Willis Lease Finance Corporation Q4 FY2025 earnings call

• Finished 2025 with strong performance, record fourth quarter revenues of $193.6 million and full year revenues of $730.2 million. - Adjusted EBITDA was $459 million. - Lease portfolio utilization averaged 85% with an average lease rental factor in excess of 1% per month. - Recently declared a recurring dividend of 40 cents per share. - Willis Aviation Capital is a recently announced asset manager with three key elements: discretionary fund management, management of joint ventures, and management of engines and aircraft for investors. - Established a $600 million fund with Liberty Mutual Insurance and a separate fund with Blackstone credit and insurance for over $1 billion. - Services businesses like parts, MRO, and consulting are important, with WASI creating value by monetizing unserviceable engines. WorkUS performed first core module performance restoration. WAZL airframe maintenance facility is fully up and running. - Elected to no longer pursue sustainable aviation fuel project. - David Hook joined to run M&A, Brian Hull moved to head Willis Aviation Capital with Steve Bridgeland hired for investor relations and capital markets.

Fourth quarter 2025 revenues were $193.6 million, a 27% year-over-year increase. Full year 2025 revenues were $730.2 million, a 28% increase. Record earnings before tax of $160.6 million. Adjusted EBITDA was $459 million. Lease portfolio utilization averaged 85% (up from 83% in 2024) with an average lease rental factor in excess of 1% per month. Core lease rent revenues were $291.6 million and interest revenues were $14.1 million due to increased total portfolio size to $3 billion at year-end 2025. Maintenance reserve revenues for the year were $232 million, up 8.4% from 2024. Spare parts and equipment sales to third parties were $95.5 million in 2025 (up from $27.1 million in 2024). Gaining on sale of lease equipment net revenue was $54 million in 2025 with an effective 20% margin. Maintenance services revenue was $25.5 million in 2025 (up from $24.2 million in 2024). Other revenue increased by 89% to $17.2 million in 2025.

• Plan to deploy capital into discretionary funds, with $600 million fund with Liberty Mutual and over $1 billion fund with Blackstone. - Expect fund initiatives and growth of joint ventures to fuel other revenue growth. - Continue to grow on all fronts including with leverage, though there may be opportunity to deploy existing capital in funds potentially not as much on balance sheet currently.

• Aviation market has engine-centric issues with over 600 aircraft powered by GTF engines grounded and new technical issues with leaps. - Engine shop visit outlook strong through mid-2030s but CFM56 and V2500 visits may taper while GPS and LEAP visits increase. - Sustainable aviation fuel project was abandoned as right to win wasn't strong enough. - Potential insurance claim recovery related to engines in Russia is ongoing but details can't be fully disclosed.

Q: Can you talk about your plans for seeding the Blackstone portfolio? How much of your own engines do you think you might end up selling into that entity?

A: We're not going to disclose specific amounts, but have a small seed portfolio to move into both Blackstone and Liberty Mutual, with lion's share from origination in marketplace.

Q: Would there be a gain on sale associated with assets in those funds if trading below fair market value?

A: Consistent with other asset sales in marketplace generally.

Q: Can you talk about competitive advantages in sourcing engines for those portfolios?

A: Good relationship with OEMs, order book with CFMI for LEAP engines, buying from other leasing companies with value add on power plant side, and success in originating high volume, low price assets for programs.

Q: As it relates to Willis Aviation Capital and the Blackstone investment, can you utilize access to asset-backed securities market to lever the $1 billion?

A: When talking about $1 billion plus, it's about $1 billion plus of metal with equity dollars less than that and leverage on assets, and we are regular issuers into ABS market so debt financing may be structured similarly to historical.

Q: On the appraised value number, would maintenance dynamic be reflected in maintenance reserve liability?

A: The $700 million appraised value excess is maintenance-adjusted market value vs book value, and long-term lease maintenance reserves and other contractual conditions add incremental value.

Q: Regarding long-term maintenance revenue being lumpy, is earnings almost double if engines were back?

A: Long-term maintenance reserve component is lumpy, annualized numbers show consistent growth over time.

Q: Views on share repurchases given asset-like model?

A: Challenge asset light terminology, call self asset medium, continue to grow with leverage, and currently pursuing growth on all fronts.

Q: Update on insurance claims pending on engines related to Russia?

A: Do have insurance claims pending, feel confident in recovery but can't go into too much detail.