WLFC Willis Lease Finance Corporation

Willis Lease Finance Corporation (NASDAQ: WLFC) (“WLFC”) today reported record first quarter total revenues of $119.1 million and record quarterly pre-tax income of $29.9 million. For the three months ended March 31, 2024, aggregate, core lease rent and maintenance reserve revenues were at an all-time high of $96.8 million, up 26% as compared to $76.7 million in 2023. The growth was predominantly driven by core, recurring lease and maintenance revenues associated with a strong, resurging aviation marketplace, and airlines leveraging our leasing, parts and maintenance capabilities in order to avoid protracted engine shop visits.

“Having developed our 145 maintenance and exchange capabilities over the past few years, we have become the partner of choice for airlines looking to avoid or outsource maintenance risk,” said Austin C. Willis, Chief Executive Officer of WLFC. “This strategy has proven effective, particularly in our supply chain constrained environment.”

“The Company performed well in the first quarter of 2024 and is benefiting from the continued maturation of our strategy,” said Brian R. Hole, President of WLFC.

First Quarter 2024 Highlights (at or for the period ended March 31, 2024, as compared to March 31, 2023 and December 31, 2023):

• Lease rent revenue of $52.9 million in the first quarter of 2024 was in-line with lease rent revenue of $53.2 million in the first quarter of 2023. During the three months ended March 31, 2024, we purchased equipment (including capitalized costs) totaling $62.8 million, which consisted of two aircraft and four engines and other parts and equipment purchased for our lease portfolio. During the three months ended March 31, 2023, we purchased equipment (including capitalized costs) totaling $55.7 million, which consisted of five engines and other parts and equipment purchased for our lease portfolio.
• Maintenance reserve revenue was $43.9 million in the first quarter of 2024, an increase of 86.7%, compared to $23.5 million in the same quarter of 2023, reflecting the high level of usage of our assets by our customer base. Engines on lease with “non-reimbursable” usage fees generated $37.6 million of short-term maintenance revenues in 2024, compared to $23.5 million in the prior year. There was $6.3 million of long-term maintenance revenue recognized in the three months ended March 31, 2024, compared to no long-term maintenance revenue recognized for the three months ended March 31, 2023. As of March 31, 2024 and March 31, 2023, there were $26.7 million and $13.7 million, respectively, of deferred in-substance fixed payment use fees included in Unearned revenue associated with engines on short-term leases. These deferred in-substance fixed payment use fees represent portfolio utilization beyond the maintenance reserve revenues reflected in our Unaudited Consolidated Statements of Income.
• Spare parts and equipment sales decreased to $3.3 million in the first quarter of 2024, compared to $5.1 million in the first quarter of 2023. The decrease in spare parts sales for the three months ended March 31, 2024 reflects variations in the timing of sales.
• Gain on sale of leased equipment was $9.2 million in the first quarter of 2024, reflecting the sale of eight engines. Loss on sale of leased equipment was $0.1 million in the first quarter of 2023, reflecting the sale of two engines. The Company is experiencing a strong market for engine sales.
• The Company generated a quarterly record of $29.9 million of pre-tax income in the first quarter of 2024, compared to the pre-tax income of $6.8 million in the first quarter of 2023.
• The book value of lease assets directly owned or through our joint ventures, inclusive of our notes receivable, maintenance rights, and investments in sales-type leases, was $2,530.7 million as of March 31, 2024.
• Diluted weighted average income per common share was $3.00 for the first quarter 2024, compared to diluted weighted average income per common share of $0.55 in the first quarter of 2023.
• Book value per diluted weighted average common share outstanding increased to $69.35 at March 31, 2024, compared to $67.73 at December 31, 2023.

Balance Sheet

As of March 31, 2024, the Company’s lease portfolio was $2,270.4 million, consisting of $2,130.3 million of equipment held in our operating lease portfolio, $97.9 million of notes receivable, $9.2 million of maintenance rights, and $33.0 million of investments in sales-type leases, which represented 337 engines, 14 aircraft, one marine vessel and other leased parts and equipment. As of December 31, 2023, the Company’s lease portfolio was $2,223.4 million, consisting of $2,112.8 million of equipment held in our operating lease portfolio, $92.6 million of notes receivable, $9.2 million of maintenance rights, and $8.8 million of investments in sales-type leases, which represented 337 engines, 12 aircraft, one marine vessel and other leased parts and equipment.

Willis Lease Finance Corporation

Willis Lease Finance Corporation (“WLFC”) leases large and regional spare commercial aircraft engines, auxiliary power units and aircraft to airlines, aircraft engine manufacturers and maintenance, repair and overhaul providers worldwide. These leasing activities are integrated with engine and aircraft trading, engine lease pools and asset management services through Willis Asset Management Limited, as well as various end-of-life solutions for engines and aviation materials provided through Willis Aeronautical Services, Inc. Additionally, through Willis Engine Repair Center®, Jet Centre by Willis, and Willis Aviation Services Limited, the Company’s service offerings include Part 145 engine maintenance, aircraft line and base maintenance, aircraft disassembly, parking and storage, airport FBO and ground and cargo handling services.

Except for historical information, the matters discussed in this press release contain forward-looking statements that involve risks and uncertainties. Do not unduly rely on forward-looking statements, which give only expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them. Our actual results may differ materially from the results discussed in forward-looking statements. Factors that might cause such a difference include, but are not limited to: the effects on the airline industry and the global economy of events such as war, terrorist activity and pandemics; changes in oil prices, rising inflation and other disruptions to world markets; trends in the airline industry and our ability to capitalize on those trends, including growth rates of markets and other economic factors; risks associated with owning and leasing jet engines and aircraft; our ability to successfully negotiate equipment purchases, sales and leases, to collect outstanding amounts due and to control costs and expenses; changes in interest rates and availability of capital, both to us and our customers; our ability to continue to meet changing customer demands; regulatory changes affecting airline operations, aircraft maintenance, accounting standards and taxes; the market value of engines and other assets in our portfolio; and risks detailed in the Company’s Annual Report on Form 10-K and other continuing reports filed with the Securities and Exchange Commission.

Unaudited Consolidated Statements of Income (In thousands, except per share data)

	Three Months Ended March 31,
	2024				2023				% Change
REVENUE
Lease rent revenue	$	52,881			$	53,220				(0.6	)%
Maintenance reserve revenue		43,870				23,498				86.7	%
Spare parts and equipment sales		3,288				5,052				(34.9	)%
Interest revenue		2,269				2,046				10.9	%
Gain (loss) on sale of leased equipment		9,201				(133	)		nm
Maintenance services revenue		5,227				4,659				12.2	%
Other revenue		2,347				1,193				96.7	%
Total revenue		119,083				89,535				33.0	%
EXPENSES
Depreciation and amortization expense		22,486				22,549				(0.3	)%
Cost of spare parts and equipment sales		2,705				4,499				(39.9	)%
Cost of maintenance services		5,574				3,927				41.9	%
Write-down of equipment		261				—				nm
General and administrative		29,581				27,831				6.3	%
Technical expense		8,255				4,342				90.1	%
Net finance costs:
Interest expense		23,003				18,389				25.1	%
Total net finance costs		23,003				18,389				25.1	%
Total expenses		91,865				81,537				12.7	%
Income from operations		27,218				7,998				240.3	%
Income (loss) from joint ventures		2,674				(1,161	)		nm
Income before income taxes		29,892				6,837				337.2	%
Income tax expense		9,023				2,443				269.3	%
Net income		20,869				4,394				374.9	%
Preferred stock dividends		900				801				12.4	%
Accretion of preferred stock issuance costs		12				21				(42.9	)%
Net income attributable to common shareholders	$	19,957			$	3,572				458.7	%
Basic weighted average income per common share	$	3.12			$	0.58
Diluted weighted average income per common share	$	3.00			$	0.55
Basic weighted average common shares outstanding		6,387				6,123
Diluted weighted average common shares outstanding		6,659				6,456

Unaudited Consolidated Balance Sheets(In thousands, except per share data)

	March 31, 2024				December 31, 2023
ASSETS
Cash and cash equivalents	$	7,622			$	7,071
Restricted cash		86,620				160,958
Equipment held for operating lease, less accumulated depreciation		2,130,327				2,112,837
Maintenance rights		9,180				9,180
Equipment held for sale		2,856				805
Receivables, net		61,881				58,485
Spare parts inventory		85,165				40,954
Investments		60,299				58,044
Property, equipment & furnishings, less accumulated depreciation		35,531				37,160
Intangible assets, net		1,034				1,040
Notes receivable, net		97,859				92,621
Investments in sales-type leases, net		33,013				8,759
Other assets		63,075				64,430
Total assets	$	2,674,462			$	2,652,344
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses	$	103,348			$	52,937
Deferred income taxes		156,030				147,779
Debt obligations		1,735,570				1,802,881
Maintenance reserves		99,529				92,497
Security deposits		26,525				23,790
Unearned revenue		41,687				43,533
Total liabilities		2,162,689				2,163,417
Redeemable preferred stock ($0.01 par value)		49,976				49,964
Shareholders’ equity:
Common stock ($0.01 par value)		69				68
Paid-in capital in excess of par		33,657				29,667
Retained earnings		417,738				397,781
Accumulated other comprehensive income, net of tax		10,333				11,447
Total shareholders’ equity		461,797				438,963
Total liabilities, redeemable preferred stock and shareholders’ equity	$	2,674,462			$	2,652,344

CONTACT:	Scott B. Flaherty
	Chief Financial Officer
	(561) 349-9989