Executive Summary

Q3 revenue was $146.2M (+38.3% y/y) and pre-tax income was $34.5M (+69.4% y/y); sequentially, revenue fell 3.3% and pre-tax income declined from a record Q2 as maintenance reserve revenue normalized and gain on sale moderated .
Diluted EPS was $3.37 (+58% y/y; down vs. Q2’s $6.21). Operating margin was 23.0% (vs. 35.8% in Q2 and 18.9% in Q3’23), driven by higher G&A including stock-based comp and a one-time $3M bonus, and higher net finance costs .
Core leasing fundamentals strengthened: lease rent rose 21% y/y to $64.9M, utilization was ~83%, short-term maintenance revenue remained robust, and management highlighted rising lease rental factors amid constrained MRO capacity and OEM supply chain issues .
Balance sheet and liquidity improved: WLFC upsized preferred stock to $65M at 8.35% and secured a new $1.0B, 5-year revolver with a $250M accordion; a $0.25/share quarterly dividend was declared (second consecutive) .
Consensus estimates were unavailable via S&P Global at time of query; comparisons to Wall Street expectations cannot be made and coverage may be limited.

What Went Well and What Went Wrong

What Went Well

“Our core leasing business is performing extremely well… Q3 pretax earnings of approximately $35M is our second highest on record” with rising lease rental factors and resilient demand amid OEM/MRO bottlenecks .
Short-term maintenance revenue remained strong and highly correlated to flying hours (up $14.2M y/y); spare parts sales grew 223% y/y and gain on sale reached $9.5M, evidencing asset market strength and integrated platform benefits .
Strategic capital actions enhance growth capacity: preferred stock expansion (to $65M, 8.35%) and new $1.0B revolver to fund asset purchases and programs, alongside continued deleveraging toward a BB-type profile .

What Went Wrong

Sequential margin compression: operating margin fell to 23.0% from 35.8% in Q2 as maintenance reserve revenue declined q/q (leases extended, fewer long-term reserve releases) and gain on sale moderated; diluted EPS fell to $3.37 from $6.21 .
G&A rose to $40.0M (+$13.4M y/y), driven by $7.8M stock-based comp (share price appreciation), a $3.0M special bonus, and $2.5M incentive comp; net finance costs increased to $27.8M (weighted average debt cost 5.13% vs. 4.04% last year) .
Utilization (~83%) remains below pre-COVID high-80s; management cited asset onboarding time, programmatic holds, and maintenance churn as constraints, despite strong market demand .

Financial Results

Income Statement Comparison

Metric ($USD Millions, unless noted)	Q3 2023	Q2 2024	Q3 2024
Total Revenue	105.745	151.120	146.223
Income from Operations	19.998	54.078	33.704
Pre-Tax Income	20.344	57.903	34.460
Net Income Attributable to Common	13.778	41.664	23.133
Diluted EPS ($)	2.13	6.21	3.37
G&A Expense	26.545	34.687	40.037
Interest Expense	19.052	24.562	27.813

Margins (Calculated from reported figures)

Margin (%)	Q3 2023	Q2 2024	Q3 2024
Operating Margin %	18.9% (19.998/105.745)	35.8% (54.078/151.120)	23.0% (33.704/146.223)
Pre-Tax Margin %	19.2% (20.344/105.745)	38.3% (57.903/151.120)	23.6% (34.460/146.223)
Net Income Margin % (Common)	13.0% (13.778/105.745)	27.6% (41.664/151.120)	15.8% (23.133/146.223)

Revenue Composition

Revenue Component ($USD Millions)	Q3 2023	Q2 2024	Q3 2024
Lease Rent Revenue	53.573	55.866	64.905
Maintenance Reserve Revenue	37.696	62.897	49.760
Spare Parts & Equipment Sales	3.359	6.186	10.863
Interest Revenue	2.106	2.284	3.412
Gain on Sale of Leased Equipment	0.773	14.428	9.519
Maintenance Services Revenue	6.199	6.781	5.948
Other Revenue	2.039	2.678	1.816
Total Revenue	105.745	151.120	146.223

KPIs and Operating Metrics

KPI	Q3 2023 / Prior	Q2 2024	Q3 2024
Utilization Rate	—	~84% (discussion)	“a little under 83%”
Weighted Avg Cost of Debt	4.04% at 9/30/2023	4.93% at 6/30/2024	5.13% at 9/30/2024
Cash from Operations (YTD)	—	$129.7M H1	$216.4M through Q3
Leverage (Debt/Equity incl. preferred)	3.71x (Q3’23 comp)	3.59x (Q2’24)	3.43x (Q3’24); Net leverage 3.25x
Lease Portfolio Book Value	$2,223.4M (12/31/2023)	$2,465.0M (6/30/2024)	$2,665.7M (9/30/2024)
Assets Purchased (quarter)	$31.0M; 5 engines (Q3’23)	$258.8M; 3 aircraft, 11 engines	$166.9M; 3 airframes, 19 engines
Assets Purchased/Sold (alt. call view)	—	Sold $65.3M	Purchased $229.8M; Sold $47.9M; Sold 13 engines

Note: Management remarks provide higher purchase totals in Q3 ($229.8M) versus the press release highlight ($166.9M). The call likely includes broader categories/capitalized costs; we flag the discrepancy for reconciliation in the 10-Q .

Guidance Changes

WLFC did not provide numerical revenue/EPS guidance. Management reiterated leverage goals and dividend policy; financing capacity was expanded.

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Share	Q4’24 payable (Nov 21)	Initiated $0.25 (Q2)	$0.25 recurring declared Oct 31	Maintained
Leverage Target	Ongoing	Mid-3x targeted	Comfort zone low-3x net; BB-type profile objective	Improved (deleverage)
Liquidity/Capital Facility	Ongoing	$500M revolver	New $1.0B 5-year revolver (+$250M accordion)	Raised capacity
Preferred Equity	Ongoing	$50M A-1/A-2	$65M Series A at 8.35%	Raised capacity

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2)	Previous Mentions (Q-1)	Current Period (Q3)	Trend
Supply chain/MRO constraints	OEM teething issues; MRO capacity tight; demand for spares elevated	Q1 EBT $29.9M; strong core run-rate noted	Constraints persist; Boeing strike exacerbating; rental factors rising	Persistent constraints; supportive of pricing
Lease rates/asset values	Selective repricing; gain-on-sale mid-teens historically	—	~37% y/y lease rate increase; new-gen engines rates rising with values	Rates up; some stabilizing at higher levels
Programmatic offerings	ConstantThrust; integrated services enable premium returns	—	Increased airline requests for ConstantThrust; ATR program expansion	Growing adoption
Portfolio modernization	Added GTF/LEAP/GEnx in Q2	—	Continued purchases; ~$400M order book through 2027	Ongoing modernization
Capital structure	$500M warehouse; deleveraging to mid-3s	—	$1.0B revolver; preferred upsized; net leverage 3.25x	Increased capacity; lower leverage
PMA/DER stance	—	—	PMA avoided due to remarketing constraints; monitoring developments	Unchanged cautious stance
Utilization	—	—	~83%; below pre-COVID high 80s due to onboarding/maintenance churn	Stable low-80s

Management Commentary

CEO: “Our core leasing business is performing extremely well… Demand for engines remains robust… Our average lease rental factor has increased over the prior quarter” .
CFO: “Weighted average cost of debt… 5.13% at 9/30/2024… cash flow from operations through the third quarter… $216.4M… leverage at 3.25x net” .
Strategic positioning: “Our platform of complementary services and assets is helping to fuel growth… [we] are exceptionally well placed to fulfill these program requirements” .

Q&A Highlights

Lease rates and values: ~37% y/y increase in lease rates; new-gen engines seeing rising rates with asset values; still room for increases in some types .
Maintenance economics: MRO availability tight; full overhauls $10M+ with LLP; module swaps preferred where feasible, but core module scarcity persists .
PMA policy: PMA parts can lower costs but impair remarketability; WLFC avoids PMA/DER given customer preferences .
Utilization and order book: Utilization ~83%; order book ~$400M through 2027; average remaining lease term ~2 years .
Credit exposure: Azul—zero AR balance; no immediate expectations for provisions despite peer disclosures .
Expenses and one-offs: G&A inflated by $7.8M stock comp, $3M special bonus (one-time), $2.5M incentives; margin leverage expected to improve as growth scales .

Estimates Context

Consensus estimates were unavailable via S&P Global at time of query; WLFC’s limited sell-side coverage or data access constraints prevented retrieval. As a result, we cannot assess beats/misses versus Street for Q3 2024.

Key Takeaways for Investors

Sequential normalization from a record Q2: Q3 fundamentals strong y/y, but lower long-term maintenance reserve releases and smaller gain-on-sale compressed margins and EPS q/q—focus on recurring core leasing trajectory rather than lumpier items .
Pricing power intact: Short-term lease structures and integrated services support repricing and premium returns; lease rental factors rising despite utilization in low-80s .
Balance sheet readiness: New $1.0B revolver and upsized preferred provide ample dry powder for asset growth and programmatic deals; deleveraging trajectory toward BB profile remains intact .
Asset market tailwinds: Elevated lease rates, robust demand, and constrained MRO/OEM supply chain bolster revenue durability and opportunistic gains on asset sales, though gains should be modeled conservatively as supply chain normalizes .
Expenses watchlist: Expect lower G&A run-rate absent one-time items and less stock comp sensitivity; monitor net finance costs given higher debt cost and mix .
Operational KPIs: Track utilization, short-term maintenance revenue, and lease portfolio growth; reconcile Q3 purchase/sale totals between press release and call disclosures via 10-Q for modeling accuracy .
Dividend continuity: Second consecutive $0.25/share quarterly dividend underscores confidence; capital allocation optionality remains given share appreciation and growth opportunities .

Management and document citations: Q3 2024 8-K press release ; Q3 2024 earnings call transcript ; Q2 2024 press release/call for trend context .

WILLIS LEASE FINANCE CORP (WLFC)·Q3 2024 Earnings Summary