• Pre-Tax Earnings (EBT): $34.5 million for Q3 2024, up 69% from the comparable quarter in 2023.
• Year-to-Date EBT: $122.3 million, up 165% on a year-to-date basis compared to 2023.
• Revenue: $146.2 million for Q3 2024.
• Core Leasing Revenues: $68.3 million, an all-time high.
• Maintenance Reserve Revenues: $49.8 million, up 32% from Q3 2023.
• Spare Parts and Equipment Sales: $10.9 million, up 223.4% from Q3 2023.
• Net Income Attributable to Common Shareholders: $23.1 million for Q3 2024.
• Diluted Weighted Average Income Per Share: $3.37, up 58.2% from Q3 2023.
• Cash Flow from Operations: $216.4 million year-to-date, up 28.1%.
• Portfolio Growth: Net growth of $182 million in Q3 2024.
• Balance Sheet Leverage: 3.43 times at Q3 2024, down from 3.71 times in Q3 2023.
• Dividend: $0.25 per share, payable on November 21, 2024.

• Warning! GuruFocus has detected 9 Warning Signs with WLFC.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Willis Lease Finance Corp (NASDAQ:WLFC) reported strong earnings with a Q3 pretax earnings of approximately $35 million, marking the second highest on record.
• The company announced a second quarterly dividend of $0.25 per share, reflecting confidence in its financial health.
• WLFC's core leasing business is performing well, with robust demand for engines and an increase in average lease rental factors.
• The company successfully expanded its revolving credit facility to $1 billion, providing ample capital for future growth.
• WLFC achieved significant portfolio growth, purchasing 27 engines and four airframes, resulting in a net portfolio growth of $182 million.

Negative Points

• Supply chain issues continue to affect OEMs' ability to produce new assets and parts, impacting WLFC's operations.
• Maintenance, repair, and overhaul (MRO) availability remains tight, particularly with larger MROs, posing challenges for engine repairs.
• General and administrative expenses increased significantly, partly due to stock-based compensation and special bonuses.
• Net finance costs rose by $8.8 million compared to Q3 2023, driven by increased average indebtedness and higher financing costs.
• Utilization rates for leased equipment were slightly under 83%, which, while high, is below pre-COVID levels in the upper 80s.

Q & A Highlights

Q: Can you provide insights on asset values and lease rates for narrow body engines, particularly older models like the CFM 56 and V2500? A: Austin Willis, CEO: We've observed a 37% year-over-year increase in lease rates. While specific engine types aren't detailed, lease rates now are similar to 2019 levels, indicating potential for further growth. Newer engine types like LEAPs and GTFs have seen climbing lease rates, reflecting their asset values.

Q: What are the trends in maintenance overhaul costs and MRO availability? How do you decide between repairing engines and using modules? A: Austin Willis, CEO: MRO availability is tight, especially with larger MROs. Overhaul costs for engines like the V2500 are over $10 million. We evaluate engines through a formal process considering repair, overhaul, part-out, or sale, choosing the option with the highest present value.

Q: Can you comment on PMA usage and its impact on costs and asset remarketability? A: Austin Willis, CEO: PMA parts can reduce overhaul costs but may affect asset remarketability. Most airline customers prefer engines without PMA parts, limiting our ability to lease or sell such engines. We continue to monitor market developments.

Q: What is the current utilization rate for leased equipment, and how does it compare historically? A: Austin Willis, CEO: The utilization rate was just under 83% in Q3. Historically, we've reached upper 80s, but current levels are influenced by asset origination, maintenance, and programmatic deals.

Q: How do you view the lifecycle of engines like the CFM and V2500, and what are your thoughts on their longevity? A: Austin Willis, CEO: These engines have significant operational life remaining, with many yet to undergo their first shop visit. However, the introduction of newer generation engines like LEAP and GTF necessitates a balanced portfolio to meet future demand.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.