Willis Lease (WLFC) Q3 2026 Earnings Call Transcript

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DATE

Nov. 3, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Austin Chandler Willis
• Executive Vice President and Chief Financial Officer - Scott Flaherty

TAKEAWAYS

• Total Revenue -- $246.3 million, up 34.3% year over year, driven by growth in equipment sales and lease rent revenue.
• Lease Rent Revenue -- $84.4 million, a 10.2% increase year over year, reflecting an increase in the average size of the portfolio and a strong lease rate factor.
• Maintenance Reserve Revenue -- $39.3 million, down 48.3% year over year, primarily due to lower long-term maintenance reserves as fewer engines came off lease.
• Spare Parts and Equipment Sales -- $98.1 million, compared to $5.4 million in the prior year period, reflecting the sale of five aircraft, two engines, and one airframe.
• Income from Investments -- $7.3 million, up 40.8% year over year, driven by contributions from the Willis Mitsui joint venture and other asset management businesses.
• Adjusted EBITDA -- $100.9 million, compared to $135.0 million in the prior year period, adjusted for non-cash items including depreciation and equipment write-downs.
• Assets Under Management -- $4.9 billion, a 10% increase from the prior quarter, following the acquisition of WNG aircraft and engine leasing entities.
• On-Balance Sheet Portfolio -- $3.3 billion in book value, a 14.2% increase year over year, surpassing $3 billion for the first time.
• Modern Technology Fleet Mix -- 60% of the portfolio, up from 54% in the prior year period, consisting of LEAP, GTF, and GEnx engine platforms.
• Contribution Margin -- $25 million, representing 18% year-over-year growth, supported by balance sheet expansion.
• Average Lease Rate -- 1.06%, up from 1.04% in the prior year period, indicating sustained strength in market lease rates.
• Maintenance Services Revenue -- $11.2 million, up 208.5% year over year, driven by growth in engine and aircraft storage and repair services.
• Management and Advisory Fees -- $4.5 million, a 140% increase year over year, resulting from increased asset management efforts through Willis Aviation Capital.
• Maintenance Reserve Liability -- $201.7 million, up from $129.3 million at the end of the second quarter, reflecting assets acquired through the WNG transaction.
• Net Finance Costs -- $32.8 million, an 11.7% decrease year over year, due to lower debt extinguishment costs and a lower weighted average cost of debt capital.
• Long-term Maintenance Reserve Cash Receipts -- $27.8 million year to date, up 72% year over year, reflecting growth in new-tech equipment.
• Equipment Write-downs -- $4.5 million, reflecting the impairment of three engines following lease returns.
• Utilization -- 83.2%, compared to 80% in the prior year period, demonstrating consistent demand across the engine portfolio.
• Series B Preferred Stock -- $35 million private placement with the Development Bank of Japan, bringing the total par investment to $100 million.
• Share Repurchase Program -- $200 million total authorization through Dec. 31, 2031, following an increase and extension approved by the Board.
• Quarterly Dividend -- 15 cents per share, representing a 12.8% increase and the company's 10th consecutive recurring quarterly dividend.
• Capital Deployment -- $3 billion in dry powder, with management targeting an allocation of one-third each to joint ventures, discretionary funds, and the balance sheet.
• Leverage Ratio -- 2.88x at the end of the third quarter, defined as total debt net of cash to equity including preferred stock.
• Income Tax Expense -- $7.1 million, which includes a $600,000 charge resulting from Florida legislative changes regarding federal tax law.

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RISKS

• Willis stated, "Fuel prices, high interest rates, and geopolitical risks are challenging the aviation sector," noting these factors influence airline liquidity and fleet decisions.
• Willis noted that high fuel prices are leading to discussions among some regional operators about "parking some aircraft," particularly older and less fuel-efficient models.
• Flaherty indicated that the company recognized a one-time charge of $600,000 due to Florida's 2026 legislative decision not to adopt certain federal tax law changes, which increased the effective tax rate by 3 percentage points.

SUMMARY

Willis Lease Finance Corporation (NASDAQ:WLFC) reported record total revenue and surpassed $3 billion in on-balance sheet assets during the third quarter. Management stated that the company has completed the seeding phase of its fund strategy and is now shifting focus toward growing its entire platform, including the balance sheet. The company expanded its global service infrastructure through a new engine repair facility in Malaysia and an agreement for a consolidated corporate campus in South Florida. Management noted that demand for engine leasing and maintenance services remains supported by persistent supply constraints and growing aftermarket requirements across the aviation industry.

• CEO Willis announced the purchase of land for a new Willis Engine Repair Center in Malaysia, marking the company's first such facility in Asia to support regional growth.
• The company entered into a purchase and sale agreement for a new facility in South Florida to consolidate its headquarters, spare parts business, and maintenance operations.
• A long-term engine storage agreement was established with Pratt and Whitney to support aftermarket storage requirements for several engine families, including the GTF and PW4000 platforms.
• Management reported that lease extensions in the third quarter were 10% to 15% higher than in previous quarters, reflecting strong customer demand to retain engines.
• The company completed a 3-for-1 common stock split effective July 21, 2026, to improve liquidity in common shares.
• Management indicated that while no immediate share repurchases are planned, the expanded $200 million authorization provides flexibility to act on accretive opportunities.

INDUSTRY GLOSSARY

• AUM (Assets Under Management): The total market value of assets the company manages on behalf of itself and third-party investors.
• Contribution Margin: A metric calculated as lease rent revenue and interest income less interest expense and depreciation of leased assets.
• GEnx/GTF/LEAP: Modern, fuel-efficient aircraft engine platforms representing the latest generation of aviation technology.
• MRO (Maintenance, Repair, and Overhaul): Essential services required to ensure aircraft and engines remain in airworthy condition.
• WACC (Willis Aviation Capital): The company's asset management arm encompassing discretionary funds and joint ventures.
• WASI (Willis Aeronautical Services, Inc.): The company's subsidiary focused on the sale of aircraft parts and materials.
• WERC (Willis Engine Repair Center): Specialized facilities providing maintenance, repair, and storage services for aircraft engines.

Full Conference Call Transcript

Operator: We would like to remind you that during today's-- 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 and should not be relied upon as rep. Representative of views as of any subsequent date NWLFC undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements in the 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 risk and other important factors that could affect WLF financial results, please refer to its filings with the SEC, including, without limitation, WLFC's most recent quarterly reports on Form 10 Q and a report on Form 10-K and other periodic reports which are available on the Investor Relations section of WLFC's website at https://www.wlfc.global/investor-relations.

Austin Chandler Willis: Thank you, operator. And thank you all for joining us today to discuss William Lease Finance Corporation's third quarter 26 financial results. On our call today, I am joined by Scott Flaherty, our Chief Financial Officer. I am pleased to announce another great quarter. We continue to deliver on our strategy to expand our platform with services, managed capital, and balance sheet investment. We grew our assets under management by 10% quarter-over-quarter. And our on balance sheet portfolio by 12% quarter-over-quarter. This was due in large part to the closing on the purchase of the WNG aircraft and engine leasing entities. Our results reflect the strength of our core leasing business.

As we add assets to the balance sheet, it has a clear, direct, and positive impact to our earnings. By growing William Aviation Capital, we are investing in the future. Driving long term fees, carried interest, and asset growth to run through our services businesses. We continue to be selective in the types of transactions that we pursue. As we originate aircraft and engine investment opportunities, we allocate them across our different pools of capital. Namely, on our balance sheet, and William Aviation Capital. Which encompasses our 2 discretionary funds, and our joint venture with Mitsui and CASC in China.

As we deploy capital into our different funds, we will see slower growth on our balance sheet for a period of time. Now that the ceding phase of our fund strategy is complete, we can focus more directly on building up our balance sheet. Which you can see from our Q3 results react favorably to even modest amounts of growth. In Q3, we took several meaningful steps forward. Beyond expanding our aircraft and engine portfolio, we announced plans to replicate our proven engine repair center model in Asia. Building on the success of our operations in The UK, and in The US. We also advanced plans to expand our operations in South Florida.

With the acquisition of a new facility that will house and consolidate our parts business, WASI, and our MRO, WERC, establish a new corporate headquarters and provide a controlled environment for storing and maintaining engines. I will recap these updates in greater detail shortly. We are making these investments against the backdrop of strong underlying demand for our assets and services supported by persistent engine supply constraints, and growing aftermarket maintenance requirements. Financially, we ended the quarter with about $4.9 billion in assets under management. Increasing this from roughly 3.7 billion in Q3 25 and $4.4 billion in Q2 26. For the first time, we surpassed $3 billion in our on balance sheet portfolio.

For the quarter, we delivered earnings before tax of $19 million and adjusted EBITDA of $101 million I would also like to highlight our contribution margin. A key indicator of the strength of the leasing business. Contribution margin is defined as lease rent revenue and interest income, less interest expense and depreciation and amortization of assets held for lease. In Q3, was $25 million, representing 18% year over year growth and a record quarterly high. This is driven largely by balance sheet growth. And it should be noted that some of this may be temporarily reversed. As we take a selection of these assets we just purchased and move them from held for sale into William Aviation Capital.

Scott will provide more details in a few minutes. Before turning to our individual business segments, I would like to spend a few minutes discussing market dynamics. Fuel prices, high interest rates, and geopolitical risks are challenging the aviation sector. Yes, we continue to see strong demand for our products and services. Having come back from a regional tour of Asia, in late August, 2 things are clear. High fuel prices are influencing operators regionally, and the growth that the region is experiencing is profound. Based on our conversations with numerous airlines over the past few months, we are not seeing a meaningful increase in retirements. But there is discussion about parking some aircraft.

By and large, these are older, less fuel efficient aircraft. You can see from our results that short term maintenance reserves have decreased since April 2026. This is partially driven by macro events that have resulted in less flying. But it is also a byproduct of modernizing our fleet. Which is now nearly 60% modern technology. Like LEAP, GTF, and GE and X engine platforms, versus 54% 1 year ago. Should high fuel prices and other factors continue to pressure airlines, we remain exceptionally well positioned to help provide liquidity to those airlines looking to shore up their balance sheets.

And to provide constant thrust type solutions to airlines who would rather opt to lease in temporarily rather than pay expensive shop visits during times of tight liquidity. Speaking of liquidity, we have a great deal of dry powder ready to deploy through our balance sheet and William Aviation Capital. Now let me turn to the William platform and our primary business segments. Leasing, William Aviation Capital, and services. Starting with leasing, Our leasing business is performing well. As we have been focusing on reallocating assets to different pools of capital to execute our growth strategy across our balance sheet business and William Aviation Capital. We saw solid utilization of our lease portfolio in Q3, averaging about 83%.

In August, we announced the acquisition of 12 commercial aircraft and 13 aircraft engines. This is a significant expansion of our portfolio. That puts capital to work in assets fitting well within our existing business and reflects our continued focus on disciplined growth and long term value creation. Next, William Aviation Capital. Or WACC grew to over 1.5 billion in Q3 26. As we stand today, we have roughly $1 billion of additional capital ready to deploy through our discretionary funds which is in addition to the capital raised by our joint ventures and William Aviation Capital structure.

This liquidity, along with the undrawn revolver capacity, and our low net leverage, provides added flexibility that will allow us to execute our growth strategy. This model can meaningfully increase the scale of the William platform over time, while generating additional asset management and services revenue. I would like to point you to slide 9, in our investor presentation. Which shows our income from investments and fee related earnings. When you combine these 2 elements, you can see the return on equity that we generate by managing third party capital is significant. And this is going to be a key driver for us as we grow. Finally, services.

With industry maintenance capacity constrained, and shop visits taking longer, our services businesses continue to be a major strategic advantage and value creator. For our own assets and those we manage. Just before our Q2earnings call we announced a long term engine storage agreement with Pratt and Whitney, to provide storage and lease return services for PW1.1 thousand PW1.5 thousand 1.9 thousand 4 thousand and 2.5 thousand engines. WLFC will support Pratt and Whitney's growing aftermarket storage requirements from its Florida UK, and Malaysia facilities. Another exciting update from the third quarter was the purchase of land to build a new William Engine Repair Center or WERC in Malaysia.

This is our third work facility globally and our first in Asia. And like our facilities in Florida and The UK, it will provide maintenance, repair, and storage services for our engine portfolio and third party assets. Critically, this new facility allows us to get closer to our customers and partners across the Asia Pacific and will support our long term growth across the region. As I mentioned earlier in my remarks, I recently spent 2 weeks traveling around Asia. Meeting customers, partners, and other stakeholders And a large takeaway was the level of activity and long term confidence in aviation across the region.

To 1 of the world's fastest growing aviation markets, And as demand for engine maintenance continues to accelerate, we are confident that WERC Malaysia will position William to capitalize on this long term growth. Our investment in the APAC region demonstrates the global scale of our ambition. And in Q3, we made similarly important investment in infrastructure here in South Florida. With the purchase, and sale agreement, for a new campus that will bring our headquarters spare parts business, maintenance and repair operations, and engine storage together under 1 roof.

This is not only a reflection of our expanded operational footprint, but it will increase operational efficiency, promote faster decision making process, support future customer demand, and bring our people closer together. South Florida has been an excellent home for our business. And we are proud to continue growing within the region. And to support further expansion of our global services platform, in September, we entered into a $35 million preferred stock purchase agreement with the Development Bank of Japan for our Series B preferred stock. Taking us to $100 million total in Series B preferred stock. This builds on our long term partnership with DBJ and further diversifies the sources of capital to support growth.

Finally, we recently announced an increase in our quarterly dividend to 15 cents per share, reflecting a 12.8% increase from our prior August distribution. And our long term confidence in our business. We also announced that the Board has approved the renewal and increase of our share repurchase program under which the company may repurchase its common stock or an aggregate purchase price of up to $200 million through December 31, 2031. While we do not have immediate plans to repurchase shares, we want the flexibility to act should the right opportunity present itself. As I have stated before, we view ourselves as a growth stock. With numerous attractive opportunities to deploy capital.

At the same time, we continue to evaluate ways to return capital to shareholders. Including through accretive share repurchases that can deliver premium returns. Overall, we have achieved another solid quarter, and we are confident in the progress we are making to scale our global platform. Expand our portfolio, and deliver long term value for our shareholders. With significant capital to deploy, into attractive aviation assets, and with strong demand across both our leasing and maintenance services we believe WLFC is well positioned for the next phase of growth. With that, I would like to hand it over to Scott Flaherty, our CFO, to discuss our financial performance in greater depth.

Scott Flaherty: Thank you, Austin, and good morning, all. Q3 was a solid quarter for William Lease producing multiple records for the business from core lease rent revenues through income received from our many investments. As we focus the first half of the year on staging and seeding our funds and joint ventures, we have now shifted to growth across the platform. The third quarter's record $246.3 million of revenues produced $18.8 million of earnings before tax or EBT. $10.2 million of net income, attributable to common shareholders, and 47 cents of diluted earnings per share, as well as $100.9 million of adjusted EBITDA.

Walking through the P and L, our quarterly top line was driven by record lease rent revenues of $84.4 million in the quarter, Lease-rent revenues were up 10.2% year-over-year, Growth in lease-rent revenues was driven by an increase in the balance sheet portfolio, up 14.2% from Q3 25, measured as equipment held for operating lease maintenance rates, notes receivable, and investment and sales type leases, which at the end of the third quarter was $3.3 billion in book value, strength in lease rates, as our average lease rate ticked up from 1.04 to 1.06% in the comparable year over year periods, all of which was slightly offset by average utilization, which was down from 80% in Q3 of 2025 to 83.2% in Q3 of 2026.

Maintenance reserve revenues for the quarter were $39.3 million down from $76.1 million in the prior comparable period, the majority of that decline was due to lower long term maintenance reserves. Which is associated with engines coming off long term leases this was $2.6 million in the current quarter compared to $29.5 million as we only recognize long term maintenance reserves on 3 engines in the third quarter of 26. $36.8 million of these revenues were short term maintenance reserves as compared to $46.6 million in the third quarter of 2025.

Short-term maintenance reserve revenues are a proxy for both the number of engines that we have on short term lease conditions as well as the operating tempo of these engines. New-tech engines make up a larger percentage of our portfolio, approximately 60% today, tend to be on long term lease conditions. So despite the fact that we receive maintenance reserve cash flows for the monthly utilization of these assets, we do not recognize the revenues generally until the end of lease.

Looking at the long term maintenance reserve cash receipts, year to date 2026, we see that they are up 72% to $27.8 million compared to the first 9 months of 2025, Although this does not immediately hit our P and L, it provides significant cash flow to the business and are reflective of our growth in the new-tech equipment. Spare parts and equipment sales were $98.1 million in the quarter, compared to $5.4 million in the comparable period 2025. Spare parts sales were 9.1 million in Q3 26, up 67.8% from $5.4 million in the comparable prior quarter. Gross margins on spare parts were 10%.

Sales in the consolidated P and L do not reflect $3.5 million of intercompany sales that are transacted at cost and eliminated in consolidation providing incremental value to the consolidated business and our lease portfolio. Equipment sales in the third quarter of 26 were 89.1 million whereas there were no such sales in the prior comparable period. These Q3 26 revenues primarily reflect the sale of 5 aircraft recently acquired to our William Mitsui joint venture where the company effectively warehoused these assets to affect the sale. Also included in these sales were 2 engines and 1 airframe. The trading profit on sale of this equipment was $6.2 million representing a 7% gross margin.

Gain on sale of lease equipment, a net revenue metric,, was $5.5 million in the third quarter, resulting from the sale of 8 engines as well as other equipment. Compared to $16.1 million in the comparable prior period. Q3 gains on sale represented a 17% gross margin on $32.1 million of gross sales. Gain on sale was lighter the gains in the preceding quarter as Q2 was influenced by the ceding of our leasing fund portfolio. Maintenance services revenue which represents engine and aircraft storage and repair service, and revenues related to management of fixed based operator services increased by $7.6 million or 28.5% to $11.2 million in the third quarter of 26.

This growth was predominantly related to growth in engine aircraft storage and repair services. Gross margin was a negative $1.7 million for the quarter. Our maintenance services offerings enhance our ability to provide a differentiated and program solution to our customer base, Inter company revenue for maintenance services are eliminated in consolidation and therefore not reflected in our P and L but continue to increase the profitability of our owned and managed assets. Management and advisory fees the fees generated through our asset management efforts, were $4.5 million in the quarter. Up 140%. On the expense side of the equation, depreciation and amortization expense increased by $2.7 million or 9% to $31.4 million in Q3 26.

The increase is primarily due to an increase in the size of our lease portfolio and the timing of placing acquired engines on lease. Write down of equipment was $4.5 million in the third quarter. Reflecting the impairment of 3 engines These asset write downs are generally associated with the evaluation of engines post lease return. G&A expenses decreased by $500 thousand to $48.7 million in the third quarter. The decrease was primarily driven by a reduction in personnel costs and expenses. Related to the ceased sustainable aviation fuel project partially offset by increased outside professional and insurance costs.

Technical expense increased by $5.1 million to $13.5 million in the quarter, as compared to $8.4 million in the prior comparable period due to an increased level of engine repair activity Technical expense generally relates to unplanned maintenance. Whereas engine performance restoration tend to be planned and capitalized events. Net finance cost decreased $4.3 million or 11.7% to $32.8 million in the quarter. The decrease was primarily attributable to $2.4 million of lower cost associated with debt extinguishment as we had effectively completed the paydown of our West 7 financing and a lower overall weighted average cost of debt capital slightly offset by increased total leverage.

Income from operations was $11.5 million, compared to $38 million in the prior comparable period. Income from investments was $7.3 million, up $2.1 million or 41% from the prior period. This income was driven by growth contributions from our William Mitsui joint venture as well as our other asset management businesses. And slightly offset by declines through our smaller China based joint venture. When we analyze our year to date income from investments, and fund management and advisory fees, and compare that to our 2026 average balance sheet investments, we can see that these initiatives have generated a 32% ROI.

Earnings before tax, or EBT, of $18.8 million for the quarter as compared to EBT of $43.2 million for the prior comparable period. Income tax expense was $7.1 million for the quarter, reflecting a 38% effective tax rate Our third quarter effective tax rate includes a onetime charge of approximately $600 thousand or 3 percentage points reflecting the impact of Florida's 2026 legislative decision not to adopt certain federal tax law changes under the 1 Big Beautiful Bill and the resulting updates to our current and deferred tax estimates. As this adjustment relates to prior year tax positions, we do not expect it to recur.

We would expect that our year to date 28% ETR to be the best estimate for a full year ETR. The company produced $10.2 million of net income attributable to common shareholders, which factors in GAAP taxes, net income attributable to our noncontrolling interests, and the costs of our preferred equity. Diluted weighted average income per share was 47 cents, in the third quarter of 26. Adjusted EBITDA for the third quarter of 26 was $101 million We believe that our adjusted EBITDA reflects the normalized cash flow generation capability of the William Enterprise.

Our adjusted EBITDA makes adjustments to our net income attributable to common shareholders for income tax expense, interest expense, preferred stock dividends and costs, the loss on debt extinguishment, depreciation and amortization expense, stock based compensation expense, write down of equipment, acquisition financing and divestitures related expenses, and other discrete gains and expenses. Net cash provided by operating activities year to date was $239 million up 14% compared to Q3 year to date.

2025, Fluxes with the prior period predominantly related to changes in net income net of tax effects, the cash tax effects, losses on debt extinguishment, the noncash effects of impairment on equipment, the prior year gain on sale of our WAML business to William Mitsui and a period over period $44 million increase in cash provided by changes in assets and liabilities. On the financing and capital structure side of the business, the company in July affected a 3-for-1 common stock split effective July 21, 2026, to provide for more liquidity in our common shares.

On September 29, we closed a private placement of $35 million of Series B preferred stock our partner Development Bank of Japan, increasing their par investment in our preferred shares to 100 million. The incremental $35 million investment carries an 8.09% dividend. On October 28, the Board of Directors approved the expansion and extension of our share repurchase program. Program was increased to $200 million in total size and extended through December 31, 2031. In August, we paid our ninth consecutive regular quarterly dividend, which was $0.0133 per share.

Subsequent to quarter end, our Board of Director has declared our 10th consecutive recurring quarterly dividend, at a rate of 15 cents per share, reflecting a 12.8% increase from our prior dividend. This dividend will be payable on November 25 to holders of record as of November 16, 2026. Our recurring dividend provides shareholders with a moderate current cash yield on their investment while not degrading the strong cash flow of our business and speaks to the health of the business and its underlying cash flow generation.

With respect to leverage, as defined as total debt obligations, net of cash and restricted cash to equity inclusive of preferred stock, Our leverage was 2.88x at the end of the third quarter of 26. Our leverage and capital availability across the entire Wools platform provides us the flexibility to access market opportunities as they become available. With that, I will hand the call back to Austin.

Austin Chandler Willis: Thank you, Scott. As you can see, we are delivering on our strategy to supplement our on balance sheet leasing business with asset management. While this strategy moderates on balance sheet growth as we deploy third party capital, it is consistent with our long term strategy we expect it to ultimately deliver premium returns. With that, I would like to open up the call for Q&A.

Operator: You have turned off to allow your signal to reach our equipment. Once again, star 1 for questions. Take our first question from Angelina Chow with Deutsche Bank.

Angelina Chow: Good morning. This is Angelina Chow on for Shannon. Thanks for taking my-- so my first question is, this quarter saw a solid increase in lease revenue. What are you seeing in terms of demand across your engine portfolio by engine types?

Austin Chandler Willis: Thanks, Angelina. We are seeing pretty consistent demand across our portfolio. Both in the legacy or current tech as well as the more modern tech. We generally do not break it down engine by engine. But I can tell you that it still remains robust. there is always fluctuations. You might have a 5B or a 7B high 1 quarter and a little bit lower the next quarter, and the same goes for GTFs or LEAPS. So we continue to see fluctuations, but demand remains pretty consistent. Lease rates have remained on average pretty flat for the majority of the year. For the. For most of the engine types.

So some going up a little bit and some going down a little bit.

Angelina Chow: Got it. Thank you. And I have another question. So you called out focusing on growing the William platform in your balance sheet. And with remaining capital available across the Liberty Mutual and Black strategies, how should we think about the pace of deployment from here and the mix of incremental asset growth between the balance sheet and the managed third party capital? Thank you.

Austin Chandler Willis: Sure. Sure. So we have in round terms, about $3 billion in capital that we can deploy or dry powder, so to speak. We tend to think about our origination opportunities in terms of a third, a third, a third. We try to allocate about a third between, our joint ventures, a third between our fund with Black and a third on balance sheet. The first half of the year, we really focused on seeding, the Blackstone and Liberty Mutual funds. So that was, both trying to originate from the market but also taking assets from our own balance sheet and putting them into those funds.

So that slowed our pace of growth on balance sheet somewhat while we did that. We have done the majority of that seating now. So as we originate, it is going to have a more direct impact to our on balance sheet growth as we also grow the other pockets of capital as well. And that is sort of what I was trying to allude to in my prepared remarks. Got it.

Angelina Chow: Thank you.

Austin Chandler Willis: You bet.

Operator: We will take our next question from William Waller with M3F.

William Waller: Hi. Great quarter operationally. From my perspective, is probably 1 of strongest quarters I have seen in the history of William Lease, so great job. On the maintenance reserve liability, in the press release, you discussed the timing of recognition of long term maintenance revenue or long term maintenance reserve revenue I tracked the bill to that through the balance sheet liability, which increased to $201.7 million at September 30, up from $129.3 million at June 30. I do not recall ever seeing growth of that magnitude while only $2.6 million was recognized as long term maintenance revenue during the quarter.

Could you walk us through kind of the primary drivers of that liability increase and specifically how much of that came from net collections of reimbursable reserves versus any amounts that were assumed in acquisitions or other portfolio activity.

Austin Chandler Willis: So I will just say 1 quick thing, and then I will hand it over to Scott. We did have the highest number of lease extensions in the third quarter that we saw in over a year, and higher than, you know, 2026 to date's been higher than 2025, but a little bit lower than 2024. And as you know, lease extensions do play a role in rev rec with respect to long term reserves. So I wanted to quickly mention that, but I will hand it over to Scott who is going to be able to give you more concise answer.

Scott Flaherty: Sure. Thanks, Austin. And thanks, Will. Thanks, for the comments on the quarter. So, yeah, you are talking about a couple things, Will. That have happened. Obviously, we were acquisitive in the quarter. And Austin, I think, discussed the WNG transaction. So some of the assets we brought over did come with reserves. Right? So that is gonna adjust and will have an effect on our pro form a balance sheet. But then and you will see this when we come out later today with our 10 q. Then if you just look on our cash flow statement and you look at the net cash provided by maintenance reserves. Right?

And the maintenance reserves are gonna be associated with those long term. With the long term leases was $27.8 million compared to date compared to $1.6162 billion year to date in the prior year. So what we are seeing, right, is that shift or the mix shift slightly to newer-tech assets, tend to be on a longer term lease. And you might not see that in the P&L, long term MR, you definitely see it on a cash basis.

William Waller: Okay. That makes sense. And, Austin, you mentioned that the kind of lease extension rate is a bit elevated. Do you guys have any sense of, you know, what percentage of long term leases are being extended? would then obviously defer the recognition of some of that maintenance reserve revenue on the long term leases.

Austin Chandler Willis: I do not have those numbers handy right now. But I will say that generally speaking, the lease extensions were I would say, 10-15% higher than they had been in previous quarters. And I would not attribute that to anything in particular other than just, you know, the normal fluctuations in our business. Yeah. Probably shows that there is good demand. Nobody wants to a lot of a lot of airlines do not wanna return engines, which I would say is probably a positive trend.

William Waller: And then on the. You kind of mentioned that you know, a lot of these are new generation engines. I think you gave this statistic that 60% of your portfolio is now sort of the new tech engines. Is that by number or by dollar amount? You know, that is carried on your balance sheet of your equipment? Is it by number of engines or by dollar amount of engines that 60% is new-tech engines?

Austin Chandler Willis: that is by dollar amount.

William Waller: Okay. Perfect. All right. Great quarter. And if there is no other questions, I might ask 1 more but I will drop back into the queue. Please. Thank you.

Operator: We will take our next question from Buckley Capital. Caller, please state your name.

Analyst: Hey, guys. Congrats on the quarter. I think Will asked the majority of my questions. I guess, I just want to make sure I understand sort of how much of that balance sheet increase related to maintenance reserves was acquisitions versus organic Thanks.

Scott Flaherty: So the amount of the increase that was related to-- that was related to cash flow for-- on a year to date, like I said, was $27.8 million. Right? And the rest. So on a year to date basis, so looking back, and the rest was related to acquisition. Got it.

Analyst: And then any commentary you guys have on, like, the pacing of how the Blackstone portfolio will kind of you know, build over time.

Austin Chandler Willis: Yeah. I mean, it is going to be consistent with our general origination. And I will say we have been pretty judicious about what we bought over the past year. it is it is gonna come down to where the market opportunities play out in 2027. You know, I think there is a view that there may be more opportunities to acquire attractive assets at good values. And should that manifest itself, and I think we will deploy pretty quickly. But, you know, these also do tend to be lumpy. So I know that is that is not a very precise answer for you. But we have believe it is 2 years for the investment phase of the funds.

And, you know, our expectation is to deploy that-- to deploy the capital, well inside of that.

Analyst: Got it. Then I guess just last thing, is there any commentary you can have on kind of when the balance sheet you know, item will be released into the income statement. Like, will that happen in the next 12 months? Or any specificity you can provide would be helpful.

Scott Flaherty: You are talking about the that is specific maintenance reserve? [Inaudible] Reserve? Yeah, yeah. [Inaudible]. You said it is No. it is hard for us-- it is hard for us to do that for a lot of the reasons that we are talking about. You know, the assets get extended on lease. You know, But it is just. it is over time, it does get recognized. Right? I mean, it is really all timing. Right? The cash flow is happening on a current basis. You know, most of the engines that we have that are long term lease are going to be paying current MRs. So the cash flow is being realized in real time.

But over time, the long term MLR will be realized. But it is really hard for us to say exactly when it is because the term. The various terms of the lease, we look at our average portfolio is, you know, approximately 2 years, but the longer term leases are obviously longer than that, and they will be realized over that period.

Analyst: Got it. that is all. Thanks, guys. Thank you. Thank you.

Operator: We will go back to William Waller with M3F.

William Waller: Yeah. As it relates to the $200 million share repurchase authorization, When you look at the convertible debt, how do you look at buying back common stock versus, you know, potentially buying back convertible debt? And would that if you did go back into the markets and buy some of the debt that you are issued, would that go against that repurchase authorization that you just authorized, or would that be something you could do outside of that?

Scott Flaherty: Yeah. So good question. You know, I. it is 2 different things. Right? The convertible bond is not is not part of a share repurchase program. So can we go out and buy debt in the open market and retire it at a discount? Yes. We can. And that would not-- that would not go against the $200 million program that we have on the share repurchase side. But as always, we kind of look where we get the most bang for the buck. For how we spend our dollars and how we allocate our capital. And does it make sense to buy a share back? Or does it make sense to buy debt back in the open market?

I mean, we have we have done all of these things in the past, or does it make sense to put the next dollar into a new asset? We kind of evaluate all these things on a case by case basis. where we are going to generate the best returns for the business.

William Waller: Okay. That makes sense. And then I think at the end of last year, you had about you know, appraisals were kind of showing the current market value of engines. I think we are about $700 million above, you know, what-- what they are carried out on the balance sheet. Does it feel like to you guys. And I know you only get appraisals done once a year. Think, on those. But with all the changes that have gone on with your portfolio with you know, sales and so on, do you have any sense of what that gain might be today?

Scott Flaherty: The unrealized gain? Sure. Yeah. So, well, as you know, we do this once a year. So. And I want. I wanna encourage you to stay tuned for when we do it, when we tell you next year. But I would not expect there to be any material difference in you know, kind of percentages. Right? We have not seen material movements And our portfolio is material enough that it does not change over any specific quarter. So I would expect to have consistent percentages. That we have had in the past there.

William Waller: Great. that is good to hear. And it seems like the stock trades at such a discount to sort of what the intrinsic value of the equity and the value of the engines you have that would make great sense if you buy back stock or buy back some of that debt. So glad to see the, the authorization and hope to see that, you act on it. And then 1 last question, just kind of circling back to the topic I asked about before on long term maintenance revenues and so on. Do you know what roughly, what percentage of your leases are long term versus short term?

I know, historically, it is kind of 50, but just kind of curious what that is, these days.

Austin Chandler Willis: Yeah. That really has not changed very much. Will. it is still roughly 50.

William Waller: Okay. Perfect. Well, thanks a lot. Really appreciate it.

Austin Chandler Willis: Thank you. Thank you.

Operator: With no additional questions in queue at this time, I would like to turn the call back over to Austin Chandler Willis for any additional or closing remarks.

Austin Chandler Willis: Thank you, operator. We appreciate everybody giving us their time today, and we look forward to speaking to you again in the New Year.

Operator: That will conclude today's call. We appreciate your participation.

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