700,000 and pretax income was $25,200,000 Our performance has enabled us to return capital to our shareholders while meaningfully expanding our business.

And in April, we paid our fourth consecutive quarterly dividend of $0.25 per share. In a moment, Scott will provide more detail on our results. Following a transformative 2024, we were off to a strong start to the year, particularly as our differentiated flywheel business model enables us to generate premium returns. The macroeconomic concerns over tariffs have created market volatility, but the drivers of our business over the long term remain unchanged. The cost of new engines continues to drive operators towards leasing, and our maintenance capabilities and programs aid cost conscious airlines who would prefer to focus on flying passengers rather than engine maintenance planning.

We remain confident in our business model and ability to continue to lead the sector in value creation. To that end, I want to highlight three notable transactions announced during the quarter that advance our strategy to provide efficient solutions to airlines. For those of you on the webcast, we have some accompanying slides. First, in February, we announced that we would exercise purchase rights to buy 30 additional LEAP engines from CFM International, a joint venture between GE Aerospace and Safran Aircraft Engines. The purchase includes LEAP one a engines for the Airbus a three twenty neo family of aircraft and LEAP one b engines for the Boeing seven thirty seven max.

These engines represent an important investment that will enable us to provide additional support to operators of these popular engines and aircraft. This purchase aligns with our vision to pioneer services and solutions that drive more sustainable operations and is consistent with our historical strategy of always having the most in demand assets for our customers. Second, in March, we announced a new constant thrust deal with Air India Express for CSM 56 dash seven b engines expected to close in the second quarter, which further builds on our existing partnership with Air India that began with our first transaction back in 2022. To reiterate, constant thrust is a product we created over a decade ago in which we do a sale and leaseback on an airline’s fleet of aircraft or engines. And when an engine becomes unserviceable, we replace it with another from our fleet, managing the unserviceable engine through our maintenance and services businesses.

The downtime for an airline is as little as one day, which delivers a level of efficiency and cost savings unobtainable through traditional maintenance or leasing arrangements. We value our partnership with Air India and believe that their decision to engage in another constant thrust deal with us is indicative of the value that it provides operators compared with alternatives. As discussed on our fourth quarter twenty twenty four earnings call, we believe constant thrust will attract heightened demand as airlines look to transition from legacy fleets into neo and max aircraft. We look forward to continuing to support the growth of the Indian aviation industry and providing innovative solutions to our global customers. And third, in March, we announced a joint venture to build an engine test facility in West Palm Beach, Florida to address the shortage of similar facilities in North America.

The shortage of adequate testing capacity is causing a logjam in the industry, constraining throughput and slowing engine repair turn times. This collaboration with Global Engine Maintenance and Engine MRO will allow us to test our engines, our customers’ engines, GEM’s customers’ engines, as well as third parties who want us to test engines for them. By combining our engine testing needs with that of another MRO, we can offset much of the cost with the base load provided by the shareholders and seek additional income by offering the service to third parties. The test cell will initially focus on c f m 56 dash five b and seven b engines, but will have the capability to test more modern variants in the future with flight modification. Finally, I want to reiterate the strength and expertise of our team as the aviation industry grapples with ongoing macroeconomic uncertainty.

Demand for our products and services remains robust, both domestically and abroad. However, as always, we are prepared for the changes that could come as a result of the volatility experienced over the previous few months. The tariffs present challenges as well as opportunities. We have operated through multiple economic cycles and industry disrupting events in our forty five plus years of operation, and we stand prepared to respond as necessary. Our deep understanding of our customers’ needs and the assets we manage will put us in the best position to prosper in any environment we face going forward.

And with that, I’ll hand it over to Scott Flaherty, our CFO, to discuss our financial performance in greater depth.

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: Thank you, Austin, and good morning all. As you can see from our P and L, we are off to a good start in 2025. Q1 produced record quarterly revenues of 157,700,000.0 driving 25,300,000.0 of earnings before taxes or EBT. Our consolidated revenues of $157,700,000.0 were up 33% from the comparable quarter in 2024 and were driven by our core lease rent revenue and maintenance reserve revenues, which were further enhanced by our vertically integrated services business. Walking through the p and l, as it relates to revenue, core lease rent revenue for the quarter was 67,700,000.0 and interest revenue was 3,900,000.0, which reflects interest income on long term loan like financings.

Growth in these line items primarily reflects our increased total portfolio size of 2,820,000,000.00 as of March 31. Our total owned portfolio is reflected on our balance sheet as equipment held for operating lease, maintenance rights, notes receivable, and investment in sales type leases. We have seen portfolio utilization grow from 76.7% at year end twenty twenty four to 86.4% by the end of q one, an almost 10 pickup as we were able to quickly deploy onto lease our December 2024 purchase of nine GTF engines from Pratt and Whitney. Additionally, we continue to see a solid average lease rate factor across the portfolio of one point o percent. Maintenance reserve revenues for the quarter were 54,900,000.0, up 11,000,000 or 25 percent from the comparable quarter in 2024.

As you peel back the numbers, you can see that 9,600,000.0 of these maintenance reserve revenues were long term maintenance reserve revenue associated with engines coming off lease and the associated elimination of any maintenance reserve liabilities. 7,700,000 of the 9,600,000.0 related to an end of lease payment for which the company has subsequently been paid by a Chinese based lessee customer. 45,300,000.0 of our maintenance reserve revenues were short term maintenance reserves compared to 37,600,000.0 in the prior comparable period. This increase in short term maintenance reserve revenue was influenced by an increase in the number of engines on short term lease conditions and the systematic contractual increase in the hourly and cyclical usage rates on our engine. And to a lesser extent, in this quarter, the timing of revenue recognition of in substance fixed payments.

Fair parts and equipment sales to third parties increased by 15,000,000 or 455% to 18,200,000.0 in q one twenty twenty five compared to 3.3 million in the comparable quarter. This increase was driven by the demand for surplus material that we are seeing as operators extend the lives of their current generation engine portfolios. In addition, there was a discrete 7,000,000 sale in the quarter as well as 2,200,000.0 of equipment sales for which there were none in the comparable period. WASI, our spare parts business, provides a valuable outlet for the company to recognize residual values on our engine portfolio while also providing feedstock for our and our customers’ fleets in a tight parts market. The recycling of these spare parts often occurs at one of our two engine MRO facilities, which are located in Coconut Creek, Florida and Bridgend, Wales.

Gain on sale of leased equipment together with our gain on sale of financial assets, a net revenue metric, aggregated to 4,800,000.0 in the first quarter, down slightly from 9.2 in the comparable period. This gain was associated with gross equipment sales of 49,800,000.0, representing an effective 10% margin on such sales. Our trading activity tends to be lumpy and varies from quarter to quarter due to the nature of the business. Trading is an important part of the business and keeps our portfolio relevant. Maintenance service revenue, which represents fleet management, engine and aircraft storage and repair services, and revenues related to management of fixed base operator services, was 5,600,000.0 in the first quarter, up slightly from the comparable period in 2024.

Gross margins came in at 5% as we are still in the build out stages of our fixed based operator services business, which influences our aggregate margins. We believe that our maintenance service offerings both enhance and create lease opportunities for the business and provide further vertical integration supporting the full life cycle of the company’s assets. On the expense side of the equation, depreciation in the first quarter was up 11.3% to 25,000,000 for the quarter as we increased the portfolio size as well as put new engines on lease, which starts their depreciation through our p and l. Write down of equipment was 2,100,000.0 for the quarter, which represented an impairment on five engines, which were all moved to held for sale. G and a was 47,700,000 in the first quarter compared to 29,600,000.0 in the comparable period in 2024.

Increases in the overall G and A spend were mainly related to 11,400,000.0 in consultant related fees, which are predominantly related to the company’s sustainable aviation fuel project. Given the stage of this project’s development, GAAP dictates that these costs are expensed rather than capitalized. The company has been awarded a UK governmental grant, which will ultimately offset a portion of these charges, but such grant will not be recognized until cash is received. We anticipate that first quarter spend, which represents licensing and engineering fees, represents the bulk of our net anticipated spend inclusive of grant in 2025. In addition, there was 6,900,000.0 of share based compensation, which was influenced by the rise in the company’s share price relative to q one twenty twenty four and represented a 3,100,000.0 increase from the comparable period.

And approximately 1,200,000.0 of wage increases due to additional headcount and general salary escalation as we grow the footprint of the overall business. Technical expense was 6,200,000.0 in the first quarter, slightly down from 8,300,000.0 in the comparable period in 2024. Technical expense generally relates to unplanned maintenance, whereas engine performance restorations tend to be planned capitalized events. Net finance costs were 32,100,000.0 in the first quarter compared to 23,000,000 in the comparable period in 2024. The increase in costs was related to an increase in indebtedness as total debt obligations increased from 1,700,000,000.0 at March 2024 to 2,200,000,000.0 at March 2025, as well as an increase in the quarterly weighted average cost of debt, inclusive of our interest rate hedge positions, which rose from 4.56 in q one twenty twenty four to 6.16 in q one twenty twenty five.

The company also picked up 1,400,000.0 in ratable earnings from our 50% ownership interest in our Willis Mitsui and Casix Willis joint ventures. The company produced 15,500,000.0 of net income attributable to common shareholders, which factors in GAAP taxes and the cost of our preferred equity. Diluted weighted average income per share was $2.21 in q one twenty twenty five. Net cash provided by operating activities was 41,000,000 in the first quarter of twenty twenty five as compared to 59,800,000.0 in the first quarter of twenty twenty four. The decrease was predominantly related to working capital, where relative changes in accounts payable had a significant influence on the net cash provided by operating activities.

Adjusting for working capital or changes in assets and liabilities, net cash provided by operating activities was 13,000,000 higher in the first quarter of twenty twenty five than in the comparable period in 2024. On the financing and capital structure side of the business, the company completed its fourth and fifth JELCO financings in the first quarter, bringing total JELCO financings at quarter end to approximately a hundred and 5,000,000. Subsequent to quarter end, the company completed its sixth JELCO, bringing our total JELCO financings to a hundred and 25,000,000. We regularly access the capital markets as we endeavor to source competitively priced capital to continue to grow our balance sheet and p and l. In February of the first quarter, we paid our third regular quarterly dividend of 25¢ per share.

Subsequent to quarter end, we declared our fourth consecutive regular quarterly dividend, which is expected to be paid on 05/22/2025 to stockholders of record at the close of business on 05/12/2025. We believe that our ability to pay a recurring dividend speaks to the health of the business and provides our shareholders with a moderate current cash yield on their investment while not degrading the strong cash flow characteristics and equity growth of the business, which supports our overall growth. With respect to leverage as defined as total debt obligations, net of cash and restricted cash to equity, inclusive of preferred stock, our leverage ticked lower to 3.31 times as compared to 3.48 times at year end twenty twenty four. We mentioned with our annual results that our leverage had climbed in the fourth quarter as we took advantage of some year end asset purchase opportunities, and we have now been able to start to work that leverage back down in the first quarter. With that, I will now open the call to questions.

Operator?

Conference Operator: Thank you. Once again, that is star one to signal for a question, and we’ll pause just briefly to assemble our queue. And we’ll take our first question from Hilary Takananda with Deutsche Bank.

Hilary Takananda, Analyst, Deutsche Bank: I just wanted to find out if you’re impacted any way by like, direct impact directly impacted by tariffs. You know? I I guess I I wasn’t sure if you, you know, if you import any, like, parts or any any materials from overseas for your, you know, maintenance services or anything like that if if you will be impacted directly. Thank you.

Executive (likely Austin Willis), Willis Lease Financial Corporation: Thanks, Hillary. So thus far, our impacts have really been de minimis, both on the import side of parts as well as on the leasing side. You got to remember, a lot of our business, at least with our MROs, the parts come from our own parts capability. So we really haven’t seen too much of an impact there yet. And on the leasing side, by and large, we really haven’t seen very much of an impact.

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: There is a little

Executive (likely Austin Willis), Willis Lease Financial Corporation: bit of noise around China early on with respect to the implication of tariffs on lease rent revenue, but it looks like that has largely gone away. So things are pretty much business as usual.

Hilary Takananda, Analyst, Deutsche Bank: Okay. So not not not not too much. I mean, so pretty much, I guess, minimal minimal impact. Okay. Great.

And then I just wanted to get your thoughts on what happens to the value of your existing portfolio in terms of market values and lease rates if if tariffs, let’s say, escalate with, you know, with Europe, let’s say, ninety days. I would think that newer aircraft gets expensive, so, you know, older maybe older asset values and lease rates go up, but then I don’t know what would happen to the demand side and, like, then what the, you know, demand for travel, let’s say, or for aircraft. So, like, what the net impact would be on the existing assets. So just kinda wanted to

Luis Raffetto, Analyst, Wolfe Research: get your thoughts on what you think the market values on these rates will be for older, you know, maybe, like, you know, your existing portfolio.

Executive (likely Austin Willis), Willis Lease Financial Corporation: Sure. So, you know, it’s hard to tell. I mean, the reality is trying to trying to look at what the future looks like at this point is is really nothing more than than pure speculation. That being said, I don’t think it’s unreasonable to expect some degree of asset inflation with our existing portfolio. Think when engines coming out of the OEMs are likely to be a bit more expensive because of the tariffs that they incur, I think that will drive up values elsewhere.

And exactly to your point, I think there’s a reasonable case to be said that incumbent assets, in particular jurisdictions, are likely to see some level of appreciation as well because obviously they be subject to cross border tariffs, should reciprocals be put in place. And then finally, I think there’s a scenario where less expensive assets could be more attractive even if they do cross borders just by the nature of the tariff being a percentage on value.

Hilary Takananda, Analyst, Deutsche Bank: Got it. Great. Thank you very much. Very helpful.

Austin Willis, Chief Financial Officer, Willis Lease Financial Corporation: No problem.

Conference Operator: We move next to Luis Raffetto with Wolfe Research. Please go ahead.

Luis Raffetto, Analyst, Wolfe Research: Hey, good morning.

Executive (likely Austin Willis), Willis Lease Financial Corporation: Good morning, Louis. It was

Luis Raffetto, Analyst, Wolfe Research: a nice step up in the spare parts sales. I guess, maybe you can say, what are you seeing in the USM market? It’s been tight for the right assets for a long time, I guess. And many engines were being repaired as opposed to being torn down. Are you seeing a shift there?

And how are you balancing the decision to either repair an engine or tear it down?

Executive (likely Austin Willis), Willis Lease Financial Corporation: Yes. So a lot of the step up in part sales from the from our parts business was due to a large transaction that we had where we purchased a portfolio of parts and then subsequently sold them back to back. But even taking that into account, we still did have a pretty good step up in part sales. And I think that is symbolic of the overall demand for used serviceable now and we expect that to continue for the foreseeable future. As we think about repairing engines ourselves, we run a process.

Whenever one of our engines becomes unserviceable, we look at do we part it out and what does fix that engine? And what’s the present value based upon that? And then we’ll also solicit bids from the third party market as to determine what that would get in cash for us right now. And ultimately, we look at the three scenarios and just do a present value analysis. And then finally, we also look at does it make sense to repair engines versus what we can purchase engines for out on the market.

And historically, you know, we’ve been pretty darn good at spot market trading. So in many cases, we can actually procure engines on a better value on a cost per cycle basis than one can overhauling them.

Luis Raffetto, Analyst, Wolfe Research: Alright. Great. Appreciate that. Maybe just two quick clarification questions. The the one engine that was sold out of the sort of spare parts and equipment, I’ll call it portfolio versus the leased engine portfolio, just how like, what’s the differentiation between those?

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: I think are you referring to the are you referring to the spare parts? Yeah. The seven the $7,000,000 of of of spare parts?

Luis Raffetto, Analyst, Wolfe Research: I know it it just in that paragraph, it said Yeah.

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: Sure. So what what you probably sure. What you probably saw is if you look at the line item of our financials, it’s spare parts and equipment sales. Right? So in the comparable period, we did not have any equipment sales.

And what equipment sales are is really effectively like a a trading. So it’s not a lease asset, not an asset that was on lease. It’s an engine or piece of equipment that we bought and ultimately sold and without having it in a lease portfolio. So really, what you saw in the quarter was a $2,000,000 step up in that one line item specifically related to that.

Conference Operator: Our next question or comment comes from the line of Will Waller with M3. Please go ahead.

Luis Raffetto, Analyst, Wolfe Research: Yeah. I just had

Will Waller, Analyst, M3: a couple of questions regarding the utilization rate. It was stated in the press release, it was 76.7% at the end of the year of, 2024. You mentioned the average, if I heard it right, was 79.9% for the quarter, and then the quarter ended at 86.4%. Is it safe to assume that the GTF engines that that affected that at the end of the year weren’t leased out until pretty close to the end of the first first quarter based on sort of what the average utilization rate was?

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: Yeah. No. I I hey, Will. How are doing? That that is a good that is a good assumption.

Right? So I think that if you kinda go back and look, like like you said, or we talk about quite often average utilization. And then if you also look at the actual at period ends, at the end of the year, we were at 76.67% utilization at the end of Q4, and now we’re at eighty six point four And a lot of that was related to some of the GTFs that we picked up late in the fourth quarter. And then over time, we’ve got that portfolio on to lease. And you’re right, They all didn’t go on lease at one point in time.

And some of those went on lease even late into the month of March.

Will Waller, Analyst, M3: And what is the going rate for, say, a GTF or a LEAP in today’s market? And how does that compare with, say, six months ago?

Executive (likely Austin Willis), Willis Lease Financial Corporation: So, Will, I I I appreciate the question, but I hope you appreciate for for competitive reasons. We’re we’re not gonna get into specific lease rates on assets.

Will Waller, Analyst, M3: Okay. And then as it relates to the long term maintenance revenues, you kind of walked through a number of numbers, and I might have heard something wrong. But there was 7,000,000 related to a Chinese airline where some engines came back off a lease. Was that during the quarter or after the quarter end?

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: Sure. So so that was a so what that was was in in end of in end of lease, so long term long term related. And that was recognized in the quarter, and cash is cash was received subsequent to quarter end.

Will Waller, Analyst, M3: Okay. Sounds good. So that but it was counted in the long term maintenance revenue for the first quarter, that 7,000,000?

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: Sure. It’s revenue recognition. Correct.

Will Waller, Analyst, M3: Okay. Perfect. And then when I look at the liability, the maintenance reserve liability, it grew from year end 97,800,000.0 to about a hundred and 4 point 5 million at the end of the first quarter. So that’s sort of the additional buildup that’s occurring where you’re having, you know, there’s some probable lease extensions that are going on and so on, but that’s where the buildup is. And then, eventually, that’s what will become revenue once the engines are returned.

Correct?

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: Correct.

Will Waller, Analyst, M3: Okay. So in a sense, that 104,450,000.00 that’s in that maintenance reserve liability, Basically, that is the revenue associated with the the long term leases that just haven’t been recognized as income yet. Correct? And then it it will be recognized once the engines are returned similar to the seven that the Chinese airline returned.

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: Sure. So so think about it like this, Will. Like, the short term component are the monthly the monthly payments that we are getting from the operators for their usage, and those are not those are not maintenance reserves. They’re they’re we would never have to give those back. Right?

So those are those are the monthly payments. The long term are the payments that come either at the end of a lease or the payments that we’ve received over the life of the lease that are the payments that are the balance that you see on the balance sheet. And at the end of the lease, where the operator chooses not to shop visit that engine and return it in the condition in which it was provided to them, they give us the engine back in its current state, and then we release those maintenance reserves and recognize them as revenues.

Will Waller, Analyst, M3: Okay. Great. So those are sort of buildings. So in a way, when we’re looking at things, if there are lease extensions going on, which it sounds like in the industry, there’s there’s a lot of lot higher than normal lease extensions going on, then you’re just gonna always kinda have a a much higher number that’s being deferred and and not being recognized as revenue. Whereas if it was a short term lease, you’d be recognizing that all along sort of all the way along the life of the lease.

It wouldn’t be one lump sum at the end.

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: That’s correct.

Will Waller, Analyst, M3: Okay. And what what you know, the the utilization, rate changed a decent amount. I think, historically, dating back three or six months ago, the last time that you disclosed that about 53% of your leases were long term leases, 47% were short term leases. What is that mix at the end of the first quarter?

Executive (likely Austin Willis), Willis Lease Financial Corporation: Yes. So the mix is pretty similar. We usually keep it in the neighborhood of fifty-fifty. And that short term lease capability is really one of the drivers that differentiates us and enables us to do what we do both on the programmatic side as well as the trading side, because that gives us the real time information on what assets are worth, so we can go out and speculatively buy them and put them out on lease. And a good example of that is with some of the assets we purchased off lease at the end of the year, without having that real time information, you’re not going to be as certain about your ability to get those assets to produce revenue.

And that’s why we’re able to get those assets on lease quickly.

Will Waller, Analyst, M3: Great. Thanks a lot. I appreciate it.

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: Thanks Will. Thanks Will.

Conference Operator: We’ll go next to Eric Greig with forty three Island Advisory.

Eric Greig, Analyst, Four Tree Island Advisory: That’s four Tree Island Advisory, but thank you. Great job on the lease rent revenue and maintenance reserve revenue growth this quarter, gentlemen. A few questions first for Scott and then one to finish up with you, Austin. The average quarterly gain on sale of flight equipment in 2024 was about $11,300,000 This quarter was less than $5,000,000 In such a strong environment, just curious why the quarter was much lower than what you’ve been averaging the last four quarters and and how you’re thinking about likely, you know, gains on sale flight equipment in in the coming quarters for for 2025.

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: Sure. Yeah. Eric, it’s it’s always it’s hard to predict, and it’s hard to time exactly the trading component. But we continue to see significant value in the portfolio. And as we’ve talked about in the past, above and beyond the book value.

So it really depends on how we package in any period assets that we are selling. So I think that we would really look to a consistent type margin over the longer term, and I wouldn’t judge any one specific period to dictate a longer term margin.

Eric Greig, Analyst, Four Tree Island Advisory: Okay. Alright. Moving moving on to the consultant related fees. The way the press release reads, it says the increase in consultant related fees predominantly related to the company’s sustainable aviation fuel project. If this was an increase, is that an 1144% increase up what baseline in the prior year?

Is it off of zero, or is it off of some kinda normal, you know, kinda consultant fees that are going out the door every quarter? I didn’t find much in historical, you know, notes in the financials to be able to determine that.

Scott Flaherty, Chief Financial Officer, Willis Lease Financial Corporation: Yeah. So so I I would say, you know, we we we, you know, we we don’t always disaggregate that. Right? But but it’s it’s a lot less material than than the aggregate that you’re seeing there, and that’s why we specifically highlighted that kind of given given the fact that it it does jump out in that one period. Yes.

And if I can add

Executive (likely Austin Willis), Willis Lease Financial Corporation: to what Scott’s saying sorry, just to jump in. The amounts that we’ve experienced historically are pretty immaterial. The amounts that we’re spending right now that we’ve spent in this first quarter really represent the lion’s share of what we expect the expense to be for this year.

Eric Greig, Analyst, Four Tree Island Advisory: And you’re saying lion’s share based on the the credits you expect to get back from the UK government or whatever body that is, on a net basis. Correct?

Executive (likely Austin Willis), Willis Lease Financial Corporation: Well, we do expect to get a fair amount back from the UK government when they pay us, over the the next two quarters.

Eric Greig, Analyst, Four Tree Island Advisory: Yep. Okay. Great. And then, finally, this last question is for you, Austin. If this is a high level question, but if you look back to year end 2022 and and go out to year end 2024 where all this data is available, the the owned number of engines that Willis has is up about 4%.

The managed engine count is actually down, you know, over 14%. But the number of employees is actually up about 60%. The question is this, with an asset base in terms of number of assets that hasn’t grown much over the last few years, why is it necessary to have 60% more employees?

Executive (likely Austin Willis), Willis Lease Financial Corporation: Thanks. So, yeah, I mean, if you look at our portfolio by and large, it’s considerably larger than it was in 2022. But I get your point on the quantity of assets being owned and managed. A lot of the growth that you’re seeing in on the G and A side and headcount is really a function of the people that we have in our services businesses. So leasing has grown somewhat commensurate, but to a lesser extent than the growth in our balance sheet.

But we have grown as we have built out our engine MRO Work U. S. In Florida, our engine MRO in The UK, and our aircraft MRO in T side in The UK as well. So that’s the predominant factor.

Conference Operator: And at this time, we have no further signals. I’ll turn the floor back to our speakers for any additional or closing remarks.

Executive (likely Austin Willis), Willis Lease Financial Corporation: Yes. I’ll make one last closing remark. Just to say, we certainly don’t know what the landscape of tariffs is going to look like going forward. But I will say that our platform is remarkably well structured to manage it because we do have the ability to manage and service our assets through our 145 repair stations, both in The U. S.

And The UK, which will work well in the event that the world does become more of a bifurcated system where assets tend to live their lives more in particular regions. So I just wanted to quickly mention that and thank everybody for taking the time to be with us today.

Conference Operator: This concludes today’s conference. We thank you for your participation. You may disconnect at this time.

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