Willis Lease Finance Corporation · NASDAQ:WLFC
Willis Lease Finance — Investor Day (December 2024)
42 slides from Willis Lease Finance's investor day presentation, Dec 16, 2024
Slide 1: Company Overview December 2024
Company Overview December 2024 1
Slide 2: Disclaimer
Disclaimer This presentation does not constitute an offer to any person or to the public generally to subscribe for or otherwise acquire any securities. This presentation has been prepared solely for informational purposes and is not intended to serve as the basis for any investment decision. Under
Slide 3: Today's Presenters
Today’s Presenters Austin C. Willis Scott B. Flaherty Brian R. Hole Hagen Disch CEO EVP & CFO President Treasurer 3
Slide 4: Today's Agenda
Today’s Agenda Austin C. Willis 1 A Premier Independent Aircraft Engine Platform CEO Austin C. Willis Scott B. Flaherty Brian R. Hole 2 Engines: The Most Desirable Asset in Aviation CEO EVP & CFO President Austin C. Willis Scott B. Flaherty Brian R. Hole 3 In-Demand Portfolio CEO EVP & CFO President
Slide 5: A Premier Independent Aircraft Engine Platform
A Premier Independent Aircraft Engine Platform 5
Slide 6: A Pioneer in Aviation Solutions for Over 39 Years
A Pioneer in Aviation Solutions for Over 39 Years (1) VERTICALLY INTEGRATED PLATFORM OF AIRCRAFT ENGINES, LOAN PRODUCTS, AND SERVICES BUSINESSES TO SOLVE AIRLINE PLANNING, FINANCING, AND MAINTENANCE NEEDS 1 WLFC’s principal source of income is from Leasing and Maintenance Reserve revenue Q3 2024 Por
Slide 7: Strategically Located Footprint to Deliver Services Globally
Strategically Located Footprint to Deliver Services Globally KEY TAKEAWAYS Presence in 6 Countries • 10 offices Teesside International Airport, UK ✓ Strategic footprint built through successfully Willis Aviation Services • 4 facilities acquiring and integrating complementary businesses • 2 joint ven
Slide 8: WLFC is a Unique Opportunity in Aviation
WLFC is a Unique Opportunity in Aviation ✓ Pioneer and market leader in the most desirable sector of commercial aviation with seasoned leadership team Growing $3.0Bn portfolio of primarily modern aircraft engines servicing the most in-demand aircraft in the industry, diversified across OEMs, ✓ engin
Slide 9: WLFC's Vertically Integrated Platform Enables Differentiated Offerings to Customers
WLFC’s Vertically Integrated Platform Enables Differentiated Offerings to Customers Services provide greater control over lifecycle of owned and managed assets through parts, maintenance, and planning (“WERC”) Engine Maintenance Facilities (US / UK) (“WASI”) Parts / Used Serviceable Est. 2018/2019 ✓
Slide 10: WLFC Has a Long-Term Winning Strategy that Drives Premium Returns
WLFC Has a Long-Term Winning Strategy that Drives Premium Returns WLFC underwriting is an analytical process that relies upon: ▪ WLFC for rent and reserve rates ▪ WAML for estimated maintenance expense ▪ WASI for part-out valuation ▪ WERC & WASL to perform maintenance Typical Lessor WLFC Capital Dep
Slide 11: ConstantThrust and ConstantAccess Programs Maximize Utilization and Return
Our ConstantThrust® and ConstantAccess® Programs Maximize Utilization and Return Through our Solutions for Customers ConstantThrust® ConstantAccess® A full ownership and risk-transfer to WLFC of the customer's engines A "just-in-time" program that provides customers a guaranteed engine within a stat
Slide 12: Growing Engine Platform with Track Record of Profitability
Growing Engine Platform with Track Record of Profitability Doubled Portfolio Value Since 2016… Asset Portfolio Net Book Value (1) ($MM) $3,040 $2,451 $2,518 $2,495 $2,218 $1,965 $2,002 $1,636 $1,456 2016 2017 2018 2019 2020 2021 2022 2023 Q3 2024 Owned JV Owned …and Stable FCF Conversion With Flexib
Slide 13: Seasoned Leadership Team with Disciplined Corporate Governance
Seasoned Leadership Team with Disciplined Corporate Governance Through 28 Years as a Publicly Listed Company Leadership Team Corporate Governance 56 21 Charles F. Willis, IV Austin C. Willis • WLFC has been a public company and SEC registrant for 28 years since the IPO in 1996 Executive CEO Chairper
Slide 14: Key Takeaways
Key Takeaways WLFC is a vertically integrated platform of aircraft engines leasing, maintenance, and services businesses Unlike typical lessors, WLFC provides greater control over lifecycle of owned and managed assets through parts, maintenance, and planning Highly profitable and growing engine plat
Slide 15: Engines: The Most Desirable Asset in Aviation
Engines: The Most Desirable Asset in Aviation 15
Slide 16: Air Travel Demand is Expected to Continue Tracking GDP Growth
Air Travel Demand is Expected to Continue Tracking GDP Growth Aviation is a Long-Term GDP+ Growth Market Engine Demand has Increased due to Disruptions Aircraft In-Service (‘000s of Aircraft) 1 OEM Delays (20.0%) 35 36 32 33 34 — Recent shortage of aircraft, engines, 30 31 31 29 26 27 28 26 27 27 28
Slide 17: Supply Chain Issues are a Tailwind for Leased Engine Demand
Supply Chain Issues are a Tailwind for Leased Engine Demand 1 2 3 OEM Delays Next-Gen Engine Durability Limited MRO Capacity With global traffic growing at 12% year-on-year through It’s the airplane of the future. It’s still grounded Aircraft engine maintenance times are higher than ever August and
Slide 18: Engine Demand is Growing, and WLFC is a Premier Full-Service Provider
Engine Demand is Growing, and WLFC is a Premier Full-Service Provider ▪ Industry requires spare engines equal to ~10% of installed engines, or ~6,700 spare engines Leased Proportion of Spare Engines in Global Fleet (1) ▪ ~35% of global spare engine fleet is leased Expected (~2,300 engines) and expec
Slide 19: Engines Retain Value Through Life Cycle and are Resistant to Volatility
Engines Retain Value Through Life Cycle and are Resistant to Volatility Engine Life Cycle WLFC Focus ▪ Ongoing maintenance rebuilds value and ▪ Phase 1: Value increases due to operational capabilities to level comparable to annual escalation rates for Phase 1: brand new engines replacement parts Eme
Slide 20: Compares Favorably to Closest Public Peers
Compares Favorably to Closest Public Peers Engine and aircraft leasing trading & management ✓ ✓ Next-generation engine leasing & services ✓ Services Offered Maintenance services ✓ ✓ ✓ End-of-life solutions & disassembly ✓ Used serviceable material ("USM") ✓ ✓ ✓ Engine parts manufacturer ap
Slide 21: Key Takeaways
Key Takeaways Secular trends drive aerospace growth above GDP with particularly attractive aftermarket Engine supply chain issues are a tailwind for leased engine demand for the foreseeable future Engines retain value through life cycle and are more resistant to volatility Demand is growing, and WLF
Slide 22: In-Demand Portfolio
In-Demand Portfolio 22
Slide 23: Split of Short- and Long-Term Leases Across our Portfolio
Split of Short- and Long-Term Leases Across our Portfolio Provides Exposure to Market Rates and Stability Across Cycle Characteristics Demand Maintenance • Maintenance reserves: >1y Lease Period (2) o Designed to cover future maintenance • Airline industry trends: costs o Growing fleet – additional
Slide 24: In-Demand Narrowbody Aircraft Engine Portfolio Producing Consistent Global Lease Revenue
In-Demand Narrowbody Aircraft Engine Portfolio Producing a Consistent Global Lease Revenue Stream Focus on Most In-Demand Assets… … And Well-Diversified Globally New Technology engines grew from 38% in June 2023 to 43% of the portfolio in September 2024 Lease Rental Revenue by Region (2) Portfolio A
Slide 25: Diversified Portfolio of Current and Next Generation Engines
Our Diversified Portfolio of Current and Next Generation Engines Gives Us Unique Relevancy and Scale to Meet Various Customer Needs In-Service Engines 1 Next Generation 2 Current Generation PW100 V2500-A5 CFM56 5B / 7B GE90 PW1100 PW1900 PW1500 GenX Leap-1A / 1B Engine Program Age 25
Slide 26: Well-Positioned for Growth with Investments in CFM56 and LEAP
Well-Positioned for Current and Future Growth with Investments in CFM56 and LEAP Today – the CFM56 Engine Tomorrow – the LEAP Engine • The CFM56 is by far the world’s largest engine program currently with 23,000 in • The LEAP is a high-bypass turbofan engine produced by CFM International that servic
Slide 27: "Aircraft for Engines" Strategy
“Aircraft for Engines” Strategy Provides An Attractive Entry Point for Engines that Dominate the Existing Portfolio Focus on lower-cost, higher-margin opportunities leveraging WLFC’s knowledge of engines, existing asset base, and access to customers and Vision counterparties • Buy and lease mid-to-e
Slide 28: Long-Standing Relationships with the World's Leading Aviation Companies
Long-Standing Relationships with the World’s Leading Aviation Companies Flag Carrier of Canada Flag Carrier of France Flag Carrier of Argentina Flag Carrier of Mexico Flag Carrier of (BBB) Flag Carrier of (BB / Ba2) Flag Carrier of India (BB+) Kazakhstan New Zealand (BBB- / Baa3) Flag Carrier of Cro
Slide 29: Continued Success in Securing and Deploying New Technology
Continued Success in Securing and Deploying New Technology ▪ In June 2024, WLFC committed to acquire 15 new technology Pratt & Whitney GTF engines from PWEL Acquiring New ▪ Transaction is valued at $364MM Technology ▪ Engines directly leased back to PWEL ▪ Pratt & Whitney’s GTF engine offers up to 1
Slide 30: Strategic Joint Venture With Mitsui Expands Opportunities
Strategic Joint Venture With Mitsui Expands Opportunities and Provides Alternative Capital Markets Access Willis Mitsui & Co. Engine Support Limited Est. 2011 | Dublin, Ireland KEY FEATURES Q3 2024 NBV of the Leased Portfolio: $336MM (49 engines) 50/50 joint venture Grows service revenue Provides ac
Slide 31: Key Takeaways
Key Takeaways Focus on all engine types across the full useful life to serve customers globally Wide range of asset types enable best-in-class asset portfolio and customer diversification Unique portfolio mix with capabilities to serve today and tomorrow’s aircraft fleet Key positions on most in-dem
Slide 32: Conservative and Diversified Funding Structure Supporting Capital Allocation Priorities
Conservative and Diversified Funding Structure Supporting Capital Allocation Priorities 32
Slide 33: WLFC Maintains Conservative Funding Strategies to Continue Growing Portfolio
WLFC Maintains Conservative Funding Strategies to Continue Growing Portfolio Through Market Cycles • WLFC, directly or through a structured financing, typically acquires engines with a combination of equity capital and funds from borrowed monies. General Funding Usually borrows up to 85%+ of an engi
Slide 34: Proven Access to Debt and Preferred Equity Capital Markets
Proven Access to Debt and Preferred Equity Capital Markets with a Large Pool of Reliable Bank Partners WLFC Debt Facilities In $MM; as of September 30, 2024 Revolving Credit Facility 403 Drawn 597 Undrawn Structured Debt Warehouse Total Size 214 Drawn 286 Undrawn WEST III 187 WEST IV 231 WEST V 271
Slide 35: Deleveraging Capital Structure with Stable Credit Ratings
Deleveraging Capital Structure with Stable Credit Ratings $MM unless otherwise noted 2020 2021 2022 2023 Q3 2024 Credit Ratings on Key Securitization Facilities Fitch KBRA Select Balance Sheet & Cash Flow Items Willis Engine 2017-A Series BBB BBB+ A Notes Asset Portfolio NBV (1) 2,218 2,451 2,518 2,
Slide 36: Demonstrated History of Strategic Investments in Our Portfolio
Demonstrated History of Strategic Investments in Our Portfolio Historical Investment in Portfolio (1) Select Transactions ($MM) Date Asset Overview Rationale 599 546 • Desirable assets to add to March 2024 15 CFM56 engines inventory 441 373 332 2023 – 2024 3 PW1133G-JM engines • Sale leaseback 302 2
Slide 37: Capital Allocation Priorities Tailored to Deliver Organic Growth
Capital Allocation Priorities Tailored to Deliver Organic Growth 1 2 3 4 Invest in Organic Maintain Regular Balancing Leverage Opportunistic Growth and Service Dividend Return M&A Capabilities Policy • Focus on pipeline and • Various credit metrics • Announced regular • JT-Power 2013 acquiring asset
Slide 38: WLFC Continues to Execute, and Investors Are Taking Note
WLFC Continues to Execute, and Investors Are Taking Note What We Have Achieved What we Have Achieved in the What is the Future Growth Historically Last 2-3 Years Opportunity Ahead of Us ✓ Resilient Utilization Trend: ~87% ✓ Invested to be well positioned for ✓ Advancement of engine program average u
Slide 39: Appendix
Appendix Supplemental Information 39
Slide 40: Business with Multiple Sources of Revenue
Business with Multiple Sources of Revenue % as of nine months ended Sept. 30, 2024 Definition Contributing Business REVENUE Lease rent revenue 42% Rental income from long-term and short-term engine leases, aircraft leases, and other leased parts and equipment Consist of long-term (<10%) and short-te
Slide 41: Reconciliation of Net Income to Non-GAAP EBITDA
Supplemental: Reconciliation of Net Income to Non-GAAP EBITDA LTM Q3 $MM 2016 2017 2018 2019 2020 2021 2022 2023 2024 Net Income Attributable to 13.8 60.3 39.9 63.6 6.4 0.2 2.1 40.4 94.9 Common Shareholders (+) D&A 66.3 66.0 76.8 86.2 94.5 90.5 88.3 90.9 91.1 (+) Interest Expense 41.1 48.7 64.2 66.9
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