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WILLIS LEASE FINANCE CORP (WLFC)·Q3 2025 Earnings Summary

Executive Summary

  • Strong top-line with total revenue $183.4M (+25.4% y/y), record lease rent ($76.6M) and maintenance reserve revenue ($76.1M); pre-tax income (EBT) $43.2M (+25.4% y/y). Management raised the regular quarterly dividend to $0.40 (from $0.25) on confidence in cash generation .
  • Versus S&P Global consensus: revenue beat by ~$27.4M (+17.6%); EPS comparison is mixed given methodology differences—Primary EPS consensus $3.34 (1 est.) vs company GAAP diluted EPS $3.25, while SPGI “actual” Primary EPS shows $4.07; coverage is thin and not directly comparable to GAAP diluted EPS* [GetEstimates Q3’25].
  • Sequentially, revenue declined from a record Q2 on lower trading/parts and maintenance services; core leasing KPIs remained healthy (86% utilization; lease rate factor ~1.04%, slightly up q/q), but G&A stayed elevated and write-downs continued, pressuring margins .
  • Capital and liquidity improved: warehouse facility amended/extended; 89% fixed-rate debt, 5.11% WACD, leverage down to 2.90x; WMES JV added a new $750M revolver to support growth .

What Went Well and What Went Wrong

  • What Went Well

    • Record core leasing metrics: “record core quarterly lease rent revenues of $76.6M, record maintenance reserve revenue of $76.1M…$43.2M EBT” (CEO/CFO), driven by strong asset demand and higher utilization (86.0%) .
    • Capital strength and flexibility: 89% fixed-rate debt, WACD 5.11%, leverage 2.90x; extended warehouse and paid off West 4 post-quarter; dividend raised to $0.40 .
    • Strategic growth: 16 engines and six aircraft purchased (~$136.4M), including 12 engines from Air India Express; expanding aircraft MRO capacity (Teesside hangars fully booked for winter) .

  • What Went Wrong

    • Operating cost pressure: G&A $49.2M (+22.9% y/y) with higher consulting (SAF), personnel, and share-based comp; maintenance services gross margin negative amid early-stage build-out .
    • Continued asset write-downs: $10.2M impairment on 8 engines (6 to held-for-sale), recurring across recent quarters; management framed as end-of-lease monetization positioning .
    • Elevated tax rate in Q3: income tax expense $18.9M (ETR ~43.7%) due to Section 162(m) and mid-year tax law changes; management expects normalization toward YTD levels .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Revenue ($M)$146.2 $157.7 $195.5 $183.4
Income from Operations ($M)$33.7 $23.9 $28.3 $38.0
EBT ($M)$34.5 $25.3 $74.3 $43.2
Net Income ($M)$24.1 $16.9 $60.4 $24.3
Net Inc. Attrib. to Common ($M)$23.1 $15.5 $59.0 $22.9
Diluted EPS ($)$3.37 $2.21 $8.43 $3.25

Revenue breakdown

Revenue Line ($M)Q3 2024Q1 2025Q2 2025Q3 2025
Lease Rent$64.9 $67.7 $72.3 $76.6
Maintenance Reserve$49.8 $54.9 $50.7 $76.1
Spare Parts & Equip. Sales$10.9 $18.2 $30.4 $5.4
Interest Revenue$3.4 $3.9 $3.6 $3.4
Gain on Sale of Leased Equip.$9.5 $4.4 $27.6 $16.1
Maintenance Services$5.9 $5.6 $8.0 $3.6
Other Revenue$1.8 $2.6 $2.9 $2.3

Key KPIs and Balance Sheet

KPI / ItemQ3 2024Q1 2025Q2 2025Q3 2025
Portfolio Utilization (end-period)82.9% 86.4% 88.3% 86.0%
Avg. Utilization (quarter)——87.2% ~86.0%
Avg Lease Rate Factor (on-lease)——~1.00% ~1.04%
Gain on Sale (units)13 engines 7 engines 14 engines, 2 airframes 10 engines, 1 airframe
Debt Obligations ($M)—$2,231.6 $2,800.6 $2,239.5
% Fixed-Rate Debt———89%
Wtd Avg Cost of Debt———5.11%
Leverage (Net Debt/Equity incl. pref.)——2.96x 2.90x
Dividend per Share—$0.25 (declared) $0.25 (paid Aug) $0.40 (declared)
Lease Assets Book Value (Owned/JVs)—$3,219.9 $3,254.1 $3,302.6
Lease Portfolio ($M)—$2,819.5 $2,830.0 $2,888.5
Portfolio Mix (items)—347 engines, 15 aircraft 348 engines, 15 aircraft 354 engines, 20 aircraft

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal revenue/EPS guidanceFY/Q4 2025None disclosedNone disclosedMaintained (no formal guidance)
Regular dividendQ4 2025$0.25/share$0.40/shareRaised
Warehouse facilityn/aPrior termsAmended/extended: commit to May 3, 2027; final repayment May 3, 2030Improved terms/tenor
WMES JV revolvern/an/aNew $750M, 5-year revolving credit facilityAdded capacity (JV)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
Utilization & lease ratesQ1: Utilization 86.4%; strong leasing tailwinds . Q2: Avg 87.2%, end 88.3%; rates +2–4% q/q .Utilization ~86%; lease rate factor ~1.04%, slightly up q/q .Strong, stable; slight q/q moderation in utilization.
Maintenance reserves mixQ1: Short-term $45.3M; long-term $9.6M . Q2: Short-term $50.2M; long-term $0.5M .Short-term $46.6M; long-term $29.5M (lumpy end-of-lease) .Elevated long-term in Q3; mix remains lumpy.
Trading/parts revenuesQ1: Parts $18.2M; gain on sale $4.4M . Q2: Parts $30.4M; gain on sale $27.6M .Parts $5.4M; gain on sale $16.1M .Down q/q from record Q2.
Write-downs/impairmentsQ1: $2.1M . Q2: $11.5M .$10.2M; end-of-lease positioning/held-for-sale .Persisting at higher levels vs 2024.
Operating costs (G&A)Q1: Higher consulting (SAF) . Q2: G&A $50.4M incl. stock comp/severance offsets by grants .G&A $49.2M; higher consulting/personnel/share-based comp .Elevated; some normalization sequentially.
Capital markets/liquidityQ1: ABS plans forming . Q2: West 8 ABS $596M; leverage 2.96x .89% fixed, WACD 5.11%; leverage 2.90x; warehouse amended; WMES $750M revolver .Improving leverage/tenor; diversified liquidity.
SAF initiativeQ1: Consulting and early-stage costs . Q2: ~$6.3M grant received; further grant awarded .Wilton International site selected; 14k t/yr target 2028; pursuing 3rd-party equity .Advancing site/partners; funding mix conservative.
MRO/Teesside expansionQ1: —Q2: Jet2 base maintenance lines .New hangars opened; fully booked for winter; 50-acre lease signed .

Management Commentary

  • CEO Austin Willis: “The cost of new engines continues to drive demand from operators for our leasing model and the value created by our maintenance capabilities and other programs.” .
  • “Q3 was indicative of the strength of our leasing business without the noise…record leasing revenues…utilization ~86%…lease rental factor over 1%.” .
  • CFO Scott Flaherty: “Long-term maintenance revenues…$29.5M…short-term $46.6M…Gain on sale of leased equipment $16.1M…implicit margin 21.9%…substantial unrecognized value in our lease portfolio.” .
  • On tax: “Higher tax rate is temporary…affected by 162(m) and mid-year tax law changes…expect reversion toward YTD rate.” .

Q&A Highlights

  • Legacy engine values vs OEM delivery recovery: Additional supply could pressure values but supports service programs like Constant Thrust; WLFC positioned with 53–54% future-gen exposure (LEAP, GTF, GEnx) .
  • Write-down cadence: Linked to end-of-lease transitions and monetization choices; write-downs “pale in comparison” to maintenance reserves recognized .
  • G&A clarity: Personnel expense details—stock-based comp ~$11.2–$11.3M; incentive comp up with performance; sequential personnel expense down >$8M from Q2 .
  • Elevated ETR: Driven by tax law implementation and 162(m); Q3 viewed as anomalous .
  • Capital returns: Share repurchases under consideration; dividend increased to $0.40 .

Estimates Context

MetricS&P Global Consensus (Q3 2025)Company Reported Actual (Q3 2025)Delta
Revenue ($M)$156.0M*$183.4M +$27.4M (+17.6% vs cons.)
Primary EPS ($)$3.34 (1 est.)*GAAP Diluted EPS: $3.25 -$0.09 (-2.7% vs cons.)
S&P “Actual” Primary EPS ($)—$4.07 (SPGI “actual”)*+$0.73 vs cons. (note methodology)
  • Coverage is thin (1 estimate for both revenue and EPS), and SPGI “Primary EPS” methodology differs from company GAAP diluted EPS; interpret EPS comparisons with caution.* [GetEstimates Q3’25]
  • Where methodology aligns, revenue was a clear beat; EPS direction depends on GAAP diluted vs SPGI Primary treatment.

Key Takeaways for Investors

  • Core engine leasing fundamentals remain robust: record lease rent and maintenance reserve revenue, stable lease rate factors, and high utilization point to sustained demand and pricing power .
  • The quarter’s revenue beat was driven by strong long-term maintenance reserve recognition and solid gains on asset sales; however, cost inflation (G&A) and recurring write-downs weighed on EPS and margins .
  • Capital structure is a developing positive: increased fixed-rate mix, longer-dated warehouse, lower leverage, and JV revolver enhance growth capacity and reduce refinancing risk .
  • MRO/aircraft capabilities are scaling (Teesside, hangars, Jet2) and should support vertical integration, potentially improving throughput and customer stickiness over time .
  • SAF project de-risking via grants/site selection is progressing; management intends a conservative funding approach with third-party equity, limiting balance sheet drag .
  • Near-term modeling: Expect lumpiness in long-term maintenance revenues and trading gains; watch for normalization in tax rate and continued moderation in G&A as one-offs roll off .
  • Catalysts: Continued dividend growth/Buyback decision, additional ABS/warehouse actions, large Constant Thrust wins, and MRO capacity utilization updates.

Footnote: *Values retrieved from S&P Global (Capital IQ).