Shares of Willis Lease Finance Corporation (WLFC Quick QuoteWLFC - Free Report) have declined 9.5% since the company reported its earnings for the quarter ended March 31, 2025, underperforming the S&P 500 index, which dipped just 0.2% in the same period. Over the past month, WLFC shares edged up 1%, again trailing the S&P 500’s stronger 4.3% advance.

Willis Lease reported a first-quarter 2025 net income of $2.21 per share, down from $3.00 per share in the first quarter of 2024. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

The company posted record first-quarter revenues of $157.7 million, up 32.5% from $119.1 million in the prior-year period. The surge was primarily driven by higher lease rent, maintenance reserve revenues, and significantly stronger spare parts and equipment sales. Despite this revenue growth, net income attributable to common shareholders fell 22.5% to $15.5 million, down from $20 million in the first quarter of 2024. The decline in net income was largely attributed to increased operating and finance costs.

Revenue Mix and Operating Highlights

Lease rent revenue rose 28.1% year over year to $67.7 million, while maintenance reserve revenues increased 25% to $54.9 million. Combined, these core recurring revenues grew to $122.6 million, up from $96.8 million a year earlier. Spare parts and equipment sales saw a dramatic rise to $18.2 million compared to $3.3 million, partly due to a one-time $7 million transaction. Interest revenues climbed 73.4% to $3.9 million, but gains on the sale of leased equipment dropped 51.8% to $4.4 million due to fewer profitable asset dispositions.

The company ended the quarter with a portfolio utilization rate of 86.4%, up from 76.7% at year-end 2024, indicating stronger demand for its assets. However, total expenses rose 45.7% year over year to $133.8 million, driven by a notable increase in general and administrative (G&A) costs, which grew 61.3% to $47.7 million, primarily from consulting fees linked to the company’s sustainable aviation fuel initiative.

Management Commentary

CEO Austin Willis underscored the company’s strategic positioning within a recovering aviation industry. He stated that ongoing concerns about tariffs and market volatility have not shaken WLFC’s confidence in the long-term fundamentals of its business. Willis Lease noted that the high cost of new engines is reinforcing leasing demand, while WLFC’s maintenance and leasing solutions provide value to cost-conscious airlines seeking to extend asset lifecycles and minimize downtime. He also emphasized that the company is seeing robust demand across both its leasing and parts distribution segments.

Cost Pressures and Earnings Impact

Despite higher revenues, profitability was squeezed due to rising expenses. Interest expense surged nearly 40% year over year to $32.1 million, reflecting higher debt levels and cost of capital. Additionally, costs related to spare parts and equipment sales grew more than sixfold to $15.3 million. Depreciation, amortization, and write-downs also rose materially. These rising costs overshadowed top-line gains and contributed to a 19.2% drop in net income, even as total assets remained stable at $3.3 billion.

Other Developments

During the quarter, WLFC recorded $2.2 million in equipment sales related to one engine and $4.4 million in gains from the sale of seven engines, one airframe, and other assets. The company also declared a second-quarter dividend of 25 cents per share, payable on May 22, 2025.