Good day, and welcome to the Willis Lease Finance Corporation Q2 2025 Earnings Call. Today's conference is being recorded. We would like to remind you that during this conference call, management will be making forward-looking statements, including statements regarding our expectations related to financial guidance, outlook for the company and our expected investment and growth initiatives. Please note these forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect WLFC's views only as of today. They should not be relied upon as representative of views as of any subsequent date, and WLFC undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risks and other important factors that could affect WLFC's financial results, please refer to its filings with the SEC, including, without limitation, WLFC's most recent quarterly report on Form 10-Q, annual report on Form 10-K and other periodic reports, which are available on the Investor Relations section of the WLFC's website at https://www.wlfc.global/ investor-relations. At this time, I would like to turn the conference over to Austin Willis, Chief Executive Officer. Please go ahead.

Thank you, operator, and thank you all for joining us today to discuss our second quarter 2025 financial results. On our call today, I'm joined by Scott Flaherty, our Chief Financial Officer; and Brian Hole, our President. First and foremost, I'd like to emphasize that this was a record-setting quarter for the company. We achieved our highest ever quarterly total revenue of $195.5 million, an increase of 29.4% over the same period last year. This achievement highlights the continued strength of the aviation marketplace, our platform and our portfolio. Airlines increasingly rely on our leasing, parts and maintenance solutions to avoid costly and time-consuming engine shop visits, helping to drive the recurring revenues that are the foundation of our business. Our steady performance has enabled us to expand our business while returning capital to our shareholders. One year ago, we announced a policy of paying a common quarterly dividend. And last week, the Board declared our fifth consecutive quarterly dividend of $0.25 per share. Scott will provide a deeper look at our financials. So I would like to turn to what we accomplished in the quarter. The momentum from the beginning of the year continues despite any lingering concerns related to tariffs and the impact on trade and economic growth. As we've said in the past, we have designed a robust and durable business model that we believe can generate premium returns across the economic cycle and under a wide variety of market conditions. Fundamentally, the increasing expense of new engines makes leasing a compelling strategy for obtaining spare engines, while our maintenance capabilities offer an attractive alternative for airline operators relative to more conventional maintenance solutions. Additionally, our position as a leading engine-focused lessor is supported by our premium differentiated asset portfolio, coupled with our integrated maintenance and materials…

Thank you, Austin, and good morning, all. We closed out the first half of 2025 with a solid second quarter performance, where the business produced record quarterly revenues of $195.5 million, up 29% from the comparable period in 2024. Record earnings before taxes or EBT for the quarter of $74.3 million, up 28.3% from the comparable period in 2024. Net income attributable to common shareholders of $59 million for the quarter, up 41.5% from the comparable period in 2024, and yes, another quarterly record for the business. Continued strong core lease rent and maintenance reserve revenues, our trading profits, all enhanced by our vertically integrated service offerings as well as the recognized value creation associated through the sale of our Bridgend asset management consultancy business through our Willis Mitsui joint venture were the key drivers to our profitability for the quarter. Walking through the P&L, as it relates to the top line, core lease rent revenue for the quarter was $72.3 million, up 29.4% from the prior comparable period. And interest revenue, which reflects interest income on long-term loan-like financing was $3.6 million, up 59.8% from the prior comparable period. The relative growth we see from the comparable quarter in 2024 was driven by an increase in our equipment held for operating lease, which sits at $2.61 billion as of June 30, 2025, as well as growth in our long-term loan-like financing portfolio. Our total owned portfolio is reflected on our balance sheet as equipment held for operating lease, maintenance rights, notes receivable and investment in sales type leases, which aggregate to $2.83 billion. Average portfolio utilization was 87.2% for the quarter compared to 83% in the comparable period of 2024. Utilization has been trending up, and we ended the second quarter at a utilization rate of 88.3%. We discussed…

We now take a question from Hillary Cacanando with Deutsche Bank.

I was just curious with OEM production now starting to improve a little bit, are you seeing any impact on lease rates? I think the lease rates on engines are still very strong but I've heard some investors express some concern about whether lease rates are peaking or when do you -- when that -- when lease rates are expected to peak kind of if you have a feel for that? Any thoughts?

Hillary, this is Austin. Thanks for your question. So we've seen lease rates increase about 9% relative to the same period last year and about 2% to 4% over the prior quarter. So I think lease rates are stabilizing, in some cases, a little bit higher, in some cases, about the same. In terms of production, we're hoping that the OEMs are kind of starting to sort things out and are going to be starting to produce the aircraft with more consistency. And I think that's what we're seeing broadly. We don't expect to see any real negative pressure on lease rates because of that in the near term. But that's also why we've got about 54% of our portfolio in the next-generation equipment. So as the pool of GTF and LEAP-powered aircraft increases, that increases our market to lease out those engines. And then also, as we start to see the phaseout of the current generation technology, which we still think is a little ways off. We're pretty well placed to execute or to exploit that with our programs like ConstantThrust that are really designed for aircraft transitions. So in general, we're -- we think the lease rates are good and expect it to be pretty strong for the foreseeable future.

Okay. So you're not really seeing that peaking as of yet. Okay. And then just a follow-up question. We've been hearing that some very young aircraft like A320neos and A220, younger than 10 years old are now being parted out to engines at spares, which speak to the demand for engines. So are you seeing that? And is that actually good for you guys, that type of environment or not?

Yes. So we are seeing that but it's a bit nuanced. So there are some aircraft that I believe the engines have been pulled off and the airframes are being parted out but I think it's pretty limited. What we're seeing a little bit more of are airlines obtaining the lease or otherwise aircraft where they're pulling the engines off temporarily to support their own fleet. We're acquiring some aircraft, underwriting them on the basis of the engines. So in general, I think it's a positive. I think it goes to the fact that there's so much demand for engines in the marketplace that people are doing whatever they can to obtain lift.

We'll take our next question from Eric Gregg with Four Tree Island Advisory.

Great quarter. Four quick questions here. First is, you said the end of the quarter utilization rate was 88.3%. What was in the average in the quarter?

Scott, do you want to take that?

Yes. The average utilization rate for the quarter -- the average utilization rate for the quarter was 87.2%. At the end of the quarter, that was quoted by Austin, the utilization rate was the 88%. Your question what was the utilization rate average for the quarter or the end of the last quarter? Could you repeat your question? Looks like he dropped. We can get back to operator.

Eric is in the queue. Okay. We can hear you now, Eric.

Okay. Sorry. Yes, I was -- I think you said it was 88.3% at the end of the quarter. I just wanted to know if that was the high point and if it was lower, that's great. I guess my other question sort of locked out here...

Yes, sorry, Eric, not to interrupt you. I think why -- the reason we quoted is we try to quote the average utilization in the period as well as the end to just kind of speak to the trends. Over the last year, we've seen going back to when we picked up a lot of GTS in the fourth quarter, we had a higher off-lease percentage. And I think if you kind of looked at the end of last year, we were in the high 70s. As we've gotten those assets on lease, we've seen our utilization go up. So we just wanted to highlight that the average utilization in the quarter was lower than the utilization at the end of the quarter, and the business is trending well in that regard.

Great. Great. My other questions are these. What was the employee count at the end of the quarter? How is the Bridgend sale going to impact income on a quarterly basis? And my final question is [Technical Difficulty] is it revenues is that the cost of maintenance services is also inclusive of your internal client as well as third party. So those are my remaining questions.

Sure. So I'll try to tick through those, and you were a little choppy there. So I'll try to get as many as possible.

Scott, if you don't mind, let me jump in on that. I -- we lost some of your later questions. But in terms of employee count, we're around 420. And I think one of your questions was asking for a little bit of color on the transaction between ourselves and the joint venture selling the consulting business. Is that correct?

Yes. I was wondering what's the ongoing revenue and operating income impact of selling that business?

Okay. So it's -- the P&L from that business hasn't been particularly material to our own business. But I think the P&L impact to us now having that additional infusion of roughly $40 million of equity is going to have a pretty positive impact when you take into account our ability to leverage it and buy profit-making equipment over time.

Great. And just to repeat in case you didn't, I was jumbled. The maintenance service revenues this quarter were less than the cost of maintenance services. I assume that the maintenance service revenues line item is a third-party revenues. Is the cost of maintenance services third-party plus internal client-related costs? Or is it the case that you're losing money on third-party maintenance services on a gross margin?

Sure. So -- so I'll answer part of the question. And then from the accounting side, I'll hand it over to Scott. So the margin -- the difference in the margin for the maintenance services business is really attributable to the additional labor that we picked up during the period, and that's largely driven by the airframe business, WASL. I think I mentioned in my prepared remarks that we secured a contract with Jet2 for 2 additional lines. And in order to secure that contract, we had to show that we had the labor force in place that was capable of servicing their aircraft. So that's really -- a lot of it is the buildup of that labor to support that contract with Jet2. And Scott, did you want to touch on the other parts?

Yes. No, I think you answered it, Austin. I think that Eric, it's you're definitely seeing a little bit of the cost of the growth of that business in the early stages. So that's why you've seen the change in margin. But obviously, you've seen also some growth in the top line there as well.

We'll now take our next question from Will Waller with M3F Inc.

You mentioned the maintenance reserve revenue was $50.7 million in the current quarter, and that was $50.2 million of that, that was short-term maintenance reserve revenue. I'm kind of curious, the long-term maintenance revenue that you mentioned is only $500,000. If I look back at last quarter, that was $9.6 million. If I look back a year ago, the same quarter, it was $17 million. When I look at the maintenance reserve liability, that grew from last quarter being about $104.4 million up to $113.1 million. Can you kind of walk through what's going on with extensions of leases and if there's an above normal number of extended leases and if that's affecting how that's accounted for and then eventually how that maintenance reserve liability, if that eventually some of that runs through the income statement and sort of the timing of that?

Thanks, Will. Thanks for the question. I think your -- the way you're thinking about the long-term maintenance revenue relative to lease extensions and long-term leases is generally correct. So for the benefit of other investors, long-term maintenance reserve recognition generally occurs when we have an engine that comes off of long-term lease. Now part of that is lumpy and part of that is due to extensions. I'd say we have seen a reasonable amount of extensions but I think the bigger factor in the second quarter was more just to do with timing than anything else. We had some long-term reserves come in a little bit later and some come in a little bit earlier. So I would be cautious to focus too much on lease extensions and more just the timing more than anything else. Scott, do you want to add to that?

Yes. No, I think the only thing I would add is that if you look at the core short-term recurring maintenance reserve revenue, you've seen that increase approaching 10%. And really, as you know, the long-term piece is always associated with those engines coming off lease. So less engines with those conditions off lease. I think you noted the point that we build a maintenance reserve. So we're still obviously pulling dollars in on that front as well, not recognizing them yet through the P&L but ultimately, we will be. And we're very happy with the yields that are getting generated by the portfolio.

Okay. Great. And then my question was probably kind of confusing but you answered it exactly what I was -- basically what I'm asking, I think you understood it. And then my last question is related to the sustainable fuel project. You had the expenses that were associated with some of the plans in the first quarter. It sounded like you got some of that grant revenue in the second quarter. And then I think there was a release that you got another grant that was awarded. But just kind of curious on how the timing of that will work and if that's reported on the income statement and where that would flow through if it does or if it has.

Sure. So yes, correct. We had -- and as we said in the -- in our last call, we mentioned that the lion's share of the cost that we would incur and that you'd see in the P&L would be what happened in that first quarter of the year. And we did receive a grant. We were awarded the grant in October of last year, and we received the proceeds for that grant, slightly in excess of $6 million in the second quarter, and we recognized that through the P&L in the quarter. The other grant that you're referring to similarly was awarded in this quarter in dollars, it's a little north of $4 million, and that will be recognized in the P&L upon receipt. So we don't have a color for you now on the receipt but we stand by what we've said in the past that we've seen the lion's share of material costs on the SAF side come through, and those were predominantly in the first quarter.

And just to add to that briefly, we're thrilled that the U.K. government has decided to give us another grant. And it's really just a testament to the project and their confidence in our ability to execute.

And it appears there are no further telephone questions at this time. I'd like to turn the conference back to our presenters for any additional or closing comments.

Thank you all for joining us today. We're thrilled with another great quarter, and we look forward to talking to you next quarter. Bye- bye.

And that does conclude today's conference. We thank you all for your participation. You may now disconnect.