Willis Lease Finance Corporation (NASDAQ: WLFC) today reported third quarter total revenues of $76.9 million and pre-tax earnings of $8.4 million. For the three months ended September 30, 2022, aggregate lease rent and maintenance reserve revenues were $60.0 million and spare parts and equipment sales were $7.0 million. The Company reported increased total revenues in the third quarter when compared to the prior year period, primarily due to an increase in lease rent revenue.

“Another strong quarter for our business,” said Austin Willis, the Company’s Chief Executive Officer. “The post COVID recovery is driving growth and profitability, however we remain watchful of macroeconomic and geopolitical risk.”

“We have been building the business for years to deliver the programmatic solutions the industry is beginning to recognize as the preferred option in almost all cases,” said Brian R. Hole, President. “We will continue to innovate and support our customers’ efforts to navigate an environment that sprouts new challenges on a daily basis.”

Third Quarter 2022 Highlights (at or for the periods ended September 30, 2022, as compared to September 30, 2021, and December 31, 2021):

  • Lease rent revenue increased by $6.6 million, or 20.1%, to $39.5 million in the third quarter of 2022, compared to $32.9 million in the same quarter of 2021, primarily reflecting an increase in the number of engines acquired and placed on lease.
  • Maintenance reserve revenue was $20.4 million in the third quarter of 2022, a decrease of 13.6% compared to $23.7 million in the same quarter of 2021. This decrease was due primarily to a reduction of $14.1 million in long-term maintenance revenue relative to the comparable period in 2021, which was offset by a quarter-over-quarter increase of $11.0 million in short-term maintenance reserve revenue, which is directly influenced by on lease engine flight hours and cycles.
  • Spare parts and equipment sales increased to $7.0 million in the third quarter of 2022, compared to $5.1 million in the third quarter of 2021. The increase in spare parts sales was driven by improved industry wide demand for surplus material compared to the prior year period.
  • Gain on sale of leased equipment was $0.9 million in the third quarter of 2022 reflecting the sale of two engines. Gain on sale of leased equipment was $2.4 million in the third quarter of 2021, reflecting the sale of six engines, one airframe and other parts and equipment.
  • The Company generated $8.4 million of pre-tax income in the third quarter of 2022 compared to $6.1 million in the comparable quarter of 2021.
  • The book value of lease assets we own directly or through our joint ventures, inclusive of our notes receivable, maintenance rights, and investment in sales-type leases, was $2,488.9 million at September 30, 2022. As of September 30, 2022, the Company also managed 333 engines, aircraft and related equipment on behalf of other parties.
  • The Company maintained $298.0 million of undrawn revolver capacity at September 30, 2022.
  • Diluted weighted average income per common share was $0.89 for the third quarter of 2022, compared to $0.32 in the third quarter of 2021.
  • Book value per diluted weighted average common share outstanding increased to $64.28 at September 30, 2022, compared to $59.23 at December 31, 2021.

Balance Sheet

As of September 30, 2022, $2,078.8 million of equipment held in our operating lease portfolio, $82.5 million notes receivable, $21.4 million of maintenance rights, and $6.7 million investment in sales-type leases, represented 337 engines, twelve aircraft, one marine vessel and other leased parts and equipment. As of December 31, 2021, the Company had $1,991.4 million equipment held for operating lease portfolio, $115.5 million notes receivable, and $22.5 million of maintenance rights, which represented 304 engines, twelve aircraft, one marine vessel and other leased parts and equipment.

Willis Lease Finance Corporation

Willis Lease Finance Corporation leases large and regional spare commercial aircraft engines, auxiliary power units and aircraft to airlines, aircraft engine manufacturers and maintenance, repair and overhaul providers in 120 countries. These leasing activities are integrated with engine and aircraft trading, engine lease pools and asset management services supported by cutting edge technology through its subsidiary, Willis Asset Management Limited, as well as various end-of-life solutions for engines and aviation materials provided through its subsidiary, Willis Aeronautical Services, Inc.

Except for historical information, the matters discussed in this press release contain forward-looking statements that involve risks and uncertainties. Do not unduly rely on forward-looking statements, which give only expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them. Our actual results may differ materially from the results discussed in forward-looking statements. Factors that might cause such a difference include, but are not limited to: the effects on the airline industry and the global economy of events such as war, terrorist activity and the COVID-19 pandemic; changes in oil prices, rising inflation and other disruptions to world markets; trends in the airline industry and our ability to capitalize on those trends, including growth rates of markets and other economic factors; risks associated with owning and leasing jet engines and aircraft; our ability to successfully negotiate equipment purchases, sales and leases, to collect outstanding amounts due and to control costs and expenses; changes in interest rates and availability of capital, both to us and our customers; our ability to continue to meet changing customer demands; regulatory changes affecting airline operations, aircraft maintenance, accounting standards and taxes; the market value of engines and other assets in our portfolio; and risks detailed in the Company’s Annual Report on Form 10-K and other continuing reports filed with the Securities and Exchange Commission.

Unaudited Consolidated Statements of Income(In thousands, except per share data) 

  Three Months EndedSeptember 30,       Nine Months EndedSeptember 30,    
    2022       2021   % Change     2022       2021     % Change
REVENUE                      
Lease rent revenue $ 39,515     $ 32,908   20.1  %   $ 114,344     $ 96,859     18.1  %
Maintenance reserve revenue   20,438       23,659   (13.6 )%     59,517       60,749     (2.0 )%
Spare parts and equipment sales   6,966       5,091   36.8  %     20,388       13,226     54.2  %
Gain on sale of leased equipment   920       2,440   (62.3 )%     3,716       2,440     52.3  %
Gain on sale of financial assets           N/A       3,116           N/A  
Asset transition fee           N/A             6,256     (100.0 )%
Other revenue   9,052       6,693   35.2  %     22,702       18,858     20.4  %
Total revenue   76,891       70,791   8.6  %     223,783       198,388     12.8  %
                       
EXPENSES                      
Depreciation and amortization expense   22,059       21,274   3.7  %     65,480       68,755     (4.8 )%
Cost of spare parts and equipment sales   4,204       3,921   7.2  %     16,080       11,008     46.1  %
Write-down of equipment   654         N/A       21,849       4,113     431.2  %
General and administrative   22,788       18,662   22.1  %     66,820       54,312     23.0  %
Technical expense   2,139       2,524   (15.3 )%     11,222       6,130     83.1  %
Net finance costs:                      
Interest expense   16,304       18,325   (11.0 )%     49,209       50,331     (2.2 )%
Total net finance costs   16,304       18,325   (11.0 )%     49,209       50,331     (2.2 )%
Total expenses   68,148       64,706   5.3  %     230,660       194,649     18.5  %
                       
Income (loss) from operations   8,743       6,085   43.7  %     (6,877 )     3,739     (283.9 )%
Income (loss) from joint ventures   (384 )     21   (1,928.6 )%     (1,531 )     (1,183 )   29.4  %
Income (loss) before income taxes   8,359       6,106   36.9  %     (8,408 )     2,556     (429.0 )%
Income tax expense   1,970       3,222   (38.9 )%     496       946     (47.6 )%
Net income (loss)   6,389       2,884   121.5  %     (8,904 )     1,610     (653.0 )%
Preferred stock dividends   819       819    %     2,431       2,431      %
Accretion of preferred stock issuance costs   21       21    %     63       63      %
Net income (loss) attributable to common shareholders $ 5,549     $ 2,044   171.5  %   $ (11,398 )   $ (884 )   1,189.4  %
                       
Basic weighted average income (loss) per common share $ 0.91     $ 0.33       $ (1.88 )   $ (0.14 )    
Diluted weighted average income (loss) per common share $ 0.89     $ 0.32       $ (1.88 )   $ (0.14 )    
                       
Basic weighted average common shares outstanding   6,093       6,189         6,058       6,135      
Diluted weighted average common shares outstanding   6,270       6,363         6,058       6,135      

Unaudited Consolidated Balance Sheets(In thousands, except per share data)

    September 30, 2022   December 31, 2021
ASSETS        
Cash and cash equivalents   $ 11,914   $ 14,329
Restricted cash     69,473     81,312
Equipment held for operating lease, less accumulated depreciation     2,078,775     1,991,368
Maintenance rights     21,358     22,511
Equipment held for sale     3,853     6,952
Receivables, net of allowances     49,544     39,623
Spare parts inventory     41,901     50,959
Investments     54,283     55,927
Property, equipment & furnishings, less accumulated depreciation     34,525     31,327
Intangible assets, net     1,144     1,188
Notes receivable     82,487     115,456
Investment in sales-type leases     6,735    
Other assets     85,976     51,975
Total assets   $ 2,541,968   $ 2,462,927
         
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY        
Liabilities:        
Accounts payable and accrued expenses   $ 29,493   $ 26,858
Deferred income taxes     130,288     124,332
Debt obligations     1,851,650     1,790,264
Maintenance reserves     58,022     65,976
Security deposits     19,909     19,349
Unearned revenue     13,331     10,458
Total liabilities     2,102,693     2,037,237
         
Redeemable preferred stock ($0.01 par value)     49,868     49,805
         
Shareholders’ equity:        
Common stock ($0.01 par value)     66     65
Paid-in capital in excess of par     17,810     15,401
Retained earnings     343,990     355,388
Accumulated other comprehensive income, net of tax     27,541     5,031
Total shareholders’ equity     389,407     375,885
Total liabilities, redeemable preferred stock and shareholders’ equity   $ 2,541,968   $ 2,462,927
  CONTACT: Scott B. Flaherty
    Chief Financial Officer
  (561) 349-9989
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