WILLIS LEASE FINANCE CORP (WLFC)·Q1 2025 Earnings Summary

Executive Summary

• Record revenue of $157.7M (+32.5% y/y) and pre-tax income of $25.3M; dividend maintained at $0.25 for Q2 2025, signaling confidence in cash generation .
• Strong operational KPIs: quarter-end utilization rose to 86.4% from 76.7% at YE 2024; core lease rent and maintenance reserves aggregated $122.6M (+27% y/y) .
• Mix shift and parts demand drove spare parts/equipment sales to $18.2M (vs. $3.3M y/y), aided by a discrete $7.0M sale; gains on sale were $4.4M (down from $9.2M y/y) amid lumpy trading .
• Elevated G&A (up $18.1M y/y to $47.7M) on $11.4M consultant fees tied to SAF project; management expects bulk of net 2025 spend was in Q1 (offset later by U.K. grant receipts), creating a transitory EPS headwind .
• Strategic catalysts: exercised options to purchase 30 new LEAP engines; announced Air India Express ConstantThrust® (26 CFM56-7B engines) and GEM joint venture for a test cell facility—expanding aftermarket capabilities and future growth vectors .

What Went Well and What Went Wrong

• What Went Well

  • “Record quarterly revenues” ($157.7M) on strength in core leasing and maintenance; quarter-end utilization improved to 86.4% as GTF engines were leased late in March .
  • USM parts demand tailwind: spare parts/equipment sales surged to $18.2M, including a discrete $7.0M sale, reflecting operators extending current-generation engine lives .
  • Strategic expansion: exercised purchase rights for 30 LEAP engines; JV to build engine test cell (initially CFM56-5B/7B, expansion to newer types) to reduce turnaround times and broaden services .

• What Went Wrong

  • EPS diluted to $2.21, pressured by elevated G&A (consultant fees for SAF project), share-based comp, and a rise in interest expense to $32.1M; net income fell 19.2% y/y .
  • Gain on sale of leased equipment declined to $4.4M vs. $9.2M y/y due to “lumpy” trading cadence, despite $49.8M gross equipment sales at ~10% margin .
  • Interest costs up as weighted average cost of debt rose to 6.16% (from 4.56% y/y), compressing profitability, though leverage improved to 3.31x from 3.48x at YE 2024 .

Financial Results

Segment revenue breakdown:

KPIs and balance sheet highlights:

Guidance Changes

Note: Company did not issue formal quantitative revenue/EPS/margin guidance for Q1 2025; management commentary emphasized utilization improvement, programs growth, and capital markets flexibility .

Earnings Call Themes & Trends

Management Commentary

• CEO: “The cost of new engines continues to drive operators towards leasing, and our maintenance capabilities and programs provide value and certainty for cost conscious airlines.” .
• CEO on tariffs: “Thus far, our impacts have really been de minimis…things are pretty much business as usual.” .
• CFO: “Q1 produced record quarterly revenues of $157.7 million, driving $25.3 million of EBT.” .
• CFO on G&A: “$11.4 million in consultant-related fees…predominantly related to the company’s sustainable aviation fuel project…we anticipate that first quarter spend…represents the bulk of our net anticipated spend inclusive of grant in 2025.” .
• CEO on strategy: exercised purchase rights for 30 LEAP engines to support A320neo/737 MAX fleets; partnership JV to address test cell shortages and reduce turnaround times .

Q&A Highlights

• Tariffs: Minimal direct impact on imports and leasing; prior China rent revenue concerns “largely gone” .
• USM market: Elevated demand; decisioning between repair vs. part-out uses present value analysis; frequent success in procuring engines at favorable cost-per-cycle versus overhauls .
• Utilization: Improved from 76.7% (YE 2024) to 86.4%; GTF engines leased progressively into late March .
• Long-term maintenance revenue: $7.7M end-of-lease payment recognized in Q1; cash received post quarter end; clarifies LT maintenance reserve recognition mechanics .
• Lease mix: Roughly ~50/50 long-term vs. short-term remains consistent; short-term capability differentiates programmatic and trading execution .

Estimates Context

• Q1 2025 vs. S&P Global consensus: Revenue estimate $149.0M* vs. company-reported $157.7M; EPS estimate $4.41* vs. actual diluted EPS $2.21—an EPS miss driven by transitory SAF-linked consultant fees and higher interest expense . Coverage is limited (# of estimates = 1*), reducing predictive value.

Values retrieved from S&P Global.*

Note: S&P’s recorded “actual” revenue ($153.42M*) differs from WLFC’s reported $157.7M; we anchor actuals on company filings for precision .

Where estimates may adjust:

• EPS forecasts likely recalibrated lower short-term to reflect temporary SAF project expense timing and higher interest costs; revenue expectations may drift upward given utilization gains and robust maintenance/parts demand .

Key Takeaways for Investors

• Revenue momentum intact with core lease and maintenance reserves driving growth; utilization inflection to 86.4% supports near-term cash generation .
• EPS headwinds appear largely timing-related (SAF consultancy spend in Q1) and partly offset by anticipated grant receipts; leverage improved to 3.31x, preserving balance sheet flexibility .
• Parts/USM demand and ConstantThrust® program wins (AIX: 26 engines) bolster recurring and programmatic revenues, reducing customer maintenance unpredictability .
• Strategic expansion into test cell capacity via GEM JV enhances vertical integration, throughput, and service scope—potentially a multi-year margin driver .
• Trading gains are episodic; focus remains on core recurring revenue and high-utilization deployment—expect variability in gains on sale quarter to quarter .
• Dividend maintained ($0.25), signaling confidence in cash flows despite EPS variability; capital markets access (JOLCO, $1B revolver) underpins future asset deployment .
• Near-term trading implication: watch for normalization of OpEx and continued utilization strength; medium-term thesis centers on platform scale, programmatic offerings, and extended aftermarket capability driving ROE and cash returns .