Willis Lease Finance Corporation (NASDAQ: WLFC) today reported annual total revenues of $311.9 million and pre-tax income of $9.8 million. For the year ended December 31, 2022, aggregate lease rent and maintenance reserve revenues were $246.0 million and spare parts and equipment sales were $27.0 million. The Company reported increased total revenues in the fourth quarter when compared to the prior year period, primarily due to an increase in the Company’s core lease rent and short-term maintenance revenues.

“2022 represents the beginnings of a solid recovery for our business,” said Austin C. Willis, the Company’s Chief Executive Officer. “The recovery in the leasing markets, driving increased demand and rate, positions the Company to combat the inflationary effects of a new, post-COVID environment.”

“Our programs are becoming the bellwether for airlines looking for efficiency and to de-couple from counterparties that are struggling to produce consistently,” said Brian R. Hole, President. “As a result, the fourth quarter likely was the busiest we have been in my time with the Company, and I am incredibly proud of the effort our people put into delivering for our customers.”

Fourth Quarter 2022 Highlights (at or for the quarter and year ended December 31, 2022, as compared to at or for the quarter and year ended December 31, 2021):

  • Lease rent revenue increased by $27.7 million, or 20.6%, to $162.6 million in 2022, compared to $134.8 million in 2021, primarily reflecting an increase in the number of engines acquired and placed on lease, including an increase in utilization compared to the prior period.
  • Maintenance reserve revenue was $83.4 million in 2022, an increase of 12.8%, compared to $74.0 million in 2021. Short-term maintenance revenue, a proxy for flight activity, was $47.4 million in 2022, compared to $17.7 million in 2021, as a result of the continued recovery in global flight traffic. As of December 31, 2022, there was $6.3 million of collected use fees included in Unearned Revenue, which further reflects increased usage of the lease portfolio.
  • Spare parts and equipment sales increased to $27.0 million in 2022, compared to $17.4 million in 2021. The increase in spare parts sales was driven by an industry-wide increase in engine and aircraft utilization, and the demand for parts associated with such increase compared to the prior year period.
  • Gain on sale of leased equipment was $3.1 million in 2022, reflecting the sale of 25 engines. Gain on sale of leased equipment was $6.0 million in 2021, reflecting the sale of 12 engines and one airframe.
  • Gain on sale of financial assets was $3.1 million in 2022, reflecting the sale of four notes receivable. Gain on sale of financial assets was $10.9 million in 2021, reflecting the sale of two notes receivable.
  • The Company generated $9.8 million of pre-tax income in 2022 compared to $9.1 million in the comparable period 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 $2,518.6 million at December 31, 2022. As of December 31, 2022, the Company also managed 324 engines, aircraft and related equipment on behalf of other parties.
  • The Company maintained $273.0 million of undrawn revolver capacity at December 31, 2022.
  • Diluted weighted average income per common share was $0.33 for 2022, compared to $0.00 in 2021.
  • Book value per diluted weighted average common share outstanding increased to $64.27 at December 31, 2022, compared to $59.23 at December 31, 2021.

Balance Sheet

As of December 31, 2022, the Company’s lease portfolio was $2,217.5 million, consisting of $2,111.9 million of equipment held in our operating lease portfolio, $81.4 million of notes receivable, $17.7 million of maintenance rights, and $6.4 million of investments in sales-type leases, which represented 339 engines, 13 aircraft, one marine vessel and other leased parts and equipment. As of December 31, 2021, the Company’s lease portfolio was $2,129.3 million, consisting of $1,991.4 million of equipment held in our operating lease portfolio, $115.5 million of notes receivable, and $22.5 million of maintenance rights, which represented 304 engines, 12 aircraft, one marine vessel and other leased parts and equipment.

Willis Lease Finance Corporation

Willis Lease Finance Corporation (“WLFC”) leases large and regional spare commercial aircraft engines, auxiliary power units and aircraft to airlines, aircraft engine manufacturers and maintenance, repair and overhaul providers worldwide. These leasing activities are integrated with engine and aircraft trading, engine lease pools and asset management services through Willis Asset Management Limited, as well as various end-of-life solutions for engines and aviation materials provided through Willis Aeronautical Services, Inc. Additionally, through Willis Engine Repair Center®, Jet Centre by Willis, and Willis Aviation Services Limited, the Company’s service offerings include Part 145 engine maintenance, aircraft line and base maintenance, aircraft disassembly, parking and storage, airport FBO and ground and cargo handling services.

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 EndedDecember 31,       Years Ended December 31,    
    2022     2021   % Change     2022     2021   % Change
REVENUE                      
Lease rent revenue $ 48,227     $ 37,972   27.0 %   $ 162,571     $ 134,831   20.6 %
Maintenance reserve revenue   23,907       13,212   80.9 %     83,424       73,961   12.8 %
Spare parts and equipment sales   6,621       4,191   58.0 %     27,009       17,417   55.1 %
Interest income   1,789       2,820   (36.6 )%     7,579       12,938   (41.4 )%
(Loss) Gain on sale of leased equipment   (583 )     3,535   (116.5 )%     3,133       5,975   (47.6 )%
Gain on sale of financial assets   —       10,874   (100.0 )%     3,116       10,874   (71.3 )%
Asset transition fee   —       —   N/A     —       6,256   (100.0 )%
Other revenue   8,183       3,210   154.9 %     25,095       11,950   110.0 %
Total revenue   88,144       75,814   16.3 %     311,927       274,202   13.8 %
                       
EXPENSES                      
Depreciation and amortization expense   22,780       21,749   4.7 %     88,260       90,504   (2.5 )%
Cost of spare parts and equipment sales   4,753       3,919   21.3 %     20,833       14,927   39.6 %
Write-down of equipment   —       3,602   (100.0 )%     21,849       7,715   183.2 %
General and administrative   25,710       21,038   22.2 %     92,530       75,350   22.8 %
Technical expense   3,193       3,251   (1.8 )%     14,415       9,381   53.7 %
Net finance costs:                      
Interest expense   17,534       17,654   (0.7 )%     66,743       67,985   (1.8 )%
Gain on debt extinguishment   (2,558 )     —   N/A     (2,558 )     —   N/A
Total net finance costs   14,976       17,654   (15.2 )%     64,185       67,985   (5.6 )%
Total expenses   71,412       71,213   0.3 %     302,072       265,862   13.6 %
                       
Income from operations   16,732       4,601   263.7 %     9,855       8,340   18.2 %
Income (Loss) from joint ventures   1,469       1,983   (25.9 )%     (62 )     800   (107.8 )%
Income before income taxes   18,201       6,584   176.4 %     9,793       9,140   7.1 %
Income tax expense   3,858       4,842   (20.3 )%     4,354       5,788   (24.8 )%
Net income   14,343       1,742   723.4 %     5,439       3,352   62.3 %
Preferred stock dividends   819       821   (0.2 )%     3,250       3,251   0.0 %
Accretion of preferred stock issuance costs   21       20   5.0 %     84       83   1.2 %
Net income attributable to common shareholders $ 13,503     $ 901   1,398.7 %   $ 2,105     $ 18   11,594.4 %
                       
Basic weighted average income per common share $ 2.21     $ 0.15       $ 0.35     $ —    
Diluted weighted average income per common share $ 2.12     $ 0.14       $ 0.33     $ —    
                       
Basic weighted average common shares outstanding   6,110       6,044         6,071       6,112    
Diluted weighted average common shares outstanding   6,379       6,304         6,297       6,346    
                                   
                                   

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

    December 31, 2022   December 31, 2021
ASSETS        
Cash and cash equivalents   $ 12,146   $ 14,329
Restricted cash     76,870     81,312
Equipment held for operating lease, less accumulated depreciation     2,111,935     1,991,368
Maintenance rights     17,708     22,511
Equipment held for sale     3,275     6,952
Receivables, net of allowances     46,954     39,623
Spare parts inventory     38,577     50,959
Investments     56,189     55,927
Property, equipment & furnishings, less accumulated depreciation     35,350     31,327
Intangible assets, net     1,129     1,188
Notes receivable     81,439     115,456
Investments in sales-type leases     6,440     —
Other assets     87,205     51,975
Total assets   $ 2,575,217   $ 2,462,927
         
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY        
Liabilities:        
Accounts payable and accrued expenses   $ 43,040   $ 26,858
Deferred income taxes     132,516     124,332
Debt obligations     1,847,278     1,790,264
Maintenance reserves     59,453     65,976
Security deposits     20,490     19,349
Unearned revenue     17,863     10,458
Total liabilities     2,120,640     2,037,237
         
Redeemable preferred stock ($0.01 par value)     49,889     49,805
         
Shareholders’ equity:        
Common stock ($0.01 par value)     66     65
Paid-in capital in excess of par     20,386     15,401
Retained earnings     357,493     355,388
Accumulated other comprehensive income, net of tax     26,743     5,031
Total shareholders’ equity     404,688     375,885
Total liabilities, redeemable preferred stock and shareholders’ equity   $ 2,575,217   $ 2,462,927
CONTACT: Scott B. Flaherty
  Chief Financial Officer
  (561) 349-9989
Willis Lease Finance (NASDAQ:WLFC)
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