Willis Lease Finance Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 6, 2025

Key Takeaways

  • Willis Lease reported Q1 revenue of $157.7 M (up 33% YoY) and pretax income of $25.2 M, with utilization rising from 79.9% to over 86% by quarter-end.
  • The company exercised rights to purchase 30 LEAP engines, secured a new constant thrust deal with Air India Express, and formed a joint venture to build an engine test facility in Florida.
  • Maintenance reserve revenues climbed 25% to $54.9 M and spare parts & equipment sales surged 455% to $18.2 M, reflecting strong aftermarket demand.
  • Net finance costs increased to $32.1 M due to higher debt levels and rising interest rates, while leverage remained elevated at 3.31x.
  • General & administrative expenses rose substantially from consulting fees for the sustainable aviation fuel project, though future UK government grants are expected to offset a portion of these costs.
AI Generated. May Contain Errors.
Earnings Conference Call
Willis Lease Finance Q1 2025
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Good day, and welcome to the Willis Lease Finance Corporation First Quarter 2025 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 views 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.

Operator

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-K, and other periodic reports, which are available on the investor relations section of WLFC's website at https://www.wlfc.global/investor-relations. At this time, I'd like to turn the conference over to Austin Willis, Chief Financial Officer. Please go ahead.

Austin Willis
CEO at Willis Lease Finance 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 Hole, 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 $157.7 million, and pre-tax income was $25.2 million. 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.

Austin Willis
CEO at Willis Lease Finance Corporation

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.

Austin Willis
CEO at Willis Lease Finance Corporation

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-1A engines for the Airbus A320neo family of aircraft and LEAP-1B engines for the Boeing 737 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.

Austin Willis
CEO at Willis Lease Finance Corporation

Second, in March, we announced a new constant thrust deal with Air India Express for CFM56-7B 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 lease back 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.

Austin Willis
CEO at Willis Lease Finance Corporation

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 2024 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. 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 log jam in the industry, constraining throughput and slowing engine repair turn times.

Austin Willis
CEO at Willis Lease Finance Corporation

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 CFM56-5B and CFM56-7B engines, but we'll 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.

Austin Willis
CEO at Willis Lease Finance Corporation

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 45+ 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. I'll hand it over to Scott Flaherty, our CFO, to discuss our financial performance in greater depth.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Thank you, Austin, and good morning all. As you can see from our P&L, we are off to a good start in 2025. Q1 produced record quarterly revenues of $157.7 million, driving $25.3 million of earnings before taxes, or EBT. Our consolidated revenues of $157.7 million 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&L, as it relates to revenue, core lease rent revenue for the quarter was $67.7 million, and interest revenue was $3.9 million, which reflects interest income on long-term loan-like financings. Growth in these line items primarily reflects our increased total portfolio size of $2.82 billion as of March 31st.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Our total owned portfolio is reflected on our balance sheet as equipment held for operating lease, maintenance rights, notes receivable, and investment and sales-type leases. We have seen portfolio utilization grow from 76.7% at year-end 2024 to 86.4% by the end of Q1, an almost 10-point pickup, as we were able to quickly deploy onto lease our December 2024 purchase of nine GTF engines from Pratt & Whitney. Additionally, we continue to see a solid average lease rate factor across the portfolio of 1.0%. Maintenance reserve revenues for the quarter were $54.9 million, up $11 million, or 25%, from the comparable quarter in 2024. As you peel back the numbers, you can see that $9.6 million 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.

Scott Flaherty
CFO at Willis Lease Finance Corporation

$7.7 million of the $9.6 million related to an end-of-lease payment for which the company has subsequently been paid by a Chinese-based lessee customer. $45.3 million of our maintenance reserve revenues were short-term maintenance reserves compared to $37.6 million 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. To a lesser extent, in this quarter, the timing of revenue recognition of in-substance fixed payments also contributed. Spare parts and equipment sales to third parties increased by $15.0 million, or 455%, to $18.2 million in Q1 2025, 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 lines of their current-generation engine portfolios.

Scott Flaherty
CFO at Willis Lease Finance Corporation

In addition, there was a discreet $7.0 million sale in the quarter, as well as $2.2 million 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 $4.8 million in the first quarter, down slightly from $9.2 million in the comparable period. This gain was associated with gross equipment sales of $49.8 million, representing an effective 10% margin on such sales.

Scott Flaherty
CFO at Willis Lease Finance Corporation

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-based operator services, was $5.6 million 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.

Scott Flaherty
CFO at Willis Lease Finance Corporation

On the expense side of the equation, depreciation in the first quarter was up 11.3% to $25 million for the quarter as we increased the portfolio size as well as put new engines on lease, which starts their depreciation through our P&L. Write-down of equipment was $2.1 million for the quarter, which represented an impairment on five engines, which were all moved to held for sale. G&A was $47.7 million in the first quarter, compared to $29.6 million in the comparable period in 2024. Increases in the overall G&A spend were mainly related to $11.4 million 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.

Scott Flaherty
CFO at Willis Lease Finance Corporation

The company has been awarded a U.K. 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 $6.9 million of share-based compensation, which was influenced by the rise in the company's share price relative to Q1 2024 and represented a $3.1 million increase from the comparable period, and approximately $1.2 million of wage increases due to additional headcount and general salary escalation as we grow the footprint of the overall business. Technical expense was $6.2 million in the first quarter, slightly down from $8.3 million in the comparable period in 2024. Technical expense generally relates to unplanned maintenance, whereas engine performance restorations tend to be planned, capitalized events.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Net finance costs were $32.1 million in the first quarter, compared to $23.0 million in the comparable period in 2024. The increase in costs was related to an increase in indebtedness as total debt obligations increased from $1.7 billion at March 2024 to $2.2 billion 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 Q1 2024 to $6.16 in Q1 2025. The company also picked up $1.4 million in ratable earnings from our 50% ownership interest in our Willis Mitsui and CASIC's Willis Joint Ventures. The company produced $15.5 million of net income attributable to common shareholders, which factors in GAAP taxes and the costs of our preferred equity. Diluted weighted average income per share was $2.21 in Q1 2025.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Net cash provided by operating activities was $41.0 million in the first quarter of 2025, as compared to $59.8 million in the first quarter of 2024. 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 million higher in the first quarter of 2025 than in the comparable period in 2024. On the financing and capital structure side of the business, the company completed its fourth and fifth JOCO financings in the first quarter, bringing total JOCO financings at quarter-end to approximately $105 million. Subsequent to quarter-end, the company completed its sixth JOCO, bringing our total JOCO financings to $125 million.

Scott Flaherty
CFO at Willis Lease Finance Corporation

We regularly access the capital markets as we endeavor to source competitively priced capital to continue to grow our balance sheet and P&L. In February of the first quarter, we paid our third regular quarterly dividend of $0.25 per share. Subsequent to quarter-end, we declared our fourth consecutive regular quarterly dividend, which is expected to be paid on May 22, 2025, to stockholders of record at the close of business on May 12th, 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.

Scott Flaherty
CFO at Willis Lease Finance Corporation

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 2024. 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?

Operator

Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to signal for a question, and we'll pause just briefly to assemble our queue. We'll take our first question from Hilary Kakanando with Deutsche Bank. Please go ahead.

Hillary Cacanando
Hillary Cacanando
Analyst at Deutsche Bank

Yes, hi. Thanks for taking my question. I just wanted to find out if you're impacted in any way, directly impacted by tariffs. I guess I wasn't sure if you import any parts or any materials from overseas for your maintenance services or anything like that, if you'll be impacted directly. Thank you.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Thanks, Hilary. 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. We really have not seen too much of an impact there yet. On the leasing side, by and large, we really have not seen very much of an impact. There was a little 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. Things are pretty much business as usual.

Hillary Cacanando
Hillary Cacanando
Analyst at Deutsche Bank

Okay. So not too much. I mean, so pretty much, I guess, minimal impact. Okay. Great. 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 tariffs, let's say, escalate with Europe, let's say, in 90 days, I would think that newer aircraft get expensive. Maybe older asset values and lease rates go up. I do not know what would happen to the demand side and then what the demand for travel, let's say, or for aircraft. What the net impact would be on the existing assets. I just kind of wanted to get your thoughts on what you think the market values and lease rates will be for older, maybe your existing portfolio.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Sure. It is hard to tell. I mean, the reality is trying to look at what the future looks like at this point is really nothing more than pure speculation. That being said, I do not think it is unreasonable to expect some degree of asset inflation with our existing portfolio. I 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. Exactly to your point, I think there is 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 will not be subject to cross-border tariffs should reciprocals be put in place.

Scott Flaherty
CFO at Willis Lease Finance Corporation

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.

Hillary Cacanando
Hillary Cacanando
Analyst at Deutsche Bank

Got it. Great. Thank you very much. Very helpful.

Scott Flaherty
CFO at Willis Lease Finance Corporation

No problem.

Operator

If you find that your question has been answered, you may remove yourself from the queue by pressing star two. We move next to Louis Raffetto with Wolfe Research. Please go ahead.

Louis Raffetto
Louis Raffetto
Analyst at Wolfe Research

Hey, good morning.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Morning, Louis.

Louis Raffetto
Louis Raffetto
Analyst at Wolfe Research

There's a nice step up in the spare part 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?

Scott Flaherty
CFO at Willis Lease Finance Corporation

Yeah. A lot of the step up in part sales 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. Even taking that into account, we still did have a pretty good step up in part sales. 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 that net revenue generate? Do we fix that engine, and what is the present value based upon that? We will also solicit bids from the third-party market as to determine what that would get in cash for us right now.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Ultimately, we look at the three scenarios and just do a present value analysis. Finally, we also look at, does it make sense to repair engines versus what we can purchase engines for out on the market? Historically, we've been pretty darn good at spot market trading. In many cases, we can actually procure engines on a better value on a cost-per-cycle basis than one can overhauling them.

Louis Raffetto
Louis Raffetto
Analyst at Wolfe Research

All right. Great. I appreciate that. Maybe just two quick clarification questions. 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 what's the differentiation between those?

Scott Flaherty
CFO at Willis Lease Finance Corporation

I think, are you referring to the spare parts? Yeah, the $7 million of spare parts?

Louis Raffetto
Louis Raffetto
Analyst at Wolfe Research

I know just in that paragraph, it said.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Yeah, sure. What you probably saw is if you look at the line item of our financials, it's spare parts and equipment sales, right? In the comparable period, we did not have any equipment sales. What equipment sales are is really effectively like a trading. It is not a lease asset, not an asset that was on lease. It is an engine or piece of equipment that we bought and ultimately sold without having it in a lease portfolio. Really what you saw in the quarter was a $2 million step up in that one line item specifically related to that.

Louis Raffetto
Louis Raffetto
Analyst at Wolfe Research

Okay. Great. Appreciate that.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Yep.

Operator

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

Will Waller
Analyst at M3

Yeah. I just had 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 affected that at the end of the year were not leased out until pretty close to the end of the first quarter based on sort of what the average utilization rate was?

Scott Flaherty
CFO at Willis Lease Finance Corporation

Yeah. No, hey, Will, how are you doing? That is a good assumption, right? I think that if you kind of go back and look, like you said, 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 are at 86.4%. A lot of that was related to some of the GTFs that we picked up late in the fourth quarter. Over time, we have got that portfolio on to lease. You are right, they all did not 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 at M3

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?

Scott Flaherty
CFO at Willis Lease Finance Corporation

Will, I appreciate the question, but I hope you appreciate for competitive reasons, we're not going to get into specific lease rates on assets.

Will Waller
Analyst at 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 million related to a Chinese airline where some engines came back off a lease. Was that during the quarter or after the quarter?

Scott Flaherty
CFO at Willis Lease Finance Corporation

Sure. So that was a, so what that was was in end-of-lease, so long-term related, and that was recognized in the quarter, and cash was received subsequent to quarter end.

Will Waller
Analyst at M3

Okay. Sounds good. But it was counted in the long-term maintenance revenue for the first quarter, that $7 million?

Scott Flaherty
CFO at Willis Lease Finance Corporation

Sure. It's revenue recognition. Correct.

Will Waller
Analyst at M3

Okay. Perfect. When I look at the liability, the maintenance reserve liability, it grew from year-end $97.8 million to about $104.5 million at the end of the first quarter. That is sort of the additional buildup that is occurring where you are having, there are some probably lease extensions that are going on and so on, but that is where the buildup is. Eventually, that is what will become revenue once the engines are returned. Correct?

Scott Flaherty
CFO at Willis Lease Finance Corporation

Correct.

Will Waller
Analyst at M3

Okay. So in a sense, that $104.45 million that's in that maintenance reserve liability, basically, that is the revenue associated with the long-term leases that just haven't been recognized as income yet. Correct? It will be recognized once the engines are returned, similar to the seven that the Chinese airline returned.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Sure. Think about it like this, Will. The short-term component are the monthly payments that we are getting from the operators for their usage. Those are not maintenance reserves. We would never have to give those back, right? 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 have received over the life of the lease that are the payments that are the balance that you see on the balance sheet. 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 at M3

Okay. Great. Those are sort of building, 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 a lot higher than normal lease extensions going on, then you're just going to always kind of have a much higher number that's being deferred 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
CFO at Willis Lease Finance Corporation

That's correct.

Will Waller
Analyst at M3

Okay. What 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?

Scott Flaherty
CFO at Willis Lease Finance Corporation

Yeah. The mix is pretty similar. We usually keep it in the neighborhood of 50/50. 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. 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. That's why we're able to get those assets on lease quickly.

Will Waller
Analyst at M3

Great. Thanks a lot. I appreciate it.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Thanks, Will.

Operator

Once again, that is star one to signal for a question. We'll go next to Eric Gregg with 43 Island Advisory.

Eric Gregg
Analyst at Four Tree Island Advisory

That's 43 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 $11.3 million. This quarter was less than $5 million. In such a strong environment, just curious why the quarter was so much lower than what you'd been averaging the last four quarters and how you're thinking about likely gains on sale of flight equipment in the coming quarters for 2025.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Sure. Yeah. Eric, it's hard to predict, and it's hard to time exactly the trading component. We continue to see significant value in the portfolio. As we've talked about in the past, above and beyond the book value. It really depends on how we package in any period assets that we are selling. 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 Gregg
Analyst at Four Tree Island Advisory

Okay. All right. Moving on to the consultant-related fees. The way the press release reads, it says increase in consultant-related fees predominantly related to the company's sustainable aviation fuel project. If this was an increase, is that an 11.4% increase off of what baseline in the prior year? Is it off of zero, or is it off of some kind of normal kind of consultant fees that are going out the door every quarter? I did not find much in historical notes in the financials to be able to determine that.

Scott Flaherty
CFO at Willis Lease Finance Corporation

Yeah. I would say we do not always disaggregate that, right? It is a lot less material than the aggregate that you are seeing there. That is why we specifically highlighted that, kind of given the fact that it does jump out in that one period.

Austin Willis
CEO at Willis Lease Finance Corporation

Yeah. If I can add to what Scott is saying, sorry, just to jump in. Yeah. The amounts that we have experienced historically are pretty immaterial. The amounts that we are spending right now or that we have spent in this first quarter really represent the lion's share of what we expect the expense to be for this year.

Eric Gregg
Analyst at Four Tree Island Advisory

You're saying the lion's share based on the credits you expect to get back from the U.K. government or whatever body that is on a net basis. Correct?

Austin Willis
CEO at Willis Lease Finance Corporation

We do expect to get a fair amount back from the U.K. government when they pay us over the next three quarters.

Eric Gregg
Analyst at Four Tree Island Advisory

Yep. Okay. Great. Finally, this last question is for you, Austin. This is a high-level question, but if you look back to year-end 2022 and go out to year-end 2024, where all this data is available, the owned number of engines that Willis has is up about 4%. The managed engine count is actually down over 14%. The number of employees is actually up about 60%. The question is this: with an asset base in terms of number of assets that has not grown much over the last few years, why is it necessary to have 60% more employees?

Austin Willis
CEO at Willis Lease Finance 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 on the G&A side in 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 U.K., and our aircraft MRO in Teesside in the U.K. as well. So that's the predominant factor.

Operator

At this time, we have no further signals. I'll turn the floor back to our speakers for any additional or closing remarks.

Austin Willis
CEO at Willis Lease Finance Corporation

Yeah. 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. 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 U.K., 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. I just wanted to quickly mention that and thank everybody for taking the time to be with us today.

Operator

This concludes today's conference. We thank you for your participation. You may disconnect at this time.

Analysts
    • Austin Willis
      CEO at Willis Lease Finance Corporation
    • Louis Raffetto
      Analyst at Wolfe Research
    • Scott Flaherty
      CFO at Willis Lease Finance Corporation
    • Will Waller
      Analyst at M3
    • Eric Gregg
      Analyst at Four Tree Island Advisory
    • Hillary Cacanando
      Analyst at Deutsche Bank
Powered by Quartr