WILLIS LEASE FINANCE CORP

Previous wording

The following discussion should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and notes thereto included under Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, reference should be made to our Audited Consolidated Financial Statements and notes thereto and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Form 10-K”). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, including the potential impact of changes in interest rates or inflation, as well as the impact of new or increased tariffs on our business, results of operations and financial condition. Our actual results may differ materially from those contained in or implied by any forward-looking statements. The financial information included in this discussion and in our consolidated financial statements may not be indicative of our consolidated financial position, operating results, changes in equity and cash flows in the future. See “Special Note Regarding Forward-Looking Statements” included earlier in this report.

Current wording

The following discussion should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and notes thereto included under Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, reference should be made to our Audited Consolidated Financial Statements and notes thereto and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, including the potential impact of changes in interest rates or inflation, as well as the impact of new or increased tariffs on our business, results of operations and financial condition. Our actual results may differ materially from those contained in or implied by any forward-looking statements. The financial information included in this discussion and in our consolidated financial statements may not be indicative of our consolidated financial position, operating results, changes in equity and cash flows in the future. See “Special Note Regarding Forward-Looking Statements” included earlier in this report.

Previous wording

Our core business is acquiring and leasing commercial aircraft and aircraft engines and related aircraft equipment pursuant to operating leases, all of which we sometimes collectively refer to as “equipment.” As of September 30, 2025, the majority of our leases were operating leases, with the exception of certain failed sale-leaseback transactions classified as notes receivable under the guidance provided by Accounting Standards Codification (“ASC”) 842 and investments in sales-type leases. As of September 30, 2025, we had 69 lessees in 37 countries. Our portfolio is continually changing due to equipment acquisitions and sales. As of September 30, 2025, we had $2,700.4 million of equipment held in our operating lease portfolio, $144.8 million of notes receivable, $27.0 million of maintenance rights, and $16.3 million of investments in sales-type leases, which represented 354 engines, 20 aircraft, one marine vessel, and other leased parts and equipment. As of September 30, 2025, we also managed 86 engines, aircraft and related equipment on behalf of other parties.

Current wording

Our core business is acquiring and leasing commercial aircraft and aircraft engines and related aircraft equipment pursuant to operating leases, all of which we sometimes collectively refer to as “equipment.” As of March 31, 2026, the majority of our leases were operating leases, with the exception of certain sale-leaseback transactions that do not meet lease criteria and are therefore classified as notes receivable under the guidance provided by Accounting Standards Codification (“ASC”) 842, Leases, and investments in sales-type leases. As of March 31, 2026, we had 70 lessees in 40 countries. Our portfolio is continually changing due to equipment acquisitions and sales. As of March 31, 2026, we had $2,760.5 million of equipment held in our operating lease portfolio, $65.6 million of notes receivable, $30.6 million of maintenance rights, and $0.3 million of investments in sales-type leases, which represented 342 engines, 20 aircraft, one marine vessel, and other leased parts and equipment. As of March 31, 2026, we also managed 129 engines, one airframe, and related equipment on behalf of other parties.

Previous wording

Willis Aeronautical Services, Inc. is a wholly-owned and vertically-integrated subsidiary whose primary focus is the sale of aircraft engine parts and materials through the acquisition or consignment of aircraft and engines. Additionally, through Willis Engine Repair Center®, Jet Centre by Willis, and Willis Aviation Services Limited, the Company’s service offerings include Part 145 engine maintenance, aircraft line and base maintenance, aircraft disassembly, parking and storage, airport FBO and ground and cargo handling services.

Current wording

Willis Aeronautical Services, Inc. is a wholly-owned and vertically-integrated subsidiary whose primary focus is the sale of aircraft engine parts and materials through the acquisition or consignment of aircraft and engines. Additionally, through Willis Engine Repair Center®, Jet Centre by Willis, and Willis Aviation Services Limited, the Company’s service offerings include Part 145 engine maintenance, aircraft line and base maintenance, aircraft disassembly, parking and storage, airport fixed base operator (“FBO”) and ground and cargo handling services.

Previous wording

Lease Rent Revenue. Lease rent revenue consists of rental income from long-term and short-term engine leases, aircraft leases, and other leased parts and equipment. Lease rent revenue increased by $11.6 million, or 17.9%, to $76.6 million in the three months ended September 30, 2025 from $64.9 million for the three months ended September 30, 2024. The increase is due to an increase in the average size of the portfolio as compared to that of the prior year period as well as an increase in average utilization (based on net book value of equipment held for operating lease, maintenance rights, and notes receivable and investments in sales-type leases net of allowances) of equipment held in our operating lease portfolio.

Current wording

Lease Rent Revenue. Lease rent revenue consists of rental income from long-term and short-term engine leases, aircraft leases, and other leased parts and equipment. Lease rent revenue increased by $9.6 million, or 14.2%, to $77.4 million in the three months ended March 31, 2026, from $67.7 million for the three months ended March 31, 2025. The increase is due to an increase in the average size of the portfolio as compared to that of the prior year period as well as an increase in average utilization (based on net book value of equipment held for operating lease, maintenance rights, and notes receivable and investments in sales-type leases net of allowances) of equipment held in our operating lease portfolio.

Previous wording

At September 30, 2025, the Company had $2,700.4 million of equipment held in our operating lease portfolio, $144.8 million of notes receivable, $27.0 million of maintenance rights, and $16.3 million of investments in sales-type leases. At September 30, 2024, the Company had $2,435.6 million of equipment held in our operating lease portfolio, $175.4 million of notes receivable, $31.5 million of maintenance rights, and $23.2 million of investments in sales-type leases. Average utilization (based on net book value of equipment held for operating lease, maintenance rights, and notes receivable and investments in sales-type leases net of allowances) was approximately 86.0% and 82.9% for the three months ended September 30, 2025 and 2024, respectively.

Current wording

At March 31, 2026, the Company had $2,760.5 million of equipment held in our operating lease portfolio, $65.6 million of notes receivable, $30.6 million of maintenance rights, and $0.3 million of investments in sales-type leases. At March 31, 2025, the Company had $2,597.8 million of equipment held in our operating lease portfolio, $179.3 million of notes receivable, $25.2 million of maintenance rights, and $17.3 million of investments in sales-type leases. Average utilization (based on net book value of equipment held for operating lease, maintenance rights, and notes receivable and investments in sales-type leases net of allowances) was approximately 85.8% and 79.9% for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Two customers accounted for approximately 12% and 10% of the Company’s total lease rent revenue during the three months ended September 30, 2025, and two customers each accounted for approximately 11% of the Company’s total lease rent revenue during the three months ended September 30, 2024.

Current wording

Two customers accounted for approximately 12% and 11%, each, of the Company’s total lease rent revenue during the three months ended March 31, 2026, and two customers accounted for approximately 14% and 10%, each, of the Company’s total lease rent revenue during the three months ended March 31, 2025.

Previous wording

Maintenance Reserve Revenue. Maintenance reserve revenue increased $26.3 million, or 52.8%, to $76.1 million for the three months ended September 30, 2025 from $49.8 million for the three months ended September 30, 2024. We recognized $29.5 million in long-term maintenance revenue for the three months ended September 30, 2025, compared to $1.2 million in long-term maintenance revenue recognized in the comparable prior period as more engines came off leases with long-term maintenance conditions. Long-term maintenance revenue is influenced by end of lease compensation and the realization of long-term maintenance reserves associated with engines coming off lease. Engines on lease with “non-reimbursable” usage fees generated $46.6 million of short-term maintenance revenues, compared to $48.5 million in the comparable prior period. Short-term maintenance revenues are a proxy for flight time of our portfolio of engines.

Current wording

Maintenance Reserve Revenue. Maintenance reserve revenue increased $0.7 million, or 1.2%, to $55.5 million for the three months ended March 31, 2026, from $54.9 million for the three months ended March 31, 2025. We recognized $12.4 million in long-term maintenance revenue for the three months ended March 31, 2026, compared to $9.6 million in long-term maintenance revenue recognized in the prior comparable period as the maintenance reserves and end-of-lease payments for engines coming off lease exceed those in the prior comparable period. Long-term maintenance revenue is influenced by end-of-lease compensation and the realization of long-term maintenance reserves associated with engines coming off lease. Engines on lease with “non-reimbursable” usage fees generated $43.1 million of short-term maintenance revenues, compared to $45.3 million in the comparable prior period. Short-term maintenance revenues are a proxy for flight time of our portfolio of engines.

Previous wording

Spare Parts and Equipment Sales. Spare parts and equipment sales decreased by $5.5 million, or 50.3%, to $5.4 million for the three months ended September 30, 2025, compared to $10.9 million for the three months ended September 30, 2024. Spare parts sales were $5.4 million and $9.9 million for the three months ended September 30, 2025 and 2024, respectively, a decrease of $4.5 million, or 45.4%, compared to the same period in 2024. The decrease in spare parts sales reflects the variations in the timing of sales. There were no equipment sales for the three months ended September 30, 2025. Equipment sales for the three months ended September 30, 2024 were $1.0 million for the sale of one engine.

Current wording

Spare Parts and Equipment Sales. Spare parts and equipment sales increased by $3.4 million, or 18.9%, to $21.7 million for the three months ended March 31, 2026, compared to $18.2 million for the three months ended March 31, 2025. Spare parts sales were $10.3 million and $16.0 million for the three months ended March 31, 2026 and 2025, respectively, a decrease of $5.8 million, or 35.9%, compared to the same period in 2025. The decrease in spare parts sales reflects variations in the timing of sales to third-party customers and is not reflective of intra-company sales as the parts business provides used serviceable material across the broader Willis platform. Equipment sales for the three months ended March 31, 2026 were $11.4 million for the sale of three engines. The trading profit on the sales of these engines was $5.7 million, representing a 50% margin. Equipment sales for the three months ended March 31, 2025 were $2.2 million for the sale of one engine.

Previous wording

Gain on Sale of Leased Equipment. During the three months ended September 30, 2025, we sold 10 engines, one airframe, and other parts and equipment from the lease portfolio for $73.7 million less economic closing adjustments, resulting in a net gain of $16.1 million. During the three months ended September 30, 2024, we sold 13 engines and other parts and equipment from the lease portfolio, resulting in a net gain of $9.5 million.

Current wording

Gain on Sale of Leased Equipment. During the three months ended March 31, 2026, we sold 14 engines from the lease portfolio for a net gain of $18.0 million. The $18.0 million gain was associated with gross sales of $60.0 million, representing a 30% margin. During the three months ended March 31, 2025, we sold seven engines, one airframe, and other parts and equipment from the lease portfolio, resulting in a net gain of $4.4 million.

Previous wording

Gain on Sale of Financial Assets. During the nine months ended September 30, 2025, we sold two investments in sales-type lease assets for a net gain of $0.4 million. There was no gain on sale of financial assets during the nine months ended September 30, 2024.

Current wording

Gain on Sale of Financial Assets. During the three months ended March 31, 2026, we sold 11 notes receivable and investments in sales-type lease assets for a net gain of $0.4 million. During the three months ended March 31, 2025, we sold two investments in sales-type lease assets for a net gain of $0.4 million.

Previous wording

Maintenance Services Revenue. Maintenance services revenues predominately represent fleet management, engine and aircraft storage and repair services, and revenue related to fixed base operator services provided to third parties, such as refueling, maintenance, and hangar services. Maintenance services revenue decreased by $2.3 million, or 38.9%, to $3.6 million for the three months ended September 30, 2025, from $5.9 million for the three months ended September 30, 2024. The decrease primarily reflects a decrease in fleet management revenue resulting from the sale of that line of business on June 30, 2025 to our joint venture Willis Mitsui & Company Engine Support Limited (“WMES”).

Current wording

Maintenance Services Revenue. Maintenance services revenue predominately represent fleet management, engine and aircraft storage and repair services, and revenue related to FBO services provided to third parties, such as refueling, maintenance, and hangar services. Maintenance services revenue increased by $4.2 million, or 74.9%, to $9.8 million for the three months ended March 31, 2026, from $5.6 million for the three months ended March 31, 2025. The increase reflects growth in engine and aircraft storage and repair services partially offset by the lack of fleet management revenues in the current period due to the sale of that business in 2025.

Previous wording

Depreciation and Amortization Expense. Depreciation and amortization expense increased by $5.0 million, or 21.2%, to $28.7 million for the three months ended September 30, 2025, compared to $23.7 million for the three months ended September 30, 2024. The increase is primarily due to an increase in the size of our lease portfolio, the timing of placing acquired engines on lease, and to a lesser extent, an increase in accelerated depreciation on older engine models.

Current wording

Depreciation and Amortization Expense. Depreciation and amortization expense increased by $5.2 million, or 20.6%, to $30.2 million for the three months ended March 31, 2026, compared to $25.0 million for the three months ended March 31, 2025. The increase is primarily due to an increase in the size of our lease portfolio and the timing of placing acquired engines on lease.

Previous wording

Cost of Spare Parts and Equipment Sales. Cost of spare parts and equipment sales decreased by $2.2 million, or 24.6%, to $6.7 million for the three months ended September 30, 2025, compared to $8.9 million for the three months ended September 30, 2024. Cost of spare parts sales were $6.7 million and $8.8 million for the three months ended September 30, 2025 and 2024, respectively, a decrease of $2.1 million, or 23.7%, reflecting the decrease in spare parts sales. Cost of equipment sales were $0.1 million for the three months ended September 30, 2024.

Current wording

Cost of Spare Parts and Equipment Sales. Cost of spare parts and equipment sales decreased by $0.9 million, or 5.9%, to $14.4 million for the three months ended March 31, 2026, compared to $15.3 million for the three months ended March 31, 2025. Cost of spare parts sales were $8.8 million and $13.8 million for the three months ended March 31, 2026 and 2025, respectively, a decrease of $5.1 million, or 36.6%, reflecting the decrease in spare parts sales. Cost of equipment sales were $5.7 million and $1.5 million for the three months ended March 31, 2026 and 2025, respectively, reflecting the increase in equipment sales.

Previous wording

Cost of Maintenance Services. Cost of maintenance services predominately represent the costs of fleet management, engine and aircraft storage and repair services, and the management of fixed base operator services provided to third parties. Cost of maintenance services decreased by $1.3 million, or 19.8%, to $5.1 million for the three months ended September 30, 2025, compared to $6.4 million for the three months ended September 30, 2024, reflecting the decrease in maintenance services revenue.

Current wording

Cost of Maintenance Services. Cost of maintenance services predominately represent the costs of fleet management, engine and aircraft storage and repair services, and the management of fixed base operator services provided to third parties. Cost of maintenance services increased by $3.5 million, or 66.3%, to $8.9 million for the three months ended March 31, 2026, compared to $5.3 million for the three months ended March 31, 2025, reflecting the increase in maintenance services revenue.

Previous wording

Write-down of Equipment. There was $10.2 million in write-downs of equipment for the three months ended September 30, 2025, reflecting the write-down of eight engines. Write-downs were predominantly related to engines moved from Equipment held for operating lease to Equipment held for sale. There was $0.6 million in write-downs of equipment for the three months ended September 30, 2024, reflecting the write-down of three engines.

Current wording

Write-down of Equipment. There was $1.1 million in write-downs of equipment for the three months ended March 31, 2026, reflecting the write-down of one engine. There was $2.1 million in write-downs of equipment for the three months ended March 31, 2025, reflecting the write-down of five engines.

Previous wording

General and Administrative Expenses. General and administrative expenses increased by $43.0 million, or 41.3%, to $147.3 million for the nine months ended September 30, 2025 compared to $104.3 million for the nine months ended September 30, 2024. The increase primarily reflects a $22.1 million increase in personnel costs, which included an increase of $16.5 million in share-based compensation and an increase of $3.3 million in wages. Of the $16.5 million increase in share-based compensation, $5.3 million related to the acceleration of the vesting of shares upon the resignation of our prior General Counsel, and the remainder primarily related to the appreciation of the market value of the Company’s equity as well as share awards to new personnel to support the continued growth of the Company. Further, there was a $9.8 million increase in consultant fees, which was influenced by costs associated with the Company’s sustainable aviation fuel project, as well as a $4.9 million increase in legal fees primarily associated with finance and strategic initiatives.

Current wording

General and Administrative Expenses. General and administrative expenses increased by $8.9 million, or 18.6%, to $56.6 million for the three months ended March 31, 2026, compared to $47.7 million for the three months ended March 31, 2025. The increase primarily reflects a $12.5 million increase in personnel costs, which included an increase of $6.9 million in share-based compensation and an increase of $4.1 million in wages. The increase in share-based compensation reflects appreciation of the market value of the Company’s equity as well as share awards to new personnel to support continued growth of the Company. The increase in wages was driven by higher headcount to support the Company’s growth. Non-recurring project expense associated with the sustainable aviation fuels project declined $11.7 million due to the decision to cease investment in and pursue strategic alternatives. General and administrative costs for the three months ended March 31, 2026 also included $4.9 million of costs which were recharged to the LMI Fund, with the associated revenue of $4.9 million included in Management and Advisory Fees, and a $2.0 million increase in acquisition, financing and divestiture related expenses.

Previous wording

Technical Expense. Technical expense consists of the non-capitalized cost of engine repairs, engine thrust rental fees, outsourced technical support services, sublease engine rental expense, engine storage and freight costs. Technical expense increased by $3.2 million to $8.4 million for the three months ended September 30, 2025, compared to $5.2 million for the three months ended September 30, 2024, primarily due to an increased level of engine repair activity as compared to that of the prior period.

Current wording

Technical Expense. Technical expense consists of the non-capitalized cost of engine repairs, engine thrust rental fees, outsourced technical support services, sublease engine rental expense, engine storage and freight costs. Technical expense increased by $3.5 million to $9.7 million for the three months ended March 31, 2026, compared to $6.2 million for the three months ended March 31, 2025, primarily due to an increased level of engine repair activity as compared to that of the prior period.

Previous wording

Net Finance Costs. Net finance costs increased $9.3 million, or 33.5%, to $37.1 million for the three months ended September 30, 2025, compared to $27.8 million for the three months ended September 30, 2024, primarily due to an overall increased level of debt obligations. There was additional interest expense of $8.3 million for the three months ended September 30, 2025 associated with the Willis Engine Structured Trust VIII (“WEST VIII”) notes payable, which closed in June 2025, and loss on debt extinguishment of $3.0 million associated with the refinance of Willis Engine Structured Trust IV (“WEST IV”) and Willis Engine Structured Trust VII (“WEST VII”) notes. Additionally, derivative-related receipts were $(0.5) million for the three months ended September 30, 2025, as compared to $3.0 million for the three months ended September 30, 2024, as certain interest rate swap positions were terminated. These increases in expense were partially offset by an increase of $3.0 million in interest income primarily related to interest earned on WEST VIII restricted cash accounts.

Current wording

Net Finance Costs. Net finance costs increased $7.6 million, or 23.6%, to $39.7 million for the three months ended March 31, 2026, compared to $32.1 million for the three months ended March 31, 2025. The increase is primarily due to $7.0 million in loss on debt extinguishment, an increase of $7.2 million in interest expense associated with Willis Engine Structured Trust VIII (“WEST VIII”) notes payable, which closed in June 2025, and an increase of $4.2 million in interest expense associated with Willis Engine Structured Trust IX (“WEST IX”) notes payable, which closed in December 2025. The loss on debt extinguishment was driven by the Company’s refinancing and capital restructuring. Additionally, derivative-related receipts were $0.9 million for the three months ended March 31, 2026, as compared to $2.4 million for the three months ended March 31, 2025, as certain swap positions were either terminated or ran off. These increases were partially offset by a decrease of $4.0 million in interest expense associated with the Company’s credit facility, a decrease of $3.6 million in interest expense associated with Willis Engine Structured Trust VII (“WEST VII”) notes payable, a decrease of $2.6 million in interest expense associated with the Willis Warehouse Facility LLC (“WWFL”), and a decrease of $2.7 million in interest expense associated with Willis Engine Structured Trust IV (“WEST IV”) notes payable, as these debt instruments were paid down or terminated as part of the Company’s refinancing and capital restructuring.

Previous wording

Income Tax Expense. Income tax expense was $18.9 million for the three months ended September 30, 2025, compared to income tax expense of $10.4 million for the three months ended September 30, 2024. The effective tax rate for the third quarter of 2025 was 43.7%, compared to 30.1% in the prior year period. The Company’s effective tax rate differed from the U.S. federal statutory rate of 21.0% primarily due to executive compensation exceeding $1.0 million as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). H.R. 1., also known as the One Big Beautiful Bill Act (“OBBBA”), was enacted on July 4, 2025. The provisions of the OBBBA impacted certain tax deductions, including bonus depreciation, limiting the Company’s ability to benefit from the Section 250 deduction. This disallowance caused the Company’s third quarter effective tax rate to be higher than that of the previous quarter.

Current wording

Income Tax Expense. Income tax expense was $11.8 million for the three months ended March 31, 2026, compared to income tax expense of $8.4 million for the three months ended March 31, 2025. The effective tax rate for the first quarter of 2026 was 31.9%, compared to 33.2% in the prior year period. The Company’s effective tax rate differed from the U.S. federal statutory rate of 21.0% primarily due to executive compensation exceeding $1.0 million as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

Previous wording

At September 30, 2025, the Company had $12.9 million of cash and cash equivalents and $158.1 million of restricted cash. We fund our operations primarily from cash provided by our leasing activities. We finance our growth through borrowings secured primarily by our equipment lease portfolio. Cash of approximately $1,005.1 million and $518.9 million for the nine months ended September 30, 2025 and 2024, respectively, was derived from our borrowing activities, which included our $596.0 WEST VIII capital raise in June 2025. In these same time periods, $1,029.8 million and $331.2 million, respectively, was used to pay down related debt.

Current wording

At March 31, 2026, the Company had $24.6 million of cash and cash equivalents and $196.0 million of restricted cash. We fund our operations primarily from cash provided by our leasing activities. We finance our growth through borrowings secured primarily by our equipment lease portfolio. Cash of approximately $127.0 million and $135.0 million for the three months ended March 31, 2026 and 2025, respectively, was derived from our borrowing activities. In these same time periods, $577.4 million and $169.4 million, respectively, was used to pay down related debt. At March 31, 2026, the Company had approximately $1.3 billion of unused borrowing capacity on its credit facility.

Previous wording

Cash flows provided by operating activities were $209.1 million and $216.4 million for the nine months ended September 30, 2025 and 2024, respectively. The $7.4 million, or 3.4%, decrease in operating cash flows was primarily driven by a $23.2 million decrease in payments on sales-type leases, a period over period $28.1 million decrease in cash flows from changes in accounts receivable, and a period over period $24.0 million decrease in cash flows from changes in accounts payable and accrued expenses. Partially offsetting the decreases was a period over period $52.1 million increase in cash flows from changes in inventory. These changes reflect significant inventory purchases made in the prior comparable period to meet the high demand for spare parts. Spare parts sales were $30.7 million and $19.4 million for the nine months ended September 30, 2025 and 2024, respectively, an increase of $11.3 million, or 58.4%, compared to the same period in 2024. Cash flows from operations are driven significantly by payments made under our lease agreements, which comprise lease revenue, security deposits and maintenance reserves, and are offset by interest expense and general and administrative costs. Cash received as maintenance reserve payments for some of our engines on lease are partially restricted by our debt arrangements. The lease revenue stream, in the short term, is at fixed rates while a portion of our debt is at variable rates. If interest rates increase, it is unlikely we could increase lease rates in the short term, and this would cause a reduction in our earnings and operating cash flows. Revenue and maintenance reserves are also affected by the amount of equipment off lease. The average utilization rate (based on net book value of equipment held for operating lease, maintenance rights, and notes receivable and investments in sales-type leases net of allowances) for the nine months ended September 30, 2025 and 2024 was approximately 84.4% and 83.3%, respectively. If there is an increase in off-lease rates or deterioration in lease rates that are not offset by reductions in interest rates, there will be a negative impact on earnings and cash flows from operations.

Current wording

Cash flows provided by operating activities were $56.7 million and $41.0 million for the three months ended March 31, 2026 and 2025, respectively. The $15.7 million, or 38.2%, increase in operating cash flows was primarily driven by a period over period $10.0 million increase in cash flows from changes in other assets for the three months ended March 31, 2026. Cash flows from operations are driven significantly by payments made under our lease agreements, which comprise lease revenue, security deposits and maintenance reserves, and are offset by interest expense and general and administrative costs. Cash received as maintenance reserve payments for some of our engines on lease are partially restricted by our debt arrangements. The lease revenue stream, in the short term, is at fixed rates while a portion of our debt is at variable rates. If interest rates increase, it is unlikely we could increase lease rates in the short term, and this would cause a reduction in our earnings and operating cash flows. Revenue and maintenance reserves are also affected by the amount of equipment off lease. The average utilization rate (based on net book value of equipment held for operating lease, maintenance rights, and notes receivable and investments in sales-type leases net of allowances) for the three months ended March 31, 2026 and 2025 was approximately 85.8% and 79.9%, respectively. If there is an increase in off-lease rates or deterioration in lease rates that are not offset by reductions in interest rates, there will be a negative impact on earnings and cash flows from operations.

Previous wording

Cash flows used in investing activities were $108.2 million for the nine months ended September 30, 2025 and primarily reflected $310.6 million for the purchase of equipment held for operating lease and for sale (including capitalized costs and prepaid deposits made in the period) and $23.2 million for the purchase of property, equipment and furnishings, which was primarily related to leasehold improvements, partially offset by proceeds from sale of equipment (net of selling expenses) of $194.3 million and proceeds from sale of business of $21.9 million. Cash flows used in investing activities were $455.0 million for the nine months ended September 30, 2024 and primarily reflected $488.4 million for the purchase of equipment held for operating lease (including capitalized costs and prepaid deposits made in the period) and $89.6 million related to leases entered into which were classified as notes receivable under ASC 842, partly offset by proceeds from sale of equipment (net of selling expenses) of $117.9 million.

Current wording

Cash flows provided by investing activities were $79.9 million for the three months ended March 31, 2026 and primarily reflected proceeds from sale of equipment (net of selling expenses) of $71.4 million, proceeds from sale of notes receivable (net of selling expenses) of $71.6 million, and proceeds from sale of investments in sales-type leases (net of selling expenses) of $15.5 million, partially offset by $57.2 million for the purchase of equipment held for operating lease and for sale (including capitalized costs and prepaid deposits made in the period) and $21.2 million for the purchase of investments and contributions to joint ventures. Cash flows provided by investing activities were $13.7 million for the three months ended March 31, 2025 and primarily reflected proceeds from sale of equipment (net of selling expenses) of $47.7 million, partially offset by $29.3 million for the purchase of equipment held for operating lease and for sale (including capitalized costs and prepaid deposits made in the period) and $7.5 million for the purchase of property, equipment and furnishings.

Previous wording

Cash flows used in financing activities were $62.4 million for the nine months ended September 30, 2025 and primarily reflected $1,029.8 million in principal payments and $18.7 million in cancellation of restricted stock in satisfaction of withholding tax, partially offset by $1,005.1 million in proceeds from debt obligations. Cash flows provided by financing activities were $175.6 million for the nine months ended September 30, 2024 and primarily reflected $518.9 million in proceeds from debt obligations and $13.1 million in proceeds from issuance of preferred stock, partially offset by $331.2 million in principal payments, $8.9 million in cash dividends paid to shareholders of common stock, and $7.2 million in cancellation of restricted stock in satisfaction of withholding tax.

Current wording

Cash flows used in financing activities were $463.0 million for the three months ended March 31, 2026 and primarily reflected $577.4 million in principal payments, $4.5 million in debt issuance costs, and $3.1 million in common stock cash dividends paid, partially offset by $127.0 million in proceeds from debt obligations. Cash flows used in financing activities were $38.1 million for the three months ended March 31, 2025 and primarily reflected $169.4 million in principal payments and $1.8 million in cash dividends paid to shareholders of common stock, partially offset by $135.0 million in proceeds from debt obligations.

Previous wording

During the nine months ended September 30, 2025 and September 30, 2024, the Company paid cash dividends of $5.7 million and $8.9 million, respectively, to shareholders of common stock.

Current wording

During the three months ended March 31, 2026 and March 31, 2025, the Company paid cash dividends of $3.1 million and $1.8 million, respectively, to shareholders of common stock.

Previous wording

Prior to the Stock Purchase Agreement, the Company’s Series A-1 Preferred Stock accrued quarterly dividends at the rate per annum of 8.5% per share, and the Series A-2 Preferred Stock accrued quarterly dividends at the rate per annum of 6.5% per share. During each of the nine months ended September 30, 2025 and 2024, the Company paid total preferred stock dividends of $4.3 million and $3.4 million, respectively.

Current wording

The Company’s Series A Preferred Stock accrues quarterly dividends at the rate per annum of 8.35% per share. During each of the three months ended March 31, 2026 and 2025, the Company paid total preferred stock dividends of $1.4 million and $1.6 million, respectively.

Previous wording

At September 30, 2025, debt obligations consisted of loans totaling $2,239.5 million, net of unamortized issuance costs and note discounts, payable with interest rates varying between approximately 3.1% and 8.0%. Substantially all of our assets are pledged to secure our obligations to creditors. For further information on our debt instruments, see Note 4 “Debt Obligations” in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

At March 31, 2026, debt obligations consisted of loans totaling $2,253.7 million, net of unamortized issuance costs and note discounts, payable with interest rates varying between approximately 3.1% and 8.0%. Substantially all of our assets are pledged to secure our obligations to creditors. For further information on our debt instruments, see Note 4 “Debt Obligations” in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

At September 30, 2025, we were in compliance with the covenants specified in our revolving credit facility, including the Interest Coverage Ratio requirement of at least 2.25 to 1.00, and the Total Leverage Ratio requirement of not greater than 4.00 to 1.00. The Interest Coverage Ratio, as defined in the credit facility, is the ratio of earnings before interest, taxes, depreciation and amortization and other one-time charges to consolidated interest expense. The Total Leverage Ratio, as defined in the credit facility, is the ratio of total indebtedness to tangible net worth. At September 30, 2025, we were in compliance with the covenants specified in the WEST III, WEST IV, WEST V, WEST VI, WEST VII, WEST VIII, and WWFL indentures and servicing and other debt related agreements.

Current wording

At March 31, 2026, we were in compliance with the covenants specified in our revolving credit facility, including the Interest Coverage Ratio requirement of at least 2.25 to 1.00, and the Total Leverage Ratio requirement of not greater than 4.25 to 1.00. The Interest Coverage Ratio, as defined in the credit facility, is the ratio of earnings before interest, taxes, depreciation and amortization and other one-time charges to consolidated interest expense. The Total Leverage Ratio, as defined in the credit facility, is the ratio of total indebtedness to tangible net worth. At March 31, 2026, we were in compliance with the covenants specified in the WEST III, WEST V, WEST VI, WEST VII, WEST VIII, and WEST IX indentures and servicing and other debt related agreements.

Previous wording

From time to time we enter into contractual commitments to purchase engines directly from original equipment manufacturers. We are currently committed to purchasing 30 additional new LEAP-1A engines and 21 additional new LEAP-1B engines for an aggregate total of $912.6 million by 2030. Further, we are currently committed to purchasing five engines for approximately $22.6 million in 2025 and six engines for $105.5 million in 2026. The purchase obligations are subject to escalation based on the closing date of each transaction. Our purchase agreements generally contain terms that allow the Company to defer or cancel purchase commitments in certain situations. These deferrals or conversions would not result in penalties or increased costs other than any potential increase due to the normal year-over-year change in engine list prices, which is akin to ordinary inflation.

Current wording

From time to time we enter into contractual commitments to purchase engines directly from original equipment manufacturers. We are currently committed to purchasing 27 additional new LEAP-1A engines and 18 additional new LEAP-1B engines for an aggregate total of $839.0 million by 2030. Further, we are currently committed to purchasing 11 engines and three aircraft for approximately $225.2 million in 2026. The purchase obligations are subject to escalation based on the closing date of each transaction. Our purchase agreements generally contain terms that allow the Company to defer or cancel purchase commitments in certain situations. These deferrals or conversions would not result in penalties or increased costs other than any potential increase due to the normal year-over-year change in engine list prices, which is akin to ordinary inflation.

Previous wording

In December 2020, we entered into definitive agreements for the purchase of 25 Pratt & Whitney aircraft engines. As part of the purchase, we have committed to certain future overhaul and maintenance services which are anticipated to range between $97.1 million and $126.8 million by 2030.

Current wording

In December 2020, the Company entered into definitive agreements for the purchase of 25 Pratt & Whitney aircraft engines. In connection with the purchase agreements, the Company is obligated to perform certain future overhaul and maintenance services, which are currently estimated to aggregate between $106.6 million and $131.9 million by 2030. If such services are not completed by that date, performance may extend through 2035, with total costs not expected to exceed $172.6 million.

Previous wording

We believe our equity base, internally generated funds and existing debt facilities are sufficient to maintain our level of operations for the next twelve months. The level of internally generated funds could decline if the amount of equipment off-lease increases, there is a decrease in availability under our existing debt facilities, or there is a significant increase in borrowing costs. Such decline would impair our ability to sustain our current level of operations. We continue to discuss additions to our capital base with our commercial and investment banks. If we are not able to access additional capital, our ability to continue to grow our asset base consistent with historical trends will be impaired and our future growth would be limited to that which can be funded from internally generated capital.

Current wording

We believe our equity base, cash on hand, internally generated funds and existing debt facilities are sufficient to maintain our level of operations for the next twelve months. The level of internally generated funds could decline if the amount of equipment off-lease increases, there is a decrease in availability under our existing debt facilities, or there is a significant increase in borrowing costs. Such decline would impair our ability to sustain our current level of operations. We continue to discuss additions to our capital base with our commercial and investment banks. If we are not able to access additional capital, our ability to continue to grow our asset base consistent with historical trends will be impaired and our future growth would be limited to that which can be funded from internally generated capital.