Aercap Holdings N.v. · NYSE:AER
Aercap — Investor Day (2024)
29 slides from Aercap's investor day presentation, 2024
Slide 1: Finance – Peter Juhas, Chief Financial Officer
FINANCE PETER JUHAS CHIEF FINANCIAL OFFICER
Slide 2: Key Messages
KEY MESSAGES Significant Financial Outperformance Strong Liquidity and Funding Foundation Consistent Cash Flow Creates Financial Flexibility Optimized Capital Allocation and New Dividend Policy Compelling Investment Opportunity © AerCap 79
Slide 3: Financial Performance
FINANCIAL PERFORMANCE © AerCap
Slide 4: Financial Highlights for 2023
FINANCIAL HIGHLIGHTS FOR 2023 ~$ 2.4 ~$ 5.3 $ 10.73 ~22% ~25% BILLION BILLION RECORD RECORD RECORD UNLEVERED BOOK VALUE ADJUSTED NET OPERATING ADJUSTED EARNINGS GAIN-ON-SALE PER SHARE INCOME CASH FLOW PER SHARE MARGIN GROWTH See Supplemental Information – Adjusted Net Income and EPS Reconciliation a
Slide 5: ESG Highlights for 2023
ESG HIGHLIGHTS FOR 2023 AerCap continues to make progress on key environmental sustainability, social responsibility and governance matters ESG RATING AGENCY UPGRADES PROGRESS ON OUR ~75% NEW DIVERSITY, EQUITY, - MSCI & SUSTAINALYTICS TECHNOLOGY TARGET BY 2024 INCLUSION & BELONGING STAKEHOLDER COLLA
Slide 6: Raising Full Year 2024 Guidance
RAISING FULL YEAR 2024 GUIDANCE Full year 2024 adjusted EPS guidance increased to ~$9.20, not including additional 2Q - 4Q 2024 gains on sale 2024 2024 Adjusted Adjusted Earnings Earnings PerPer Share Share Guidance Guidance • Key drivers of outperformance include: ~$9.20 $9.00 ~$0.70 1Q’24 gains •
Slide 7: Liquidity and Funding
LIQUIDITY AND FUNDING © AerCap
Slide 8: Strong Liquidity & Funding Foundation
STRONG LIQUIDITY & FUNDING FOUNDATION $ % ACCESS TO LIQUIDITY DEBT INTEREST LEVERAGE CAPITAL MIX RATE RISK Diverse sources Sources-to- Secured debt-to- Hedging interest 2.40 to 1 of funding uses ratio of 1.7x total assets rate exposure adjusted of ~14% leverage ratio See Supplemental information – C
Slide 9: Diversified Funding Model
DIVERSIFIED FUNDING MODEL AerCap has a diversified funding model and executed a broad array of financing transactions in 2023 ~$8.1B ~$2.8B SECURED BANK / TERM ~$2.5B LOANS / OTHER DEBT CAPITAL MARKET SECURED BANK ISSUANCES TRANSACTIONS ~$3.1B OTHER UNSECURED 2023 DEBT / RCF 2023 SOURCES OF ~$1.6B O
Slide 10: Diversified Funding Footprint
DIVERSIFIED FUNDING FOOTPRINT With 100+ banking relationships, AerCap’s banking group is geographically diversified AMERICAS EMEA ASIA PACIFIC 2023 2023 2023 ~$7.7B ~$8.2B ~$5.2B 28 25 57 LENDERS LENDERS LENDERS See Supplemental information – Endnotes. © AerCap 87
Slide 11: Diversified Funding Footprint
DIVERSIFIED FUNDING FOOTPRINT With 100+ banking relationships, AerCap’s banking group is geographically diversified AMERICAS EMEA ASIA PACIFIC UK Germany Ireland $1.6B $2.3B China Canada $1.6B $0.1B $0.5B Switzerland Japan United States Netherlands $0.5B $6.0B $2.1B $0.4B France South Korea Spain $2
Slide 12: Financial Flexibility
FINANCIAL FLEXIBILITY © AerCap
Slide 13: Best-in-Class Operating Cash Flow
BEST-IN-CLASS OPERATING CASH FLOW AerCap is outperforming other aircraft lessors by a wide margin Last 12 Months Operating Cash Flow / Average Total Assets 10% 9% 8% AerCap 7.5% 7% 6% Other Aircraft Lessors 5% 4% 3% 2% 1Q21 3Q21 1Q22 3Q22 1Q23 3Q23 See Supplemental information – Endnotes. © AerCap 9
Slide 14: Proven Financial Flexibility
PROVEN FINANCIAL FLEXIBILITY AerCap’s adjusted leverage ratio has consistently been ~2.5x or less since 4Q 2022 Adj. Leverage Ratio (Net Debt / Equity) Sept 2020: Charge Mar 2022: Charge related related to Covid-19 to Ukraine Conflict 3.1x 2.9x 2.7x Target Adj. Leverage Ratio 2.7x 2.5x 2.3x Mar 2021
Slide 15: Upward Ratings Trajectory
UPWARD RATINGS TRAJECTORY AerCap is currently rated BBB with the 3 main rating agencies and is on positive outlook with Moody’s and S&P A3 A- Baa2 BBB A- BBB Positive Positive Stable Baa1 BBB+ BBB+ FEB. 2023 OCT. 2019 MAR. 2023 Baa2 UPGRADE BBB UPGRADE UPGRADE BBB FEB. 2017 MAR. 2016 JUL. 2016 UPGRA
Slide 16: Capital Allocation
CAPITAL ALLOCATION © AerCap
Slide 17: Effective Capital Allocation
EFFECTIVE CAPITAL ALLOCATION Dynamic capital allocation policy enables deployment of capital towards its most productive uses ORGANIC DE-LEVERING GROWTH RETURN OF M&A CAPITAL STRONG CAPITAL GENERATION PROVIDES FINANICAL FLEXIBILITY AND CAPITAL ALLOCATION OPPORTUNITIES © AerCap 94
Slide 18: AerCap Generates Large Amounts of Capital
AERCAP GENERATES LARGE AMOUNTS OF CAPITAL We generated ~$4.6 billion of equity capital in 2023 and deployed ~$4.3 billion 2023 Capital Generation and Deployment ($ billion) Increase $6.0 Decrease $5.0 1.2 (1.7) $4.0 $3.0 3.4 (2.6) $2.0 4.2 $1.0 1.1 0.8 - Excess Capital at Capital Generation Net Reco
Slide 19: Dividend Considerations: Why Pay a Dividend?
DIVIDEND CONSIDERATIONS WHY PAY A BROADENS POTENTIAL INVESTOR BASE SIGNALS CONFIDENCE IN DURABILITY OF CASH FLOWS DIVIDEND? BRINGS AERCAP MORE IN LINE WITH OTHER LARGE INDUSTRIALS AND FINANCIALS S&P 500 S&P 500 – Industrials Only S&P 500 – Financials Only Non-Dividend Payer Non-Dividend Payer Non-Di
Slide 20: Dividend Sizing
DIVIDEND SIZING Annualized dividend of $1.00 per share is consistent with historical S&P 500 company dividend initiations AerCap Annualized Dividend Average S&P 500 Dividend Initiation ~1.2% ~1.2% $1.00 PER SHARE / $85 SHARE PRICE = DIVIDEND DIVIDEND YIELD YIELD ~$1.8B 2024E ~11% ~19% ~$200 MILLION
Slide 21: Capital Return Strategy
CAPITAL RETURN STRATEGY We Will Continue to Target a 2.7x Adjusted Leverage Ratio Capital Return Strategy Remains Heavily Weighted Towards Share Repurchases We Are Initiating a ~$200 Million Annual Allocation for Dividends and Plan to Grow Dividend Per Share Primarily Through Share Repurchases © Aer
Slide 22: AerCap Investment Case
AERCAP INVESTMENT CASE © AerCap
Slide 23: AerCap: Financial or Industrial
AERCAP: FINANCIAL OR INDUSTRIAL Financials are typically valued on a ROE versus P/B basis Industrials are typically valued on a P/E or free cash flow basis AerCap is undervalued on both of these metrics © AerCap 100
Slide 24: AerCap Is Undervalued…as a Financial
20% 30% - 10% © AerCap RNR EG AER SYF 18% ACGL CINF ARCC BRK/A EWBC FCNCA MKL CNA See Supplemental information – Endnotes. APO MTB BAP AFL CB RF HIG COF JPM L FITB PNC WFC HBAN AMP BAC RGA AFG TROW CFG STT BEN USB BK DFS AIG PFG WRB RJF XP CRBG TRV ALLY PYPL GS PRU MS NTRS C IBKR AXP Return on Marke
Slide 25: …and as an Industrial
20x 90x 30x 40x 50x 60x 80x > 100x - 10x 70x © AerCap UBER SYM AXON VRT GE HEI RRX CMI TDG PWR ROL ACM CTAS See Supplemental information – Endnotes. TRU XYL XPO VRSK CPRT EFX TTEK IR HWM NSC ETN WSO FAST TT ODFL RSG PAYC BAH WM AME IEX FTV WAB NOC NDSN SAIA CLH …AND AS AN INDUSTRIAL EMR FIX ADP BR G
Slide 26: Leader in Capital Deployment
20% 14% 16% 18% 2% - 4% 6% 8% 10% 12% © AerCap RYAN FCNCA ERIE TFC ICE CME BX BRO SQ JKHY OWL TW BAP FDS KKR CBOE See Supplemental information – Endnotes. NDAQ MCO FITB TROW COF FIS RF BRK/A MSCI GPN APO MMC BLK BAC NTRS CG XP SCHW BEN MTB JPM MA SPGI AXP V WTW RJF C CPAY MS GS AON CFG LPLA PYPL WFC
Slide 27: Steady Growth in Book Value per Share
STEADY GROWTH IN BOOK VALUE PER SHARE AerCap’s book value per share has grown by a CAGR of ~20% over the last two years $90 $87.47 $85 $80 $75 $70 $65 $61.11 $60 $55 $50 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 AerCap BVPS See Supplemental Information – Endnotes. © AerCap 104
Slide 28: Sources of Additional Value
SOURCES OF ADDITIONAL VALUE There are a number of strong tailwinds not included in AerCap’s book value today Book Value Per Share POTENTIAL INSURANCE RECOVERIES ASSET INFLATION GECAS DISCOUNT $87.47 BVPS TODAY © AerCap 105
Slide 29: The AerCap Advantage
THE AERCAP ADVANTAGE AerCap’s platform is the competitive advantage to achieve superior returns throughout the life-cycle of assets 1st Financing Strong Balance Sheet 7th 2nd Trading & End-of-Life Purchasing Active Trader / Buy at the AerCap Materials Right Time 6th ADVANTAGE 3rd Transitions Specifi