Willis Lease (WLFC) Earnings Call Transcript

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Date

Tuesday, Mar. 10, 2026 at 10 a.m. ET

Call participants

• Chief Executive Officer — Austin Willis
• Chief Financial Officer — Scott B. Flaherty

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Takeaways

• Revenue -- $193.6 million for the quarter, up 27%, and $730.2 million for the full year, up 28%.
• Adjusted EBITDA -- $459.1 million, an increase of 16.6% from the prior year, newly reported to reflect "the immense cash-generating capability of our enterprise."
• Earnings before tax (EBT) -- $160.6 million, a record figure directly attributed to strong demand for leasing and services.
• Lease portfolio utilization -- 85% average utilization, up from 83%, with a lease rental factor in excess of 1% per month.
• Dividend policy -- Introduced a recurring dividend of $0.40 per share, with recent quarterly dividends paid at the higher rate for six consecutive quarters.
• Leasing portfolio -- Total portfolio reached $3 billion in assets at year-end.
• Maintenance reserve revenues -- $232 million, up 8.4%, with $44.5 million from long-term lease returns and $187.5 million from short-term reserves.
• Spare parts and equipment sales -- $95.5 million to third parties, up markedly from $27.1 million, driven by a $57.8 million increase in equipment sales to joint ventures (Willis Mitsui); gross margin on parts sales was 2%, and on equipment was 3.6%.
• Gain on sale of lease equipment -- $54 million from $269.7 million in asset sales, representing a 20% margin; gain was $45.1 million in the prior year.
• Maintenance services revenue -- $25.5 million, up 5.5%, though gross margins in this segment were minus 9.5% due to ongoing investment in fixed base operator services.
• Other revenue -- $17.2 million, up 89%, driven mainly by management fees, with growth connected to expanded joint venture activity and fund management initiatives.
• Write-down of equipment -- $32.9 million, increased from $11.2 million, recorded after annual impairment testing and appraisals.
• G&A expenses -- $194.7 million, relatively flat as a percentage of revenue, with $15.3 million of the increase tied to higher share-based compensation, including $5.3 million for accelerated vesting related to an executive departure.
• Technical expense -- $31.4 million, up $9.1 million, reflecting growth in the engine portfolio and usage patterns.
• Net finance cost -- $135.1 million, up from $104.8 million, attributable to a higher debt level ($2.7 billion from $2.264 billion), new ABS and note issuances, and lower derivative receipts offset by some interest income and note reductions.
• Gain on sale of subsidiary -- $43 million from the sale of Bridgend Asset Management Limited (BAML) to Willis Mitsui, with an arm’s-length services agreement in place post-sale.
• Income from joint ventures -- $13.4 million, up 62%, driven by Willis Mitsui growth.
• Cash flow from operations -- $283.2 million, consistent with the prior year.
• Capital and strategic transactions -- $3.4 billion in related activity, including: three JOLCO financings ($60 million); two ABS transactions ($596 million and $392.9 million); a $750 million revolver for Willis Mitsui; new $600 million (Liberty Mutual) and $1 billion-plus (Blackstone) fund partnerships.
• New asset management platform -- Willis Aviation Capital launched, already secured $600 million (Liberty Mutual) and $1 billion-plus (Blackstone) funds, structured to include fee income and "carried interest" to WLFC as general partner and minority investor.
• Service business growth -- Nearly 300 of approximately 475 employees are in services; 57% of Wazee (parts) sales are intercompany; new core module restoration completed at Work US MRO, and materials agreement with CFM established to support engine repairs.
• Airframe maintenance initiatives -- Wazel fully operational; twelve maintenance checks completed; certified for 737NG C checks and A320ceo six-year checks, with business expected to grow alongside fleet retirements.
• Sustainable aviation fuel project terminated -- Management explicitly decided not to pursue the project due to a lack of "right to win" for required investment scale.
• Leverage (debt/equity) -- Reduced to 2.97x from 3.48x, reflecting improved balance sheet flexibility.
• Unrecognized market value -- Management estimates a $700 million unrecognized premium of maintenance-adjusted market value above balance sheet book value for the asset portfolio, exclusive of potential future end-of-lease payments or return conditions.

Summary

The call delivered material disclosure about Willis Lease Finance Corporation (NASDAQ:WLFC)’s expanded asset management business, including partnered funds set to drive incremental fee and carry revenue, and detailed the company’s record performance across topline, cash generation, and asset trading. Management stressed the critical role of engines in aviation market dynamics, linked to ongoing supply challenges and the structural need for more—and more frequent—engine shop visits, with a corresponding boost to both leasing and services demand. Key investment in the service platform, a move away from sustainable aviation fuel, and updates on dividend and leverage policy signal a sharpened focus on asset-backed, recurring revenue and scalable growth. Management confirmed the company’s $700 million market value premium above book, notably not including additional upside from contracted return conditions or new engine orders. Channel-specific growth in joint venture, fund management, and asset recycling was directly cited as a central component of forward strategy.

• Management stated that the majority of assets seeded into new funds will be from "origination in the marketplace," with only a modest portion from the company’s own balance sheet, and that asset transfers will generally produce market-consistent gains on sale.
• Management noted, "our leverage ticked lower over the year by over a half turn to 2.97x at year end 2025 from 3.48x," describing enhanced flexibility for opportunistic purchases and investments.
• CFO Scott B. Flaherty confirmed the $700 million premium estimate: "What I talked about was the $700,000,000, and that was looking at the disparity in the maintenance adjusted market value—the exercise that we go through every year on our entire portfolio—and the book value of our assets adjusted for the maintenance reserves," with incremental value possible from end-of-lease terms and options, neither quantified nor booked.
• Management disclosed that "Technical expense, which is predominantly unplanned maintenance and is expensed rather than capitalized, was $31,400,000," with the increase attributed to growth in leased engines and usage.
• Share-based compensation expenses rose substantially, with $5.3 million due to accelerated vesting upon an executive departure and further increases tied to share price appreciation, historical awards, and new hires, with future expense mitigation expected from cash incentive caps in 2026.
• CEO Austin Willis challenged the "asset-light" characterization, describing the company’s evolving model as "asset medium," and found strategic merit in balancing on- and off-balance sheet growth, fueled by funding partnerships rather than a shift away from ownership.
• Executives acknowledged the existence of pending insurance claims on written-down Russian assets, expressing confidence in eventual recovery but refraining from further disclosure.

Industry glossary

• ABS: Asset-backed securities—financing structures where pools of assets (here, aircraft engines and leases) back securities sold to investors.
• JOLCO: Japanese operating lease with call option—a cross-border aircraft financing product combining tax and structural benefits for lessors and lessees.
• LLP: Life-limited part—an engine component that has a defined life limit set by regulatory authorities and must be replaced after a certain number of cycles or flight hours.
• MRO: Maintenance, repair, and overhaul—services involving repairs and upkeep for aircraft engines and components.
• GTF: Geared turbofan—a modern aircraft engine with a reduction gear to improve efficiency, produced by Pratt & Whitney.
• CFM56, LEAP, V2500: Major families of commercial aircraft engines referenced for maintenance and leasing portfolio allocation.
• AOG: Aircraft on ground—industry term for aircraft out of service due to technical problems.
• Carried interest ("promote"): The share of fund profits allocated to the general partner (WLFC here) above their invested capital share, as compensation for asset management and performance.

Full Conference Call Transcript

Austin Willis: Thank you, operator. And thank you all for joining us today to discuss Willis Lease Finance Corporation's Fourth Quarter 2025 Financial Results. On our call today, I am joined by Scott B. Flaherty, our Chief Financial Officer. I encourage you to view our accompanying presentation illustrating details from our prepared remarks. We finished the year with strong performance, delivering record revenues for the fourth quarter of $193,600,000, a 27% increase year over year.

For the full year, we achieved record revenues of $730,200,000, a 28% increase, and record earnings before tax of $160,600,000, reflecting the growing demand for our products and services and the strength across the aviation market, as our global airline partners continue to rely upon Willis Lease Finance Corporation's leasing and services solutions to keep their fleets operating reliably and cost effectively. In addition to the revenue numbers described above, I would like to highlight our adjusted EBITDA of $459,000,000. We felt that highlighting EBITDA while adjusting for selected items would give investors a look at the immense cash-generating capability of our enterprise.

We saw strong utilization of our lease portfolio throughout the year, averaging 85%, up from 83% in 2024, while retaining an average lease rental factor in excess of 1% per month. Utilization is affected by engines that are in maintenance, and engines that we keep off lease to support programs like ConstantThrust. Our consistent business performance and confidence in the strength of the aviation market has enabled Willis Lease Finance Corporation to return capital to our shareholders. Accordingly, we recently declared a recurring dividend of $0.40 per share, reflecting our continued commitment to delivering long-term total returns to our shareholders. The aviation market has become engine-centric.

Engines are a critical constraint to both new aircraft deliveries as well as maintaining an operational aircraft fleet. While there is some optimism about improvements in aircraft AOGs resulting from delays in engine repairs, there are still over 600 aircraft powered by GTF engines that remain grounded and new technical issues that have arisen around LEAPs that threaten to require additional maintenance. The outlook for engine shop visits remains strong through the mid-2030s.

While we expect to see shop visits taper for the CFM56 and V2500 engine types, this will be more than replaced by the shop visits for the GTF and LEAP engines which represent a growing proportion of our portfolio and we feel will require more frequent and more expensive shop visits than previous generations, even after the teething issues have been resolved. We lease engines to airlines needing replacement power during shop visits. We sell spare parts to repair facilities overhauling engines. And finally, we repair engines ourselves. So the long-term demand environment for our business model looks robust.

Willis Aviation Capital is our recently announced asset manager, comprised of three key elements: discretionary fund management, management of joint ventures, and management of engines and aircraft for investors where Willis Lease Finance Corporation has no equity interest. And I am pleased to say that we are ready to begin deploying capital into our discretionary funds. We established a $600,000,000 fund with Liberty Mutual Insurance, where we are minority investors and the general partner. This fund will provide finance for aircraft engines at attractive interest rates and advance rates. We have provided loan-like products on our balance sheet for some time, but this structure will enable us to be even more competitive.

We are uniquely positioned to add value in that our leasing business gives us comfort in the asset should we need to repossess at any point. We established a separate fund with Blackstone Credit and Insurance for over $1,000,000,000. This fund will invest in engines and aircraft similarly to Willis Lease Finance Corporation’s proprietary investments. Willis Lease Finance Corporation will also be a minority investor and general partner in this fund as well. Both funds are funds of one. Our strategy is to deploy the capital alongside our joint venture and our own balance sheet, then establish follow-on funds with additional limited partners.

We earn a servicing fee from both funds as well as carried interest or promote that is payable based upon the funds’ performance. We look forward to building upon our 2025 fee-related revenue of $17,200,000 found in other revenue in our financials. These funds are not a shift in focus but rather an expansion of our focus onto both on- and off-balance-sheet aspects of managing assets.

By establishing these funds, we can increase our return on equity through fee income and carried interest, pursue more transactions that otherwise would have been too large for us, pursue larger transactions with single parties where we can disperse concentration among more pockets of capital, grow our services businesses—namely parts, MRO, and consulting—which benefit from significant intercompany revenue more quickly than we could strictly with on-balance-sheet growth. Finally, we can offer a more broad spectrum of products to our customers. Many airlines taking delivery of large numbers of engines are looking to finance some and sell some to lease back. With these funds, we can do both competitively.

Our platform also provides unique value to the limited partners invested in the funds. As mentioned with Liberty Mutual, we are well positioned to manage the collateral in the loans since it is the same collateral we lease out daily. With respect to the Blackstone fund, our services businesses will enable us to manage assets owned by these funds efficiently by getting them repaired quickly at our MROs and cost effectively with our used serviceable material and module exchanges. Our services businesses continue to provide a great deal of value to our overall platform. Of the 475 or so employees at Willis Lease Finance Corporation, nearly 300 are in our services businesses.

Wazee, our parts business, continues to create value by monetizing our unserviceable engines at a premium to what they would otherwise be sold for. In the fourth quarter, 57% of Wazee's sales were intercompany, supporting our two MROs. Our Work US and Work UK MROs had 15% and 31%, respectively, of their revenues from intercompany. The material and the MROs help us keep our book values and turn times down for our engines as well as our customers. I am proud to say that Work US recently performed its first core module performance restoration, replacing both LLPs as well as airfoils.

And when the engine tested, it achieved approximately 51.7 degrees of EGT margin at high thrust, a testament to the quality of the product we are producing. While this event alone is not significant, it is a big step towards becoming a more comprehensive maintenance provider. Similarly, we entered into a very novel materials agreement with CFM that was disclosed in a recent press release. We worked closely with CFM throughout 2025 on this initiative, and I am proud to say that we helped design a structure that we expect will facilitate the repair of CFM56 engines in order to keep the fleet flying.

We expect this to be a structure to help drive further business to and for our MROs. Wazel, our airframe maintenance facility in the UK, is now fully up and running and certified to perform all C checks on 737NG and up to 6Y checks on A320ceo aircraft. We have performed 12 maintenance checks in 2025, and have good line of sight on business for the next 12 months. The airframe maintenance is going to become increasingly important as our aircraft leasing portfolio grows. Equally important is the support Wazel can provide for aircraft teardowns which we expect to track with fleet retirements in the future.

In the European market, we see robust demand for maintenance checks in the winter season. During the summer season, we focus more on supporting leasing companies and airlines for maintenance and aircraft disassembly, where we also buy or lease out engines as they are removed from the disassembled airframes. We elected to no longer pursue our sustainable aviation fuel project. This was a very difficult decision, but we decided that, ultimately, our right to win in the space was not as strong as we feel is necessary to support the type of investment that is required.

We hope another party can carry it forward because it is a strong project and we feel that decarbonizing aviation is critical for ensuring the long-term viability of commercial air travel. Finally, I would like to welcome David Hook to our team who will run M&A for us. David is a reformed investment banker from Bank of America and a longtime pilot in the Marine Corps. He brings a wealth of knowledge and perspective and we are fortunate to have him.

Similarly, Brian Hole, who was the President of Willis Lease Finance Corporation from 2016 until 2025, has moved to head up Willis Aviation Capital, and he has hired Steve Bridgeland, a well-respected industry veteran, to act as the Head of Investor Relations and Capital Markets for Willis Aviation Capital. Thanks to you three gentlemen, and thank you to the Willis team for delivering another great year of performance. With that, I will hand it over to Scott B. Flaherty.

Scott B. Flaherty: Thank you, Austin. And good morning all. 2025 was another record year for Willis Lease Finance Corporation. Revenues of $730,200,000, up 28.3% from 2024, record earnings before tax, or EBT, of $160,600,000 for the year. Adjusted EBITDA, a new metric we are reporting, highlighting the strength of the cash flow of the Willis enterprise, was $459,100,000, up 16.6% from $393,700,000 in the prior year. Walking through the P&L, record revenues were driven by core lease rent revenues of $291,600,000 and interest revenues of $14,100,000. Growth in these line items reflects our increased total portfolio size of $3,000,000,000 at year end 2025.

Our total owned portfolio is presented on our balance sheet as equipment held for operating lease, maintenance rights, notes receivable, and investment in sales-type leases. In 2025, the company purchased equipment, including capitalized shop visit costs, totaling $524,600,000. This growth was partially offset on the balance sheet by $215,600,000 of equipment book value sales, $106,300,000 of lease portfolio asset depreciation, $41,500,000 of asset transfers into held for sale, $32,900,000 of impairment write-downs, and $23,100,000 of payments received against our outstanding notes receivable and sales-type leases. Maintenance reserve revenues for the year were $232,000,000, up $18,100,000, or 8.4%, from 2024.

As you peel back the numbers, you can see that $44,500,000 of these maintenance reserve revenues were long-term maintenance reserves associated with engines coming off long-term lease, up from $39,400,000 in the prior year. In 2025, we had 19 assets come off long-term lease compared to 20 assets in 2024. $187,500,000 of our maintenance reserve revenues were short-term maintenance reserves compared to $174,500,000 in 2024. This continued strong cash flow is representative of the demand for our portfolio, the number of engines on short-term lease conditions, and the success of our program offerings. Spare parts and equipment sales to third parties were $95,500,000 in 2025 compared to $27,100,000 in 2024.

The $68,400,000 increase in sales was driven by $37,700,000 of spare parts sales, up $11,600,000, or 44.4%, from the prior year. Gross margin on these spare parts sales was 2% for the year, but more importantly, provided the Willis platform and our customers access to high-demand used serviceable material to keep fleets flying. $57,800,000 of these sales related to equipment sales primarily to our joint venture partner, Willis Mitsui, compared to $1,000,000 of similar sales in 2024. We recognize gross revenues on equipment sales when the asset has not been on lease in our portfolio. Margin on the equipment sales was $2,100,000, or 3.6%.

Gain on sale of lease equipment, a net revenue metric, was $54,000,000 in 2025 and was associated with $269,700,000 of gross equipment sales, representing an effective 20% margin on such sales. This compares to a gain of $45,100,000 in 2024 where we saw similar healthy margins in excess of 20%. Our trading activities are an important part of Willis Lease Finance Corporation's efforts to recycle the portfolio, keeping it relevant to our customer base. Maintenance services revenue, which represents fleet management, engine and aircraft storage and repair services, and revenues related to management of fixed base operator services, was marginally up in 2025 to $25,500,000 as compared to $24,200,000 in 2024.

The 5.5% growth in maintenance services was driven by a $5,300,000 increase in aircraft maintenance services and partially offset by a decline of $4,500,000 related to the sale of our fleet management business in 2025. Gross margins in maintenance services were minus 9.5% as we are still in the buildout stages of our fixed base operator services. Furthermore, these sales exclude the intercompany sales, which are eliminated in consolidation. We believe that our maintenance service offerings provide a differentiated solution to our customers and create incremental lease opportunities for our business. Other revenue increased by $8,100,000, or 89%, to $17,200,000 from $9,100,000 in 2024.

Other revenue primarily is driven by management fees, and has grown alongside the growth of our Willis Mitsui joint venture portfolio. We would expect our fund initiatives as well as the continued growth of our Willis Mitsui joint venture and our management of engines for third parties to fuel this growth on a go-forward basis. On the expense side of the equation, depreciation for 2025 was up $19,100,000 to $111,600,000 as we increased the portfolio size but also as we placed new assets on lease for the first time, which starts their depreciation cycle. Write-down of equipment was $32,900,000 for the year as compared to $11,200,000 in 2024.

As we go through our annual impairment process, we obtain appraisals on all of our engines and aircraft assets. When looking at our year-end 2025 maintenance adjusted market value of our portfolio—which includes our equipment held for operating lease, maintenance rights, and financial assets in the aggregate representing our portfolio—and comparing this value to the book value of our portfolio net of any on-balance-sheet maintenance reserves, we see an unrecognized market value in excess of our balance sheet book value of approximately $700,000,000. This excess value excludes any potential future end-of-lease payments or other contractual return conditions, which adds even more value to the portfolio. G&A was $194,700,000 in 2025, compared to $146,800,000 in 2024.

G&A as a percentage of total revenue remained relatively flat year over year. Increases in the overall G&A spend were related to a $23,700,000 increase in personnel costs which included a $15,300,000 increase in share-based compensation expense and a $4,200,000 increase in wages. Of the $15,300,000 increase in share-based compensation, $5,300,000 related to the acceleration of vesting of shares associated with the departure of our former general counsel. The remainder of increased share-based compensation costs was associated with the appreciation of our share price and the effect of such appreciation on older stock-based compensation awards. To a lesser extent was also the effect of share-based compensation awards associated with new hires.

In 2025, the company modified its share-based compensation program to reflect significant appreciation in the price of the company's public equity. These changes phase in over time as historical awards, expensed over multiple years as they vest, flow through the P&L. Also, starting in 2026, the company has modified its cash incentive compensation plan incorporating caps which will further reduce cash compensation expense. Lastly, $4,700,000 of the increase relates to higher legal fees primarily associated with finance initiatives as well as startup costs of the company's new partnerships on the fund side of the business. Technical expense, which is predominantly unplanned maintenance and is expensed rather than capitalized, was $31,400,000 for the year, up $9,100,000 from the prior year.

The increased level of technical expense is in line with the growth of the portfolio, the number of engines on short-term lease conditions, and the usage of the portfolio. Net finance costs were $135,100,000 in 2025 compared to $104,800,000 in 2024.

The increase in costs was related to an increase in indebtedness as total debt obligations increased from $2,264,000,000 at year end 2024 to $2,700,000,000 at year end 2025; a $4,700,000 increase in year-over-year interest expense on our warehouse facility as this facility was not in place until May 2024, and therefore only had half a year of interest expense and related fees; $17,800,000 of incremental expense associated with our West 8 notes which did not close until June 2025; $6,200,000 of less derivative receipts as certain swap positions matured in 2024 and 2025.

The increase in interest expense was partially offset by increasing interest income associated with the increased restricted cash on our ABS financings and savings on our fully paid off West 4 ABS notes and partially paid off West 7 ABS notes. In 2025, the company recognized a $43,000,000 gain associated with the sale of our wholly owned subsidiary, Bridgend Asset Management Limited, or BAML, to our joint venture Willis Mitsui for $45,000,000. BAML, now doing business as Willis Mitsui and Company Asset Management Limited, continues to provide services to the Willis platform on an arm’s-length market pricing basis.

The company also picked up $13,400,000 in earnings from our 50% ownership interests in our Willis Mitsui and CASIC Willis joint ventures, which was up 62% from $8,200,000 in 2024. Income from joint ventures was primarily driven by growth in our Willis Mitsui joint venture. Income tax expense was $46,800,000 for the year, up $2,800,000, or 6.4%, from the prior year. The company's effective tax rate for the year was 29.2%, which differed from the 21% federal statutory rate predominantly due to Section 162 addbacks as well as certain discrete tax effects associated with the sale of our BAML business.

The company's actual cash tax payment in 2025 was $3,400,000, as we benefit from significant depreciation tax shields associated with our leasing portfolio. The company produced $108,100,000 of net income attributable to common shareholders, factoring GAAP taxes and the cost of our preferred equity, which was up 3.5% from $104,400,000 in 2024. Diluted weighted average income per share was $15.39 in 2025 compared to $15.34 in 2024. Adjusted EBITDA, a metric we have included in our new financial disclosures, speaks to the normalized cash flow generation of the Willis enterprise.

Our adjusted EBITDA makes adjustments to our net income attributable to common shareholders for income tax expense, interest expense, preferred stock dividends and costs, depreciation and amortization expense, stock-based compensation expense, the write-down of equipment, acquisition financing and divestitures-related expenses, and other discrete gains and expenses, including the onetime gain on the sale of our BAML business and our sustainable aviation fuel project-related expenses incurred in 2024 and 2025. The adjusted EBITDA for 2025 was $459,100,000, up 16.6% from $393,700,000 in 2024. Cash flow from operations was $283,200,000 in 2025, in line with 2024.

On the financing and capital structure side of the business, the company completed a series of capital market and strategic transactions, many in the fourth quarter, to support the growth of our on- and off-balance-sheet businesses.

2025 included approximately $3,400,000,000 of capital and strategic activity for Willis Lease Finance Corporation and our affiliated businesses, including three JOLCO transactions raising approximately $60,000,000 of capital between March and April; $596,000,000 of ABS financings through our West 8 transaction in June; a first-time $750,000,000 revolving credit facility at our Willis Mitsui joint venture in October; $392,900,000 of ABS financing through our West 9 transaction in December; a $600,000,000 partnership with Liberty Mutual Investments to support our fund business focused on loan and loan-like assets in December; and a $1,000,000,000-plus partnership with Blackstone Credit and Insurance to also support our fund business focused on operating lease assets, also in December.

We continually look to diversify our sources of funding and minimize our overall cost of capital and have been successful accessing numerous markets over the years. In 2025, we returned $8,700,000 of capital to our shareholders in the form of common dividends. In November 2025, we paid our sixth consecutive quarterly dividend at an increased rate of $0.40 per share; subsequent to year end, we declared and then paid in February our seventh consecutive regular quarterly dividend, which was at the higher $0.40 per share rate. A recurring dividend provides shareholders with a moderate current cash yield on their investment while not degrading the strong cash flow of our business.

With respect to leverage, as defined as total debt obligations, net of cash and restricted cash, to equity inclusive of preferred stock, our leverage ticked lower over the year by over a half turn to 2.97x at year end 2025 from 3.48x at year end 2024. This level of leverage provides the company with flexibility to make opportunistic purchases and investments. With that, I hand the call back to Austin.

Austin Willis: Thank you, Scott. Putting it all together, 2025 was a terrific year from a performance perspective. But more importantly, we laid the groundwork for a long-term strategy using Willis Aviation Capital to accelerate growth in both assets under management as well as through our services businesses. Thank you all for joining us today. I will now turn the call back to the operator for Q&A.

Operator: Thank you. Signal to reach our equipment. A voice prompt on your phone line will indicate when your line is open, and we ask that you state your name when posting your question. Once again, star one for questions. We will pause for just a moment. We will take our first question from Zach Peflin with Buckley Capital.

Zach Peflin: Guys, thanks for taking my question. Can you talk a little bit about your plans for seeding the Blackstone portfolio? How much of your own engines do you think you might end up selling into that entity?

Austin Willis: Hey, Zach. Good to hear from you. So we are not going to disclose specific amounts, but I will say that we do have a small seed portfolio that we intend to move over into both Blackstone and Liberty Mutual. But the lion's share of the assets that we expect to populate in these funds will be from origination in the marketplace.

Zach Peflin: Got it. And then the assets that you would be seeding those funds with, would there be a gain on sale associated with those, I am assuming, if they are trading below fair market value?

Austin Willis: Yeah. I mean, I would say it is consistent with other asset sales you have seen in the marketplace generally.

Zach Peflin: Got it. And but you are not going to give the sort of direction or specificity around what percentage of the portfolio you might be selling into that.

Scott B. Flaherty: Sure, Zach. It is Scott. No. We are not going to give an exact number. But as Austin said, there is materiality to the portfolio. And as I mentioned in my earlier comments about the value of the portfolio, when we looked at the maintenance adjusted market values and the premium to the book values, we would expect to continue to see gains on the movement of those assets.

Zach Peflin: Got it. That is helpful. And then I guess maybe just a follow-up on that. For the engines that you will be buying for those portfolios, can you maybe talk about your competitive advantages and sort of sourcing those engines and buying, you know, at full-on market prices.

Austin Willis: Sure. So it is consistent with our business model generally. We have a good relationship with the OEMs and we do have an order book with CFMI for LEAP engines. That is one source. Another source is buying from other leasing companies where we think we have got a value add on the powerplant side. And a lot of that is aircraft-for-engine strategy. And then lastly is programs. You know, we have been very successful at originating high-volume, low-price assets for programs because we are adding more value than simply the dollars that we are spending to acquire the asset. It is really helping them defer maintenance long term.

So those are some key areas for us, and we expect to continue originating through those pathways.

Zach Peflin: Got it. Thanks so much. That is all for me.

Scott B. Flaherty: You bet. Thanks.

Operator: Thank you. We will take our next question from William Waller with M3F.

William Waller: As it relates to Willis Aviation Capital and the Blackstone investment, you mentioned the $1,000,000,000 number. I am curious if you can utilize the access that you guys have had to the asset-backed securities market to then lever that. You guys are probably pretty unique in that you have a much lower cost of funds, given the success you have had and the history you have had in the asset-backed securities market. So just curious if that $1,000,000,000 could then be leveraged kind of as you have done with your own capital in the past or how you are looking at that.

Scott B. Flaherty: Sure. Thanks for the question. I think one thing to note is when we talk about $1,000,000,000 plus, we are talking about $1,000,000,000 plus of metal. And, therefore, the fund or the equity dollars themselves will be less than the billion dollars, and that billion dollars plus does contemplate the leverage on those assets. And, yes, we are a regular issuer into the ABS market, so I would not be surprised if, ultimately, debt financing was structured in a way that was not dissimilar from what you have seen historically.

William Waller: Okay. Great. And then on the appraised value number, your stated equity—common equity—is about $662,000,000. You mentioned the appraised value in excess of, you know, what you carry them on the books at, of your equipment is about $700,000,000. You then also mentioned the maintenance dynamic. Would that be reflected in the maintenance reserve liability related to long-term leases where you have not had those engines come back off lease, where you would add that in as well.

Scott B. Flaherty: Sure. What I talked about was the $700,000,000, and that was looking at the disparity in the maintenance adjusted market value—the exercise that we go through every year on our entire portfolio—and the book value of our assets adjusted for the maintenance reserves. Right? Ultimately, those maintenance reserves will come back into the value of the assets. What I said on top of that, and I did not quantify, was that we do have engines that are on long-term lease conditions that maybe are not paying a maintenance reserve, have an end-of-lease component, or have a contractual return condition to come back following a full shop visit. That would all be incremental value above and beyond the $700,000,000 disparity.

William Waller: Okay. Great. And then your order book, there is there is nothing being factored into that for the order book. So the order book, if you have, say, prices for options to acquire LEAP engines at below current market value prices, that would not be included in that $700,000,000 as well. Correct?

Scott B. Flaherty: Correct. Correct.

William Waller: Okay. Great. And then as it relates to your long-term maintenance revenue, that number was down in the fourth quarter. I realize it is lumpy given you only account for that as you actually get the, you know, as you get the engines back in your possession. I see that maintenance reserve liability increased by about $13,300,000 from the 2025 to the 2025. Would it be safe to assume that had you gotten those back your earnings would have almost been double what you reported. Correct?

Scott B. Flaherty: Sure. I think you are highlighting a good point. Right? The long-term maintenance reserve component is lumpy. We had in the fourth quarter of 2024, we had, you know, approaching $15,000,000. In 2025, we had approximately $55,000,000. But when you look for the full year, we had in 2025, almost $45,000,000 compared to $39,000,000, or approaching $40,000,000, in 2024. That is lumpy over time, but consistently, we see growth as the portfolio builds. So I think that is something, you know, if you are thinking about modeling, you really have to normalize over time.

Austin Willis: Yeah. And to reiterate what Scott is saying, if you look at the annualized numbers for 2024 and 2025, the percentage or the proportion of long-term relative to short-term is pretty consistent.

William Waller: Okay. Great. And then, just one or two more quick ones. We saw an 8-K that you repurchased some shares during the fourth quarter. What are your views on share repurchases, you know, given it looks like you will be going more towards an asset-light model where I am guessing capital, you know, the need for all the cash and the capital that you are generating may not be as significant going forward. How are you looking at repurchases?

Austin Willis: So I will first challenge the asset-light terminology. I think I know it sounds a bit tongue in cheek, but I would probably call us asset medium. You know, we have been the beneficiaries of owning assets on balance sheet for 40-plus years. And I think we have shown that we are good at it, and it serves us quite well. We are going to continue to grow to the extent that we can with respect to leverage. I do think you are right. There is an opportunity to, you know, to deploy the existing capital in Blackstone and Liberty Mutual and potentially not deploy as much on balance sheet. But that is not necessarily the strategy for us now.

We are really pursuing growth on all fronts.

William Waller: Okay. And then lastly, the engines that you guys wrote down related to Russia, we have seen most companies like AerCap and Air Lease, you know, recapture a lot of that value in the form of insurance claims. You guys, do you still have any sort of insurance claims pending on that? Surprised we have not seen anything. Just kinda curious as to an update on that.

Austin Willis: Yeah. We do. And for that reason, I cannot go into too much detail. But I think if you look at some of the judgments that we have seen, both in Europe and in the US, we feel pretty confident in what the recovery is going to look like. But I will kinda leave it there.

William Waller: Okay. Great. Thanks a lot. I really appreciate it.

Austin Willis: Thank you, William. I appreciate the good questions.

Operator: Thank you. That will conclude our question and answer session. At this time, I would like to turn the call back over to Austin Willis for any additional or closing remarks.

Austin Willis: Only to say thank you for joining us today, thank you for being shareholders. 2025 was a great year, and we look forward to 2026.

Operator: Thank you. That will conclude today's call. We appreciate your participation.

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