Willis Lease Finance Q1 Earnings Call Highlights

Key Points

• Willis reported record quarterly results with $77.4 million in lease rent revenue, $123.8 million Adjusted EBITDA and $23.7 million net income, while diluted EPS rose to $3.26 and average utilization climbed to 85.8%.
• The asset-management arm, Willis Aviation Capital, is scaling rapidly—managing over $2.7 billion of committed/deployed third‑party capital within a $4.1 billion AUM platform and about $1.5 billion of capital ready to deploy, supported by an expanded $1.75 billion revolver and low net leverage (~2.68x).
• Management said the Iran conflict has had minimal direct impact so far and sees leasing as counter‑cyclical amid high fuel prices, but warned prolonged fuel pressure could force retirements and weigh on mid‑life aircraft values; the company says it is “well‑hedged” with >50% of engines in modern types (LEAP, GTF, GEnx).

Willis Lease Finance NASDAQ: WLFC reported record lease rent revenue and higher earnings in the first quarter of 2026, as management pointed to strong demand for spare engines, elevated maintenance needs, and growing momentum behind its third-party capital platform, Willis Aviation Capital.

Macro backdrop: limited impact so far from Iran conflict, fuel risks in focus

CEO Austin Willis said the company has not seen a material impact on pricing or lease rates since the conflict began in Iran, adding that demand has remained “robust.” He noted the company has “minimal exposure in the Middle East,” where effects are being felt most acutely.

Willis said airlines are responding to higher fuel prices and potential shortages by reducing capacity or parking aircraft, warning that “should high fuel prices persist into the fall, we expect the airlines to feel liquidity pressure.” He also described Willis Lease’s business as historically counter-cyclical in such environments, arguing airlines may favor leasing solutions over costly engine overhauls “for $10 million or more,” which can increase utilization within the company’s portfolio.

At the same time, Willis cautioned that prolonged elevated fuel prices could lead to aircraft retirements and lower lease rates and values for mid-life aircraft, though he said mid-life engine values should be more resilient. He added the company considers itself “well-hedged,” with “over 50%” of its engine portfolio in modern technology engine types, including LEAP, GTF, and GEnx.

First-quarter results: record lease rents, higher EBITDA and EPS

CFO Scott Flaherty said the quarter produced record quarterly lease rent revenues of $77.4 million, Adjusted EBITDA of $123.8 million, earnings before taxes of $36.8 million, and net income attributable to common shareholders of $23.7 million. Diluted weighted average income per common share was $3.26, up from $2.21 in the first quarter of 2025.

Flaherty attributed lease rent revenue growth to portfolio expansion, improved utilization, and higher lease rates. He said average utilization rose to 85.8% in Q1 2026 from 79.9% a year earlier, while the average on-lease lease rate factor was 1.04% compared to 1.0% in Q1 2025. The owned portfolio stood at $2.86 billion at quarter-end.

Maintenance reserve revenue was $55.5 million, slightly above $54.9 million in Q1 2025. Flaherty said $12.4 million of maintenance reserve revenue in the quarter was long-term maintenance reserve revenue tied to engines coming off lease, including elimination of maintenance reserve liabilities and end-of-lease cash payments. Short-term maintenance reserves totaled $43.1 million, down from $45.3 million in the year-ago period.

Asset sales, services growth, and rising costs

Spare parts and equipment sales increased to $21.7 million from $18.2 million in the prior-year quarter. Flaherty said spare parts sales to third parties fell to $10 million from $16 million, citing timing differences, while noting $7.5 million of intra-company sales (eliminated in consolidation) highlighted the value of a vertically integrated parts business.

Equipment sales rose to $11.4 million, reflecting the sale of three engines that were not previously leased. Flaherty said the trading profit on those sales was $5.7 million, representing a “50% margin,” which he said supported management’s view that a discount exists between the book value and market value of the portfolio.

Separately, Flaherty said gain on sale of leased equipment and gain on sale of financial assets totaled $18.4 million, up from $4.8 million in Q1 2025. He said $18 million of that was tied to the sale of 14 engines for $60 million of gross proceeds, including five engines sold to the Willis Mitsui joint venture, representing an effective “30% margin.” The company also recognized $0.4 million of gain on sale of financial assets after selling 11 notes receivable and sales-type lease investments for $87.1 million of gross sales, which he described as generally par sales.

Maintenance services revenue climbed to $9.8 million from $5.6 million, with Flaherty citing growth in engine and aircraft storage and repair services and noting the current-period comparison lacked fleet management revenue due to the sale of the BAMO business in late Q2 2025. Gross margins improved to 9.3% from 4.6%.

On expenses, depreciation rose to $30.2 million from $25.0 million, reflecting a larger lease portfolio and timing of assets placed on lease. Write-downs of equipment were $1.1 million versus $2.1 million a year earlier.

G&A increased to $56.6 million from $47.7 million, driven primarily by higher personnel costs, including an increase of $6.9 million in share-based compensation and $4.1 million in wages. Flaherty said share-based compensation rose due to appreciation in the company’s equity value and awards to new personnel supporting growth, adding that the company modified its share-based compensation program in January 2025 due to the stock price increase. He also cited $4.9 million of costs recharged to the Liberty Mutual fund (with corresponding revenue recorded in management and advisory fees) and a $2 million increase in acquisition, financing, and divestiture-related expenses, partially offset by an $11.7 million reduction in project expense after the company “cease[d] investment in and pursue[d] strategic alternatives” for its Sustainable Aviation Fuels project.

Technical expense rose to $9.7 million from $6.2 million, which Flaherty said generally relates to unplanned maintenance.

Net finance costs increased to $39.7 million from $32.1 million, primarily due to a $7 million loss on debt extinguishment tied to refinancings. Flaherty said less than $1 million of that loss was cash expense, with most tied to acceleration of previously capitalized issuance costs. Total indebtedness was $2.25 billion, relatively flat year over year, and the weighted average cost of debt capital, inclusive of swaps, was 5.12%.

Willis Aviation Capital builds scale; company cites liquidity for growth

Willis highlighted the company’s expanding asset management platform, Willis Aviation Capital (WAC), which he called a “natural extension” enabling Willis to manage third-party capital alongside its balance sheet. He said WAC, including partnerships with Blackstone Credit & Insurance and Liberty Mutual Investments and existing joint ventures, now manages more than $2.7 billion of committed or deployed capital.

In Q1 2026, Willis said the company funded about $90 million of finance leases through the Liberty Mutual fund, noting the transactions did not generate gain on sale because they were par sales to the fund. He added that in April the company began selling operating lease engines from its balance sheet to the Blackstone fund and said management was encouraged by early traction and a “solid pipeline.”

During Q&A, Willis said the company is not disclosing specific management fee terms, but described them as “roughly in line” with standard discretionary fund structures—based on a percentage of assets managed and a percentage of profitability through carried interest. He added that fees related to Blackstone would “start to see fees kicking in here in the next quarter” and said the company expects to “seed about $200 million from our balance sheet into the Blackstone portfolio.”

On liquidity and capital deployment, Willis said the company ended the quarter with $4.1 billion of assets under management and approximately $1.5 billion of capital “ready to deploy” through discretionary funds and joint ventures, including a $750 million revolving credit facility. He also cited the company’s expanded revolver and “low net leverage of 2.7 times.” Flaherty reported leverage of 2.68 times at quarter-end.

Credit facility expansion, JOLCO financings, and dividend

Flaherty said the company amended and extended its revolving credit facility in March 2026, increasing commitments from $1.0 billion to $1.75 billion and extending maturity to April 2031. He added that, concurrent with the $750 million expansion, the company terminated its $500 million warehouse facility.

The company also completed its 7th and 8th JOLCO financings during the quarter, bringing total JOLCO financings to approximately $170 million at quarter-end. Willis separately said the company closed two JOLCO transactions totaling about $50 million.

On shareholder returns, Flaherty said the company paid its seventh consecutive regular quarterly dividend of $0.40 per share in February. He added the board subsequently declared an eighth consecutive recurring quarterly dividend of $0.40 per share, payable May 22, 2026, to holders of record on May 11, 2026.

About Willis Lease Finance NASDAQ: WLFC

Willis Lease Finance Corporation NASDAQ: WLFC is an independent global provider of aircraft engine leasing, trading and aftermarket services. Founded in 1991 and headquartered in the United States, the company specializes in offering short- and long-term operating leases for jet engines and auxiliary power units. Through its broad engine portfolio, Willis Lease Finance supports a wide range of commercial aircraft across various operators, including major airlines, regional carriers and other leasing companies.

In addition to leasing solutions, Willis Lease Finance offers comprehensive engine trading and asset management services.

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