Willis Lease Finance Corporation Reports Second Quarter Pre-tax Income of $19.0 million

Rhea-AI Summary

Willis Lease Finance Corporation (NASDAQ: WLFC) Reports Strong Q2 2023 Results, Driven by Increased Core Lease Rent and Maintenance Reserve Revenues

Positive

• The company reported a 48.3% increase in lease rent revenue and a 46.1% increase in maintenance reserve revenue compared to the same quarter in 2022.
• Pre-tax income saw a significant 73.2% increase compared to the second quarter of 2022.
• Diluted weighted average income per common share increased to $2.02 for the second quarter of 2023.
• The book value per diluted weighted average common share outstanding increased to $64.69 at June 30, 2023.

Negative

• Spare parts and equipment sales decreased to $4.6 million in the second quarter of 2023, compared to $6.8 million in the second quarter of 2022.

COCONUT CREEK, Fla., Aug. 03, 2023 (GLOBE NEWSWIRE) -- Willis Lease Finance Corporation (NASDAQ: WLFC) today reported second quarter total revenues of $109.0 million and pre-tax earnings of $19.0 million. For the three months ended June 30, 2023, aggregate lease rent and maintenance reserve revenues were $89.8 million and spare parts and equipment sales were $4.6 million. The Company reported increased total revenues in the second 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 driven by continued global recovery in travel.

“Our second quarter results reflect the fundamental strength of our core leasing business,” said Austin Willis, the Company’s Chief Executive Officer. “A scarcity of serviceable spare engines and strong demand from the airlines, continues to drive favorable lease rates and terms.”

“Despite huge demand and industry-wide shortages, our teams continue to deliver for our customers that planned ahead and signed up for our custom-built programs as well as for those requiring ad hoc support,” said Brian R. Hole, President. “As always, people make the difference and ours are world class.”

Second Quarter 2023 Highlights (at or for the period ended June 30, 2023, as compared to June 30, 2022, and December 31, 2022):

• Lease rent revenue increased by $17.7 million, or 48.3%, to $54.4 million in the second quarter of 2023, compared to $36.7 million in the second quarter of 2022. The increase is due to an increase in the number of engines acquired and placed on lease, including an increase in utilization compared to that of the prior period.
• Maintenance reserve revenue was $35.4 million in the second quarter of 2023, an increase of 46.1%, compared to $24.2 million in the same quarter of 2022. There was $6.8 million long-term maintenance revenue recognized for the three months ended June 30, 2023, compared to $15.1 million in the comparable prior period. “Non-reimbursable” maintenance reserve revenue is directly influenced by on lease engine flight hours and cycles. Engines out on lease with “non-reimbursable” usage fees generated $28.6 million of short-term maintenance revenues, compared to $9.2 million in the comparable prior period. As of June 30, 2023 and December 31, 2022, there was $19.8 million and $6.3 million, respectively, of cumulative deferred in-substance fixed payment use fees included in “Unearned revenue.”
• Spare parts and equipment sales decreased to $4.6 million in the second quarter of 2023, compared to $6.8 million in the second quarter of 2022.
• Gain on sale of leased equipment was $4.5 million in the second quarter of 2023, reflecting the sale of two engines and other parts and equipment from the lease portfolio. Gain on sale of leased equipment was $0.5 million in the second quarter of 2022, reflecting the sale of eight engines.
• There was no gain on sale of financial assets during the second quarter of 2023 as we did not sell any notes receivable. Gain on sale of financial assets was $3.1 million in the second quarter of 2022, reflecting the sale of four notes receivable.
• The Company generated $19.0 million of pre-tax income in the second quarter of 2023, a 73.2% increase as compared to pre-tax income of $11.0 million in the second quarter of 2022.
• The book value of lease assets we own directly or through our joint ventures, inclusive of our notes receivable, maintenance rights, and investments in sales-type leases, was $2,551.3 million at June 30, 2023. As of June 30, 2023, the Company also managed 339 engines, aircraft and related equipment on behalf of other parties.
• The Company maintained $242.0 million of undrawn revolver capacity at June 30, 2023.
• Diluted weighted average income per common share was $2.02 for the second quarter of 2023, compared to diluted weighted average income of $0.81 in the second quarter of 2022.
• Book value per diluted weighted average common share outstanding increased to $64.69 at June 30, 2023, compared to $64.27 at December 31, 2022.

Balance Sheet

As of June 30, 2023, $2,161.7 million of equipment held in our operating lease portfolio, $95.0 million of notes receivable, $14.0 million of maintenance rights, and $5.8 million of investments in sales-type leases, which represented 348 engines, 12 aircraft, one marine vessel and other leased parts and equipment. As of December 31, 2022, the Company had $2,111.9 million 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.

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 ended June 30,											Six months ended June 30,
			2023				2022			% Change				2023				2022			% Change
REVENUE
Lease rent revenue		$	54,416			$	36,704			48.3	%		$	107,636			$	74,829			43.8	%
Maintenance reserve revenue			35,415				24,245			46.1	%			58,913				39,079			50.8	%
Spare parts and equipment sales			4,550				6,792			(33.0	)%			9,602				13,422			(28.5	)%
Interest revenue			2,258				1,865			21.1	%			4,304				3,978			8.2	%
Gain on sale of leased equipment			4,461				498			795.8	%			4,328				2,796			54.8	%
Gain on sale of financial assets			—				3,116			(100.0	)%			—				3,116			(100.0	)%
Other revenue			7,896				4,855			62.6	%			13,748				9,672			42.1	%
Total revenue			108,996				78,075			39.6	%			198,531				146,892			35.2	%
EXPENSES
Depreciation and amortization expense			22,494				21,612			4.1	%			45,043				43,421			3.7	%
Cost of spare parts and equipment sales			3,058				7,014			(56.4	)%			7,557				11,876			(36.4	)%
Write-down of equipment			1,671				78			2,042.3	%			1,671				21,195			(92.1	)%
General and administrative			38,327				20,427			87.6	%			71,598				44,032			62.6	%
Technical expense			4,919				3,436			43.2	%			7,748				9,082			(14.7	)%
Net finance costs:
Interest expense			19,085				16,023			19.1	%			37,474				32,906			13.9	%
Total net finance costs			19,085				16,023			19.1	%			37,474				32,906			13.9	%
Total expenses			89,554				68,590			30.6	%			171,091				162,512			5.3	%
Income (Loss) from operations			19,442				9,485			105.0	%			27,440				(15,620	)		(275.7	)%
(Loss) Income from joint ventures			(474	)			1,469			(132.3	)%			(1,635	)			(1,147	)		42.5	%
Income (Loss) before income taxes			18,968				10,954			73.2	%			25,805				(16,767	)		(253.9	)%
Income tax expense (benefit)			5,152				5,046			2.1	%			7,595				(1,474	)		(615.3	)%
Net income (loss)			13,816				5,908			133.9	%			18,210				(15,293	)		(219.1	)%
Preferred stock dividends			811				811			—	%			1,612				1,612			—	%
Accretion of preferred stock issuance costs			21				21			—	%			42				42			—	%
Net income (loss) attributable to common shareholders		$	12,984			$	5,076			155.8	%		$	16,556			$	(16,947	)		(197.7	)%
Basic weighted average income (loss) per common share		$	2.04			$	0.83						$	2.65			$	(2.81	)
Diluted weighted average income (loss) per common share		$	2.02			$	0.81						$	2.57			$	(2.81	)
Basic weighted average common shares outstanding			6,354				6,129							6,239				6,040
Diluted weighted average common shares outstanding			6,442				6,246							6,449				6,040

Unaudited Consolidated Balance Sheets (In thousands, except per share data)
		June 30, 2023				December 31, 2022
ASSETS
Cash and cash equivalents		$	5,918			$	12,146
Restricted cash			49,094				76,870
Equipment held for operating lease, less accumulated depreciation			2,161,650				2,111,935
Maintenance rights			14,032				17,708
Equipment held for sale			2,713				3,275
Receivables, net of allowances			52,259				46,954
Spare parts inventory			41,764				38,577
Investments			53,716				56,189
Property, equipment & furnishings, less accumulated depreciation			37,329				35,350
Intangible assets, net			1,100				1,129
Notes receivable, net of allowances			95,047				81,439
Investments in sales-type leases, net of allowances			5,827				6,440
Other assets			83,507				87,205
Total assets		$	2,603,956			$	2,575,217
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses		$	41,927			$	43,040
Deferred income taxes			137,884				132,516
Debt obligations			1,827,021				1,847,278
Maintenance reserves			73,872				59,453
Security deposits			22,528				20,490
Unearned revenue			33,626				17,863
Total liabilities			2,136,858				2,120,640
Redeemable preferred stock ($0.01 par value)			49,931				49,889
Shareholders’ equity:
Common stock ($0.01 par value)			68				66
Paid-in capital in excess of par			21,740				20,386
Retained earnings			373,965				357,493
Accumulated other comprehensive income, net of tax			21,394				26,743
Total shareholders’ equity			417,167				404,688
Total liabilities, redeemable preferred stock and shareholders’ equity		$	2,603,956			$	2,575,217

CONTACT:	Scott B. Flaherty
	Chief Financial Officer
	(561) 349-9989

FAQ

What were Willis Lease Finance Corporation's total revenues for the second quarter of 2023?

Willis Lease Finance Corporation reported total revenues of $109.0 million for the second quarter of 2023.

What led to the increase in the company's total revenues in the second quarter of 2023?

The increase in total revenues was primarily due to an increase in the company's core lease rent and short-term maintenance revenues driven by continued global recovery in travel.

How did the company's pre-tax earnings perform in the second quarter of 2023?

The company reported pre-tax earnings of $19.0 million for the second quarter of 2023, reflecting a significant increase compared to the prior year period.

What was the percentage increase in lease rent revenue for the second quarter of 2023 compared to the same period in 2022?

The company reported a 48.3% increase in lease rent revenue for the second quarter of 2023 compared to the same period in 2022.

How did the company's diluted weighted average income per common share change in the second quarter of 2023?

Diluted weighted average income per common share increased to $2.02 for the second quarter of 2023, compared to $0.81 in the second quarter of 2022.