Willis Lease Finance’s 2026 Q2 Call: Lease Mix Signals, Blackstone Fee Timing Clash

Date of Call: Aug 4, 2026

Financials Results

• Revenue: $194M (lease rent $77.1M, maintenance reserve $46.5M, spare parts & equipment sales $21.2M, gain on sale of leased equipment $32M, management and advisory fees $5.5M, other revenue $1.4M)
• EPS: $1.31 per diluted share
• Gross Margin: Spare parts gross margin 10%, equipment sales gross margin 49% (14.2% overall for leased equipment gain), maintenance services gross margin -1.4M (negative)
• Operating Margin: Operating income $34M

Business Commentary:

Asset Growth and Portfolio Modernization:

• Willis Lease Finance Corporation increased its assets under management from $3.6 billion in Q2 2025 to $4.4 billion in Q2 2026, reflecting a 21% increase.
• The company's portfolio is now 60% modern technology engines by net book value, focusing on LEAP, GTF, and GENX.
• This growth was driven by strategic investments in modern platforms and acquisitions, positioning the company to benefit from industry trends towards more fuel-efficient aircraft.

Financial Performance and Earnings:

• The company reported an EBT of $38 million and an adjusted EBITDA of $120.7 million for Q2 2026.
• Lease rent revenue grew by 6.7% year-over-year to $77.1 million, despite a decline in short-term maintenance reserve revenue.
• Strong financial performance was supported by solid leasing operations and strategic asset acquisitions.

M&A Strategy and Acquisition Activity:

• Willis Lease Finance Corporation completed acquisitions of assets through special purpose vehicles, including three Airbus A330-300 aircraft and additional commercial aircraft and engines.
• The company is focused on expanding its portfolio and customer base, with an emphasis on M&A to facilitate transitions to modern technology.
• This strategy is supported by increased liquidity and low leverage, enabling the company to execute its growth plans effectively.

Services and Strategic Partnerships:

• The company signed a significant engine storage agreement with Pratt & Whitney, enhancing its services capabilities.
• Willis Lease Finance Corporation is advancing discussions to establish another repair center in Asia, leveraging its replicable solution model.
• These partnerships and service offerings strengthen the company's position as a comprehensive provider in the aviation sector.

Sentiment Analysis:

Overall Tone: Positive

• Management reported another quarter of 'solid financial and operational performance' with 'continued strong momentum.' They highlighted strong EBT and adjusted EBITDA, growth in assets under management, and confidence in executing their strategy and scaling their platform for long-term value.

Q&A:

• Question from Jordan Heimowitz (Philadelphia Financial): Can you talk a little bit about the assets you've put into SPV and the mark on them and how it kind of highlights the undervaluation of the current marks on your balance sheet?
  Response: The portfolio composition in the SPVs broadly mirrors the company's own portfolio, with a few finance leases migrated to the Liberty Mutual Fund. Management noted an embedded ~20% gain if the entire portfolio were sold at appraised market value.

• Question from Jordan Heimowitz (Philadelphia Financial): Broadly, is it fair to say the book value is inherently understated similar to AirCap?
  Response: No, the portfolio is not uniformly undervalued; the gain profile is granular and varies by asset, as evidenced by a 49% gross margin on equipment sales.

• Question from Jordan Heimowitz (Philadelphia Financial): When coverage on the convertible notes picks up, do you think guidance will be similar to AirCap's (excluding gains) or include gains?
  Response: Management declined to speculate on future guidance, noting they are not yet providing it.

• Question from Will Waller (M3): Can you talk about the capacity you see for the asset management business and how that might grow in the future and the type of institutional demand you're seeing?
  Response: The company is seeing significant demand for its asset management products and intends to deploy capital in its current funds before raising additional larger funds in the future as part of a long-term strategy.

• Question from Will Waller (M3): Has there been a shift to shorter-term leases given market uncertainty and higher fuel prices?
  Response: The lease mix remains around 50-50 between long-term and short-term, with any slight shift attributed to portfolio modernization, not a broad market trend.

Contradiction Point 1

Lease Term Mix Trend

Contradiction on whether lease term mix has shifted recently, impacting understanding of customer behavior and market trends.

Waller (M3) - Will Waller (M3)

2026Q2: The lease term mix is still roughly 50% long-term and 50% short-term, similar to last year, with no significant recent shift attributed to market uncertainty or fuel prices. - Austin Willis(CEO)

Given the uncertainty in the aviation market and higher fuel prices, has there been a shift towards shorter-term leases, and is the current mix still approximately 50% long-term versus short-term? - Will Waller (M3F)

2026Q2: The lease mix remains around 50/50 between long-term and short-term. The slight shortening of lease terms is not attributed to market uncertainty. - Austin Willis(CEO)

Contradiction Point 2

Asset Management Strategy Forward Guidance

Contradiction on willingness to provide forward-looking guidance on asset management performance, affecting investor expectations and planning.

Jordan Heimowitz (Philadelphia Financial) - Jordan Heimowitz (Philadelphia Financial)

2026Q2: The CFO declined to provide specific forward-looking guidance but acknowledged the point regarding the company's performance relative to gains. - Scott Flaherty(CFO)

As coverage increases, will your guidance resemble AirCap's approach of earnings without gains, earnings with gains, or a combination? - Jordan Hymowitz (Philadelphia Financial)

2026Q2: The company declined to speculate on future credit ratings or guidance, stating, "I don’t want to get ahead of ourselves on guidance." - Scott Flaherty(CFO)

Contradiction Point 3

Blackstone Fund Fee Recognition Timeline

Contradiction on when revenue from the Blackstone fund will appear on financial statements, impacting financial reporting and forecasting.

Jordan Heimowitz (Philadelphia Financial) - Jordan Heimowitz (Philadelphia Financial)

2026Q2: The company sold $224 million of assets from the SPVs and recognized a $32 million gain, representing a 14.2% gross margin. - Scott Flaherty(CFO)

How do the assets in SPV and their valuation highlight the undervaluation of the current marks on your balance sheet? - William Waller (M3F)

2026Q1: Fees from the Blackstone Credit & Insurance fund will start to appear in the next quarter, as capital deployment began in April 2026. - Austin Willis(CEO)

Contradiction Point 4

Valuation and Marking of Assets in SPVs

Contradiction on the current market value versus appraised value of the portfolio, affecting asset valuation transparency and investor perception.

Jordan Heimowitz (Philadelphia Financial) - Jordan Heimowitz (Philadelphia Financial)

2026Q2: The overall portfolio, based on recent appraisals, is estimated to be about 20% below its appraised value, implying an embedded gain. - Scott Flaherty(CFO)

How do the assets in SPV and their marks highlight the undervaluation of the current marks on the balance sheet? - William Waller (M3F, Inc.)

2025Q4: The $700 million figure represents the disparity between the maintenance-adjusted market value and the book value of the portfolio adjusted for existing maintenance reserves. - Scott Flaherty(CFO)