WILLIS LEASE FINANCE Q2 FY26 earnings call WLFC

WLFC continues to execute its strategy of growing assets under management, which increased 21% to $4.4 billion in Q2 2026. This growth is driven by both on-balance sheet assets and the expansion of Willis Aviation Capital (WAC) to $1.4 billion, an 80% increase year-over-year. The company has largely completed seeding its Blackstone and Liberty Mutual funds, with $1.3 billion of additional capital ready for deployment in discretionary funds.

The company's consolidated portfolio is 60% modern tech engines (LEAP, GTF, GEnx), positioning it well for future demand. While older engine types (CFM56, V2500) saw reduced flight hours and maintenance reserve revenue due to higher fuel prices, demand for LEAP and GTF engines is expected to accelerate as they mature and require more frequent maintenance. WLFC's "constant thrust" product is designed to facilitate transitions from older to newer assets.

WLFC has increased its focus on M&A, participating in both marketed and off-market deals. The company recently acquired entities owning 3 Airbus A330-300 aircraft and signed definitive documentation to acquire entities owning an additional 12 commercial aircraft and 13 aircraft engines. These acquisitions expand the portfolio and customer base, with sellers increasingly preferring entity sales to avoid lengthy novation processes.

The Services business remains a strategic advantage, with a major engine storage agreement signed with Pratt & Whitney. This reflects confidence in WLFC's maintenance facilities in the US and UK, with plans for a new center in Asia. The Willis Engine Repair Center (WERC) model is replicable, enhancing the company's ability to provide differentiated offerings and increase profitability.

WLFC maintains a strong capital structure with low leverage of 2.78x. The company issued $200 million in 2.5% convertible senior notes due 2031, using proceeds to delever its revolving credit facility and enhance business flexibility. This move converts higher-cost revolver leverage to lower-coupon convertible debt, immediately accretive to the P&L. A 3-for-1 stock split was also effected to increase liquidity for investors.