Willis Lease Finance Corporation Q2 FY2025 earnings call

• This was a record-setting quarter with highest ever quarterly total revenue. Airlines rely on the company's leasing, parts and maintenance solutions. - The yield of the portfolio is in the high teens, with lease rental factor of 1.01% and utilization increasing from 82% in June 2024 to 88% in June 2025. - Operationally, the quarter's results are due to team dedication and strategic initiatives: purchased/sold 31 engines and 4 airframes, completed largest ever engine ABS, did sixth JOLCO, began to see results from SOAR lean business system, received over $6 million in grant proceeds for SAF initiative, and entered into a contract with Safran to build a test cell facility. - Launched SOAR lean business system to scale efficiently while maintaining high-quality service. - Appointed Clif Dameron as General Counsel. - Sold consulting and advisory business Bridgend Asset Management to Willis Mitsui & Company Engine Support Limited. - Secured commitment from Jet2.com for 2 base maintenance lines. - Encouraged by U.S. and EU 0 tariff policy on aircraft and parts, and positive changes regarding depreciation and interest in the Big Beautiful Bill.

The company achieved a record quarterly total revenue of $195.5 million, a 29.4% increase from the same period last year. Core lease rent revenue for the quarter was $72.3 million, up 29.4% from the prior comparable period. Interest revenue was $3.6 million, up 59.8% from the prior comparable period. Maintenance reserve revenues for the quarter were $50.7 million, with short-term maintenance reserve revenues at $50.2 million (up 9.5% from the comparable quarter in 2024) and long-term maintenance revenues at $0.5 million. Spare parts and equipment sales to third parties increased by $24.2 million or 391% to $30.4 million in Q2 2025. Gain on sale of leased equipment was $27.6 million in the second quarter, up $13.2 million or 91.2% from the comparable period. Maintenance services revenue increased by $1.3 million to $8 million in the second quarter of 2025 with negative 7% gross margins.

• Confident in operational excellence and innovation positioning the company for further growth and value creation. - Expect lease rates to remain strong for the foreseeable future as the company has a significant portion of its portfolio in next-generation equipment and is well-placed for aircraft transitions with programs like ConstantThrust. - Dividend declared: fifth consecutive quarterly dividend of $0.25 per share expected to be paid on August 21, 2025.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations. Risks include those related to tariffs, trade, economic growth, and other factors discussed in the company's filings with the SEC, such as risks affecting financial results.

Q: With OEM production starting to improve, are you seeing any impact on lease rates?

A: Lease rates have increased about 9% relative to the same period last year and about 2% to 4% over the prior quarter. Lease rates are stabilizing and not expected to have real negative pressure in the near term as the company has a large portion of its portfolio in next-generation equipment and is well-positioned for aircraft transitions.

Q: Are you seeing young aircraft being parted out to engines at spares, and is that good for the company?

A: Yes, seeing some aircraft with engines pulled off and airframes parted out but it's limited. What's more seen is airlines obtaining aircraft and pulling engines off temporarily, which is positive as it shows demand for engines.

Q: What was the average utilization rate for the quarter and the end of the quarter?

A: The average utilization rate for the quarter was 87.2% and the end of the quarter utilization rate was 88.3%.

Q: What was the employee count at the end of the quarter?

A: Around 420.

Q: What's the ongoing revenue and operating income impact of selling the consulting business?

A: The P&L from that business hasn't been particularly material, but the additional infusion of roughly $40 million of equity will have a positive impact when considering the ability to leverage it and buy profit-making equipment over time.

Q: Regarding maintenance service revenues and costs, is the maintenance service revenues line item third-party revenues and is the cost of maintenance services third-party plus internal client-related costs or losing money on third-party maintenance services on a gross margin?

A: The margin difference in the maintenance services business is attributable to additional labor picked up during the period, largely driven by the airframe business WASL, with a lot of it being the buildup of labor to support contracts like the one with Jet2.