Willis Lease Finance (WLFC) Q1 2025 Earnings Call May 06, 2025 10:00 AM ET Company Participants Austin Willis - CEOScott Flaherty - EVP & CFOLouis Raffetto - Senior VP, Equity ResearchWilliam Waller - Portfolio ManagerEric Gregg - Founder and Principal Conference Call Participants Hillary Cacanando - Analyst Operator Day, and welcome to the Willis Lease Financial Corporation First Quarter twenty twenty five Earnings Call. Today's conference is being recorded. We would like to remind you that during this con ...

Willis Lease Finance (WLFC) Q1 2025 Earnings Call May 06, 2025 10:00 AM ET Speaker0 Day, and welcome to the Willis Lease Financial Corporation First Quarter twenty twenty five Earnings Call. Today's conference is being recorded. We would like to remind you that during this conference call, management will be making forward looking statements, including statements regarding our expectations related to financial guidance, outlook for the company and our expected investment and growth initiatives. Please note ...

Financial Data and Key Metrics Changes - GE Aerospace reported adjusted revenue of $35 billion in 2024, with revenue growth in double digits and profit increasing by $1.7 billion [10] - Free cash flow rose by $1.3 billion, indicating strong financial performance driven by operational and commercial successes [10][12] - The company returned over $6 billion to shareholders through share repurchases and dividends, achieving a total shareholder return of 65% in 2024, significantly outperforming the S&P 500 Industrials Index [13] Business Line Data and Key Metrics Changes - The aftermarket services segment accounted for approximately 70% of total revenue, highlighting its importance to the company's financial health [10] - Orders for more than 4,600 engines were secured in 2024, with significant commitments from major airlines and defense sectors [11] - The LEAP engine program is a key growth driver, with aftermarket capacity expanded by 40% in 2024 and enhancements expected to double its time on wing performance [12] Market Data and Key Metrics Changes - The commercial services backlog stands at over $140 billion, providing visibility for future revenue growth [17] - The aerospace sector has benefited from a tariff-free regime since 1979, contributing to a $75 billion annual US trade surplus [40] - Supply chain constraints were identified as a challenge, particularly related to 15 priority supplier sites, but improvements were made to increase material input by 26% in the second half of 2024 [15][46] Company Strategy and Development Direction - The company is focused on service and readiness, with a strategy that emphasizes operational efficiency and customer satisfaction [13] - GE Aerospace plans to invest over $3 billion annually in R&D to advance technologies that will shape the future of flight, including open fan engines and hypersonics [48][49] - The integration of engineering and supply chain teams into a new technology and operations organization aims to enhance collaboration and accelerate problem-solving [16][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering another strong year in 2025, supported by a robust start and a significant commercial services backlog [17] - The company is navigating macroeconomic uncertainties while focusing on sustainable improvements to meet demand in 2025 [46] - Management emphasized the importance of maintaining investments in key priorities despite the challenges posed by heightened tariffs [41][42] Other Important Information - The company has a diversified fleet of preferred platforms across narrow body and defense sectors, which enhances its competitive advantage [18] - GE Aerospace's commitment to safety, quality, delivery, and cost remains a core principle guiding its operations [18] Q&A Session Summary Question: What are your current and future views on the administration's tariffs as it applies to GE Aerospace growth and supplies to and from other countries? - Management supports the administration's focus on American competitiveness and plans to invest $1 billion in US manufacturing while hiring 5,000 workers [40] - Heightened tariffs are expected to result in additional costs, but the company is taking actions to offset these impacts, estimating a reduction of incremental costs to $500 million in 2025 [41][42] Question: What were factors in 2024 that limited revenue growth for commercial engines and services in the company overall? - While total company revenue was up double digits, supply chain and material constraints were significant challenges, particularly from priority suppliers [44] - The company is reorganizing teams to improve transparency and stability with suppliers, aiming for increased output in 2025 [46] Question: What technologies is the company most excited about? - The company is investing in technologies that will shape next-generation aviation, including RISE technologies for commercial aerospace and advanced engines for defense [48][49]

Financial Data and Key Metrics Changes - AerCap reported GAAP net income of $643 million and earnings per share (EPS) of $3.48 for Q1 2025, with adjusted net income of $679 million and adjusted EPS of $3.68, leading to an increase in full-year EPS guidance [5][12][16] - The company experienced a net maintenance contribution of $82 million, significantly higher than the typical range of $30 million to $40 million, primarily due to lower leasing expenses [12][13] - The net gain on sale of assets was $177 million, with total sales revenue of $683 million from 35 owned assets, resulting in a 35% unlevered gain on sale margin [13][14] - Total sources of liquidity were approximately $20 billion, including over $1 billion in cash and $11 billion in revolvers and other committed facilities [14][15] Business Line Data and Key Metrics Changes - The passenger aircraft segment saw strong demand, particularly for 787s, with successful transitions of three midlife 787s between customers in Europe [6][11] - A sale leaseback transaction worth $7.87 million was executed with a new customer, indicating strong interest in AerCap's offerings [7] - The company ordered 268 new LEAP engines in 2024, with over 120 already delivered, highlighting the operational capacity expansion in line with the growing fleet [8][10] Market Data and Key Metrics Changes - AerCap's airline customers maintained a 99% utilization rate and an 84% extension rate during the period, reflecting strong market demand despite uncertainties [5][16] - The company noted that the U.S. market represents only about 22% of the global market, emphasizing the importance of international markets in overall demand [51][64] Company Strategy and Development Direction - AerCap announced a new $500 million share repurchase program, reflecting confidence in its financial position and commitment to returning value to shareholders [5][16] - The company continues to focus on long-term fleet management strategies, emphasizing the importance of maintaining a modern fleet and avoiding short-term decision-making [56][65] - AerCap is exploring opportunities in the helicopter business, with recent agreements for leasebacks of new helicopters, indicating a diversification strategy [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about robust demand for the foreseeable future, despite some macroeconomic uncertainties [11][17] - The company acknowledged potential delays in the 777 freighter conversion program but remains confident in achieving strong performance for the year [16][17] - Management highlighted the importance of maintaining a strong balance sheet and low leverage, positioning the company well for future growth [17] Other Important Information - AerCap was upgraded to BBB+ by Fitch, achieving this rating across all three major rating agencies [15] - The company has repurchased over $1 billion worth of stock so far this year, taking advantage of market volatility [16][18] Q&A Session Summary Question: Expectations for bilateral transactions in light of tariff uncertainty - Management expects to see more bilateral negotiations due to the company's scale and global reach, particularly in engines and helicopters [20][21] Question: Impact of buyback on EPS guidance - The increase in EPS guidance was primarily driven by gains on sale and higher net maintenance contributions, with some offset from delays in the freighter conversion program [22][24] Question: Capital deployment in engines and helicopters - Management indicated ample capital availability for deployment in engines and helicopters, emphasizing profitability over growth for its own sake [30][31] Question: Indicators of demand trends - Management noted that while U.S. airlines are adjusting capacity, long-term fleet decisions remain strong, with no current reduction in demand [51][52] Question: Composition of aircraft buyers - Recent sales were approximately a quarter to airlines, a third to other lessors, and a third to investors, with minimal sales to end-of-life part outs [67] Question: Tariff impacts on lessors - Management discussed the potential for tariffs to affect aircraft supply and pricing, emphasizing the importance of maintaining access to used aircraft markets [68][72] Question: Future demand for wide-body aircraft - Strong demand for wide-body aircraft has been observed, with management confident in the market's growth potential [98][99]