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Item 7. Management’s Discussion and Analysis

2026-03-10 compared with 2025-03-11 · 150 added, 90 removed, 213 unchanged (53% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report.

The following discussion and analysis of our financial condition and results of operations (the “MD&A”) is intended to help the reader understand the results of operations and financial condition of the Company.

The MD&A is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and related notes included in Part IV of this Annual Report on Form 10-K and incorporated herein by reference.

A discussion of our results of operations for our fiscal year ended December 31, 2024 compared to the year ended December 31, 2023 is included our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 11, 2025 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-Looking Statements.

This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

This Annual Report on Form 10-K, including the MD&A, includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical fact, including statements regarding prospects or future results of operations or financial position, made in this Annual Report on Form 10-K are forward-looking.

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trends in the airline industry and our ability to capitalize on those trends, including growth rates of markets and other economic factors;

risks associated with our growth strategies and strategic priorities;

risks associated with owning and leasing jet engines and aircraft;

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As of December 31, 2025, we had $2,801.7 million of equipment held in our operating lease portfolio, $139.9 million of notes receivable, $30.6 million of maintenance rights, and $16.6 million of investments in sales-type leases, which represented, in aggregate, 363 engines, 20 aircraft, one marine vessel and other leased parts and equipment.

As of December 31, 2024, we also managed 277 engines, aircraft and related equipment on behalf of other parties.

As of December 31, 2025, we also managed 116 engines and related equipment on behalf of third parties.

Willis Aero 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 engines.

As of December 31, 2025, we had $56.6 million in spare parts inventory.

Willis Asset Management is a wholly-owned and vertically-integrated subsidiary whose primary focus is the engine management and consulting business.

In 2011 we entered into an agreement with Mitsui & Co., Ltd.

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Each partner holds a 50% interest in the joint venture.

WMES owned a lease portfolio of 50 engines with a net book value of $328.9 million at December 31, 2024.

WMES owned a lease portfolio of 65 engines, one aircraft, and other parts and equipment with a net book value of $575.3 million at December 31, 2025.

Our investment in the joint venture was $78.9 million as of December 31, 2025.

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CASC Willis acquires and leases jet engines to Chinese airlines and concentrates on meeting the fast-growing demand for leased commercial aircraft engines and aviation assets in the People’s Republic of China.

CASC Willis owned a lease portfolio of four engines with a net book value of $37.3 million as of December 31, 2024.

CASC Willis owned a lease portfolio of six engines with a net book value of $50.4 million as of December 31, 2025.

Our investment in the joint venture was $21.6 million as of December 31, 2025.

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Where collection cannot be reasonably assured, for example, upon a lessee bankruptcy, we do not recognize revenue until cash is received.

We also estimate and charge to income a provision for bad debts based on our experience in the business and with each specific customer and the level of past due accounts.

We also estimate and charge to income provisions for bad debts and credit losses based on our experience in the business and with each specific customer and the level of past due accounts.

The financial condition of our customers may deteriorate and result in actual losses exceeding the estimated allowances.

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On an annual basis, even absent any such ‘triggering event’, we evaluate the carrying value of the assets in our lease portfolio to determine if any impairment exists.

Impairment may be identified by several factors, including, comparison of estimated sales proceeds or forecasted undiscounted cash flows over the life of the asset with the asset’s book value.

Impairment may be identified by several factors, including, comparison of estimated sales proceeds or forecasted undiscounted cash flows over the life of the asset with the asset’s book value, as well as appraisals from third parties.

If the forecasted undiscounted cash flows are less than the book value, the asset is written down to its fair value.

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If the forecasted undiscounted cash flows and fair value of our long-lived assets decrease in the future, we may incur impairment charges.

Write-downs of equipment to their estimated fair values totaled $11.2 million for the year ended December 31, 2024, primarily reflecting an adjustment of the carrying value of one airframe and 11 engines.

Write-downs of equipment to their estimated fair values totaled $32.9 million for the year ended December 31, 2025, primarily reflecting an adjustment of the carrying value of 28 engines.

As of December 31, 2025, included within equipment held for lease and equipment held for sale was $78.2 million in remaining book value of 29 assets which were previously written down.

Write-downs of equipment to their estimated fair values totaled $4.4 million for the year ended December 31, 2023, primarily reflecting an adjustment of the carrying value of five engines and two airframes.

As of December 31, 2024, included within equipment held for lease and equipment held for sale was $50.8 million in remaining book value of 16 assets which were previously written down.

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Revenue is summarized as follows:

Years Ended December 31,

Year Ended December 31,

2025 2024 % Change

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Gain on sale of leased equipment 54,025 45,063 19.9 %

Gain on sale of financial assets 378 — nm

Maintenance services revenue 25,492 24,158 5.5 %

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Lease rent revenue increased by $53.4 million, or 22.4%, to $291.6 million for the year ended December 31, 2025 from $238.2 million for the year ended December 31, 2024.

The increase is primarily due to an increase in the average size of the portfolio as compared to that of the prior period, offset by a slight decrease in average utilization (based on net book value) of equipment held in our operating lease portfolio, primarily as a result of the Company’s significant purchases of engines during December 2024, the majority of which were off-lease as of December 31, 2024.

Two customers accounted for approximately 11% each of total lease rent revenue during the year ended December 31, 2024.

The increase is primarily due to an increase in the average size of the portfolio as compared to that of the prior period as well as an increase in average utilization from 83% to 85% (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.

One customer accounted for approximately 13% of total lease rent revenue during the year ended December 31, 2025.

Two customers accounted for approximately 11%, each, of total lease rent revenue during the year ended December 31, 2024.

As of December 31, 2025, the Company had $2,801.7 million of equipment held in our operating lease portfolio, $139.9 million of notes receivable, $30.6 million of maintenance rights, and $16.6 million of investments in sales-type leases.

As of December 31, 2024, the Company had $2,635.9 million of equipment held in our operating lease portfolio, $183.6 million of notes receivable, $31.1 million of maintenance rights, and $21.6 million of investments in sales-type leases.

Average utilization (based on net book value) was approximately 83% and 84% for the years ended December 31, 2024 and 2023, respectively.

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% and 83% for the years ended December 31, 2025 and 2024, respectively.

Maintenance Reserve Revenue .

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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 out on lease with “non-reimbursable” usage fees generated $174.5 million of short-term maintenance revenues for the year ended December 31, 2024 compared to $118.3 million for the year ended December 31, 2023, an increase of $56.2 million or 47.5%.

Engines on lease with “non-reimbursable” usage fees generated $187.5 million of short-term maintenance revenues for the year ended December 31, 2025 compared to $174.5 million for the year ended December 31, 2024, an increase of $13.0 million, or 7.4%.

The increase in short-term maintenance reserve revenue was influenced by an increase in the number of engines on short-term lease conditions, the timing of recognition of in-substance fixed payments, and the systematic, contractual increase in the hourly and cyclical usage rates on our engines.

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Spare parts and equipment sales for the year ended December 31, 2025 increased by $68.4 million, or 252.3%, to $95.5 million compared to $27.1 million for the year ended December 31, 2024.

The increase in spare parts sales reflects the demand for surplus material that we are seeing as operators extend the lives of their current generation engine portfolios.

Equipment sales for the year ended December 31, 2024 were $1.0 million for the sale of one engine.

There were no equipment sales for the year ended December 31, 2023.

Spare part sales were $37.7 million and $26.1 million for the years ended December 31, 2025 and 2024, respectively, an increase of $11.6 million or 44.4%.

The increase in spare parts sales reflects the demand for surplus material as operators seek to extend the lives of their current generation engine portfolios.

Equipment sales for the year ended December 31, 2025 were $57.8 million related to the sale of four engines.

Equipment sales for the year ended December 31, 2024 were $1.0 million related to the sale of one engine.

Interest Revenue .

Interest revenue increased by $2.4 million, or 20.6%, to $14.1 million for the year ended December 31, 2025, from $11.7 million for the year ended December 31, 2024.

The increase primarily reflects an increase in notes receivable related to failed sale-leasebacks in which the Company was the buyer-lessor and on sales-type leases.

The increase primarily reflects interest revenue recognized on new notes receivable that were entered into during the latter half of 2024.

Notes receivable result from failed sale-leasebacks in which the Company was the buyer-lessor.

Gain on Sale of Leased Equipment .

During the year ended December 31, 2025, we sold 38 engines, five airframes, and other parts and equipment from the lease portfolio for a net gain of $54.0 million.

During the year ended December 31, 2024, we sold 35 engines, eight airframes, and other parts and equipment from the lease portfolio for a net gain of $45.1 million.

During the year ended December 31, 2023, we sold 28 engines, one airframe, and other parts and equipment from the lease portfolio for a net gain of $10.6 million.

Gain on Sale of Financial Assets.

During the year ended December 31, 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 year ended December 31, 2024.

Maintenance Services Revenue .

Maintenance services revenue predominantly represents fleet management, engine and aircraft storage and repair services, and revenue related to management of fixed base operator services to third-party customers.

Maintenance services revenue remained relatively flat for the year ended December 31, 2024.

Maintenance services revenue increased 5.5% year over year, reflecting organic growth in the business partially offset by the sale of the fleet management business on June 30, 2025 to our joint venture WMES.

Other Revenue.

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The increase for the year ended December 31, 2025 compared to that of the prior year primarily reflects increased managed service revenue.

These services include management of the WMES lease portfolio, which occurs on an ongoing basis, as well as marketing, which occurs on a transactional basis.

These services include management of the WMES lease portfolio, which occurs on an ongoing basis, as well as marketing, procurement, and financing arrangement, which occurs on a transactional basis.

Depreciation and Amortization Expense .

Depreciation and amortization expense increased $19.1 million, or 20.7%, to $111.6 million for the year ended December 31, 2025 compared to $92.5 million for the year ended December 31, 2024.

The increase is primarily due to an increase in the size of our lease portfolio.

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.

Cost of Spare Parts and Equipment Sales .

Cost of spare parts and equipment sales increased by $7.6 million, or 50.3%, to $22.9 million for the year ended December 31, 2024 compared to $15.2 million in the prior year period, reflecting the increase in spare parts and equipment sales.

Cost of equipment sales were $0.1 million for the year ended December 31, 2024.

There were no equipment or cost of equipment sales for the year ended December 31, 2023.

Cost of spare parts and equipment sales increased by $69.4 million to $92.3 million for the year ended December 31, 2025 compared to $22.9 million in the prior year period, reflecting the increase in spare parts and equipment sales.

Cost of spare parts sales were $36.6 million and $22.8 million for the year ended December 31, 2025 and December 31, 2024, respectively, reflecting the increase in spare parts sales.

Cost of equipment sales were $55.7 million for the year ended December 31, 2025, compared to $0.1 million for the year ended December 31, 2024, reflecting the increase in equipment sales.

Cost of Maintenance Services.

Cost of maintenance services increased by $3.3 million, or 15.6%, to $24.5 million for the year ended December 31, 2024, compared to $21.2 million for the for the year ended December 31, 2023.

The increase is primarily related to an increase in personnel costs, as a result of expansion of our aircraft tear down and repair services business, as well as an increase in facility related costs.

Cost of maintenance services increased by $3.4 million, or 14.1%, to $27.9 million for the year ended December 31, 2025, compared to $24.5 million for the year ended December 31, 2024.

The increase is primarily related to an increase in personnel costs as a result of expansion of our aircraft disassembly and repair services.

Write-down of Equipment.

Write-downs of equipment to their estimated fair values totaled $32.9 million for the year ended December 31, 2025, primarily reflecting an adjustment of the carrying value of 28 engines.

Write-downs of equipment to their estimated fair values totaled $4.4 million for the year ended December 31, 2024, primarily reflecting an adjustment of the carrying value of two airframes and five engines.

General and Administrative Expenses .

General and administrative expenses increased by $48.0 million, or 32.7%, to $194.7 million for the year ended December 31, 2025 compared to $146.8 million in 2024.

The increase primarily reflects a $35.5 million increase in personnel costs, partially offset by a $3.3 million decrease in other taxes related to international tax treaties.

Increased personnel costs included approximately $14.4 million of costs related directly and indirectly to share-based compensation, which was influenced by the rapid appreciation of the market value of the Company’s common stock.

Share-based compensation included one-time special awards of $3.0 million and $1.7 million made at the direction of the Compensation Committee of the Board of Directors of the Company to our Executive Chairman and our President, respectively.

Further, incentive compensation increased by $9.2 million as a result of full-year business performance to date as the Company’s incentive compensation expense has historically been formulaically derived from consolidated pre-tax, pre-incentive compensation earnings.

The increase primarily reflects a $23.7 million increase in personnel costs, which included an increase of $15.3 million in share-based compensation and an increase of $4.2 million in wages.

Of the $15.3 million increase in share-based compensation, $5.3 million related to the acceleration of the vesting of shares upon the resignation of our former 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 $12.6 million increase in consultant fees, which was influenced by costs associated with the Company’s sustainable aviation fuel project, which the Company decided to cease investment in and pursue strategic alternatives for, including, a potential sale, as well as a $4.7 million increase in legal fees primarily associated with finance and strategic initiatives related to the Company’s new investment partnerships.

Technical Expense .

Technical expenses consist 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.

These expenses decreased by $5.8 million, or 20.7%, to $22.3 million for the year ended December 31, 2024, compared to $28.1 million in 2023.

The decrease is primarily due to a lower level of engine repair activity as compared to that of the prior period.

These expenses increased by $9.1 million, or 40.8%, to $31.4 million for the year ended December 31, 2025, compared to $22.3 million in 2024, primarily due to an increased level of engine repair activity as compared to that of the prior period.

Net Finance Costs .

Net finance costs increased by $26.0 million, or 33.0%, to $104.8 million for the year ended December 31, 2024, from $78.8 million for the year ended December 31, 2023, primarily due to an overall higher level of debt obligations, including increased borrowing costs.

Interest expense associated with WEST VII Series A 2023 term notes payable increased by $25.0 million for the year ended December 31, 2024, as the notes payable was not issued until late 2023.

Further, there was additional interest expense of $6.6 million for the year ended December 31, 2024 associated with WWFL, as the senior secured warehouse facility was not entered into until 2024.

Additionally, derivative-related receipts were $12.0 million for the year ended December 31, 2024, as compared to $23.4 million for the year ended December 31, 2023, as certain swap positions ran off.

These increases were offset by a decrease in interest expense of $18.2 million associated with the Company’s credit facility for the year ended December 31, 2024, due to a decrease in the average outstanding balance of the credit facility over the course of the year.

Income Taxes .

Income tax expense for the year ended December 31, 2024 increased by $20.7 million, or 88.6% to $44.0 million from $23.3 million for the comparable period in 2023.

The effective tax rate for the years ended December 31, 2024 and December 31, 2023 was 28.8% and 34.8%, respectively.

The decrease in the effective tax rate was predominantly due to a decrease in state taxes as a percentage of the overall rate.

Net finance costs increased by $30.4 million, or 29.0%, to $135.1 million for the year ended December 31, 2025, from $104.8 million for the year ended December 31, 2024, primarily due to an overall higher level of debt obligations.

Interest expense associated with the Company’s credit facility increased by $9.7 million for the year ended December 31, 2025, due to an increase in the average outstanding balance of the credit facility for the year ended December 31, 2025, as compared to that of the prior year.

We recognized incremental interest expense of $4.7 million for the year ended December 31, 2025 associated with Willis Warehouse Facility LLC (“WWFL”), as the senior secured warehouse facility did not close until May 2024, $17.8 million of additional interest expense associated with WEST VIII notes payable, which did not close until June 2025, and loss on debt extinguishment of $3.1 million associated with the refinancing of WEST IV and WEST VII notes.

Additionally, derivative-related receipts were $5.8 million for the year ended December 31, 2025, as compared to $12.0 million for the year ended December 31, 2024 as certain interest rate swap positions were terminated and certain interest rate metrics fluctuated.

Partially offsetting these increases in interest expense were savings resulting from the full repayment of the WEST IV notes payable and the partial repayments of the WEST VII notes payable.

Gain on Sale of Business.

During the year ended December 31, 2025, a wholly-owned subsidiary of the Company, entered into a Share Purchase Agreement (the “SPA”), by and between Willis Asset Management Limited (“WAML”) and WMES.

Pursuant to the SPA, WAML sold the entire issued share capital of Bridgend Asset Management Limited (“BAML”), a United Kingdom-based aviation consultancy business, to WMES for a total purchase price of $45.0 million subject to certain working capital adjustments.

The transaction closed on June 30, 2025, resulting in a gain on sale of business of approximately $43.0 million for the Company.

Income Tax Expense .

Income tax expense for the year ended December 31, 2025 increased by $2.8 million, or 6.4% to $46.8 million from $44.0 million for 2024.

The effective tax rate for the year ended December 31, 2025 and December 31, 2024 was 29.2% and 28.8%, respectively.

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”), as well as the sale of the Company’s entire issued share capital of BAML, a discrete item due to the unusual and infrequent nature of the sale.

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.

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA

We analyze our financial data to evaluate the health of our business and assess our performance.

As appropriate, in addition to income or loss from operations under GAAP, we use Adjusted EBITDA, a non-GAAP financial measure, to evaluate our business.

We believe that this non-GAAP financial measure provides meaningful supplemental information regarding our performance as it excludes certain items that may not be indicative of our recurring operating results.

We also believe that investors, in addition to management, benefit from referring to this non-GAAP financial measure in assessing our performance, when viewed together with our GAAP results.

While items excluded from Adjusted EBITDA may be recurring in nature and should not be disregarded in evaluating performance, it can be useful to exclude such items as they can vary significantly between periods and or not be indicative of current or future operating results.

Because non-GAAP financial measures are not standardized, our calculation of Adjusted EBITDA may differ from similarly titled non-GAAP measures, if any, reported by other companies.

This non-GAAP financial measure should not be considered in insolation from, or as a substitute for, financial information performed in accordance with GAAP.

We define Adjusted EBITDA as net income attributable to common shareholders, excluding (i) income tax expense, (ii) interest expense, (iii) preferred stock dividends/costs, (iv) loss on debt extinguishment, (v) depreciation and amortization expense, (vi) stock compensation expense, (vii) write-down of equipment, (viii) acquisition, financing and divestitures related expenses, and (ix) other items not indicative of our ongoing operating performance.

Adjusted EBITDA was approximately $459.1 million and $393.7 million for the years ended December 31, 2025 and 2024, respectively.

The increase in Adjusted EBITDA of $65.4 million was primarily driven by the changes noted in the Results of Operations section above.

See below for the reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net income attributable to common shareholders.

Year Ended December 31,

(in thousands)

Net income attributable to common shareholders $ 108,066 $ 104,378

Income tax expense 46,849 44,033

Interest expense 132,060 104,764

Preferred stock dividends/costs 5,692 4,234

Loss on debt extinguishment 3,081 —

Depreciation and amortization expense 111,553 92,460

Stock compensation expense (1) 44,566 29,247

Write-down of equipment 32,947 11,228

Acquisition, financing and divestitures related expenses 3,495 1,449

Other (2) (29,197) 1,881

Adjusted EBITDA $ 459,112 $ 393,674

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In 2025, upon the resignation of our former General Counsel, $5.3 million of stock compensation expense relates to the acceleration of vesting of shares.

In 2025, the Company recognized $43.0 million in relation to the gain on sale of the BAML business.

In 2025 and 2024, the Company recognized $13.8 million and $1.9 million, respectively, in non-recurring project expenses associated with the sustainable aviation fuels project.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

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We generate significant cash flow from our core business as evidenced by our net cash provided by operating activities, which was $283.2 million in 2025.

Beyond cash provided through operations, we generally fund the growth of our business through a combination of equity and corporate borrowings secured by our equipment lease portfolio.

Cash of approximately $1.3 billion and $625.7 million in the years ended December 31, 2024 and 2023, respectively, was derived from this borrowing activity.

In these same time periods $840.0 million and $665.5 million, respectively, was used to pay down related debt.

Beyond cash provided through operations, we generally fund the growth of our business through a combination of equity and borrowings secured by our equipment lease portfolio.

Cash of approximately $1.7 billion and $1.3 billion in the years ended December 31, 2025 and 2024, respectively, was derived from this borrowing activity.

In these same time periods $1.2 billion and $0.8 billion, respectively, was used to pay down related debt.

Our credit facility and senior secured warehouse credit facility are our primary source of capital to grow our business.

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In October 2016, the Company sold and issued to DBJ an aggregate of 1,000,000 shares of the Company’s Series A Preferred Stock, $0.01 par value per share (the “Series A-1 Preferred Stock”) at a purchase price of $20.00 per share.

The net proceeds to the Company after deducting investor fees were $19.8 million.

In September 2017, the Company sold and issued to DBJ an aggregate of 1,500,000 shares of the Company’s Series A-2 Preferred Stock, $0.01 par value per share (the “Series A-2 Preferred Stock”) at a purchase price of $20.00 per share.

The net proceeds to the Company after deducting issuance costs were $29.7 million.

In September 2024, the Company entered into a Series A Preferred Stock Purchase Agreement with DBJ, which refinanced and expanded the Company’s Series A-1 and Series A-2 Preferred Stock into one $65.0 million Series A Preferred Stock series (the “Series A Preferred Stock”), which accrues quarterly dividends at the rate per annum of 8.35% per share.

The net proceeds after deducting issuance costs were $13.1 million.

The Company’s Series A-1 Preferred Stock accrued quarterly dividends at the rate per annum of 6.5% per share through October 15, 2023 and accrued at the rate per annum of 8.5% per share thereafter through September 26, 2024.

The Series A-2 Preferred Stock accrued quarterly dividends at the rate per annum of 6.5% per share.

Prior to issuing the new Series A Preferred Stock, 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 the years ended December 31, 2025 and 2024, the Company paid total preferred stock dividends of $5.7 million and $3.5 million, respectively.

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Cash flows provided by operating activities were $283.2 million and $284.4 million in the years ended December 31, 2025 and 2024, respectively.

The $54.7 million, or 23.8%, increase in operating cash flows was primarily driven by a 60.0% increase in maintenance reserve revenue, reflecting increased levels of usage fees resulting from high levels of travel and supply chain constraints.

Additionally, payments received on sales-type leases increased $25.9 million, and changes in receivables contributed to $38.5 million of incremental operating cash flows as collections improved.

Partially offsetting these increases in operating cash flows was a year over year $29.5 million decline in cash flows from changes in inventory, reflecting investment in parts of high demand engine types, and a $27.0 million decline in cash flows from changes in unearned revenue driven by the increase in long-term maintenance revenue recognition.

The $1.2 million, or 0.4%, decrease in operating cash flows was primarily driven by a $24.3 million decrease in payments on sales-type leases, a period over period $19.6 million decrease in cash flows from changes in accounts receivable, and a period over period $28.3 million decrease in cash flows from changes in other assets.

Partially offsetting the decreases was a period over period $44.5 million increase in cash flows from changes in inventory.

These changes reflect significant inventory purchases made in the prior year to meet the high demand for spare parts.

Spare parts sales were $37.7 million and $26.1 million for the years ended December 31, 2025 and 2024, respectively, an increase of $11.6 million, or 44%, from 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.

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Revenue and maintenance reserves are also affected by the amount of equipment off lease.

Approximately 74% and 84%, by book value, of our assets were on-lease as of December 31, 2024 and 2023, respectively.

Our year-end 2024 on-lease rate was influenced by a large, late December 2024 purchase of nine off-lease Pratt & Whitney GTF Advantage™ engines.

The average utilization rate for the years ended December 31, 2024 and 2023 was approximately 83% and 84%, 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.

Cash flows used in investing activities were $764.9 million for the year ended December 31, 2024 and primarily reflected $830.5 million for the purchase of equipment held for operating lease (including capitalized costs and prepaid deposits made during the year), and $101.8 million related to leases entered into during 2024 which were classified as notes receivable under ASC 842, partly offset by $171.2 million in proceeds from sales of equipment (net of selling expenses).

Cash flows used in investing activities were $92.8 million for the year ended December 31, 2023 and primarily reflected $163.6 million for the purchase of equipment held for operating lease (including capitalized costs and prepaid deposits made during the year), and $15.4 million related to a lease entered into during 2023 which was classified as a note receivable under ASC 842, partly offset by $85.1 million in proceeds from sales of equipment (net of selling expenses).

Cash flows provided by financing activities for the year ended December 31, 2024 were $445.0 million and primarily reflected $1,305.7 million and $13.1 million in proceeds from the issuance of debt obligations and preferred stock, respectively, partly offset by $840.0 million in principal payments, $11.6 million in new debt issuance costs, and $10.7 million in common stock cash dividends paid.

Cash flows used in financing activities for the year ended December 31, 2023 were $57.9 million and primarily reflected $665.5 million in principal payments and $9.4 million in new debt issuance costs, partly offset by $625.7 million in proceeds from the issuance of debt obligation.

Cash flows used in investing activities were $256.4 million for the year ended December 31, 2025 and primarily reflected $524.6 million for the purchase of equipment held for operating lease (including capitalized costs and prepaid deposits made during the year) and $31.1 million for the purchase of property, equipment and furnishings, which was primarily related to leasehold improvements, partly offset by $269.7 million in proceeds from sales of equipment (net of selling expenses) and $21.9 million from sale of business.

Cash flows used in investing activities were $764.9 million for the year ended December 31, 2024 and primarily reflected $830.5 million for the purchase of equipment held for operating lease (including capitalized costs and prepaid deposits made during the year), and $101.8 million related to leases entered into during 2024 which were classified as a note receivable under ASC 842, partly offset by $171.2 million in proceeds from sales of equipment (net of selling expenses).

Cash flows provided by financing activities for the year ended December 31, 2025 were $387.6 million and primarily reflected $1,661.0 million in proceeds from the issuance of debt obligations, partly offset by $1,221.5 million in principal payments on debt obligations, $19.3 million in cancellation of restricted stock units in satisfaction of withholding tax, $14.6 million in new debt issuance costs, and $8.7 million in common stock cash dividends paid.

Cash flows provided by financing activities for the year ended December 31, 2024 were $445.0 million and primarily reflected $1,305.7 million and $13.1 million in proceeds from the issuance of debt obligations and preferred stock, respectively, partially offset by $840.0 million in principal payments, $11.6 million in new debt issuance costs, and $10.7 million in common stock cash dividends paid.

Debt Obligations and Covenant Compliance

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For further information on our debt instruments, see Note 5 “Debt Obligations” in Part II, Item 8 of this Form 10-K.

In December 2025, the Company and its direct, wholly-owned subsidiary WEST IX, closed WEST IX’s offering of $392.9 million in aggregate principal amount of fixed rate notes.

The WEST IX Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $337.4 million and the Series B Notes issued in an aggregate principal amount of $55.5 million.

The WEST IX Notes are secured by, among other things, WEST IX’s direct and indirect ownership interests in a portfolio of aircraft engines and airframes.

The Series A Notes and Series B Notes have a fixed coupon of 5.16% and 5.70%, respectively, an expected maturity of approximately six years and a final maturity of 25 years.

The Series A Notes and Series B Notes were issued at a price of 99.99937% and 99.99686% of par, respectively.

In June 2025, the Company and its direct, wholly-owned subsidiary WEST VIII, closed WEST VIII’s offering of $596.0 million in aggregate principal amount of fixed rate notes.

The WEST VIII Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $524.0 million and the Series B Notes issued in an aggregate principal amount of $72.0 million.

The WEST VIII Notes are secured by, among other things, WEST VIII’s direct and indirect ownership interests in a portfolio of aircraft engines and airframes.

The Series A Notes and Series B Notes have a fixed coupon of 5.58% and 6.07%, respectively, an expected maturity of approximately six years and a final maturity of 25 years.

The Series A Notes and Series B Notes were issued at a price of 99.99721% and 99.99711% of par, respectively.

In October 2024, the Company entered into a new, $1.0 billion, five-year, revolving credit facility with a consortium of lenders, refinancing its $500.0 million credit facility.

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On a quarterly basis, the interest rate is adjusted based on the Company’s leverage ratio, as calculated under the terms of the revolving credit facility.

Under the revolving credit facility, some subsidiaries except WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL jointly and severally guarantee payment and performance of the terms of the loan agreement.

Under the revolving credit facility, some subsidiaries except WEST III, WEST IV, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL jointly and severally guarantee payment and performance of the terms of the loan agreement.

The guarantee would be triggered by a default under the agreement.

In May 2024, WWFL, a wholly-owned subsidiary of the Company, entered into a secured credit agreement with the Bank of Utah as security trustee and administrative agent and Bank of America, N.A.

In May 2024, WWFL entered into a non-recourse, senior secured warehouse credit agreement with the Bank of Utah as security trustee and administrative agent and Bank of America, N.A.

as facility agent.

The secured credit agreement provides for a five-year non-recourse, senior secured warehouse credit facility with an availability period of two years and an initial committed amount of up to $500.0 million.

The secured credit agreement provides for an initial committed amount of up to $500.0 million.

The warehouse credit agreement was amended in July 2025 to among other things, (i) extend the availability period of the commitments to May 2027, (ii) extend the final repayment date to May 2030, (iii) provide more favorable asset advance rates to WWFL, and (iv) reduce fees.

The purpose of the senior secured warehouse credit facility is to finance the acquisition of equipment for lease as well as for general working capital purposes, with the amounts drawn under the facility not to exceed that which is allowed under the borrowing base as defined by the credit agreement.

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On a quarterly basis, the interest rate is adjusted based on the Company’s leverage ratio, as calculated under the terms of the senior secured warehouse credit facility.

Pursuant to the secured warehouse credit facility, some subsidiaries except WEST III, WEST IV, WEST V, WEST VI, and WEST VII jointly and severally guarantee payment and performance of the terms of the loan agreement.

Pursuant to the secured warehouse credit facility, some subsidiaries except WEST III, WEST V, WEST VI, WEST VII, WEST VIII, and WEST IX jointly and severally guarantee payment and performance of the terms of the loan agreement.

The guarantee would be triggered by a default under the agreement.

In October 2023, the Company and its direct, wholly-owned subsidiary WEST VII, closed its offering of $410.0 million aggregate principal amount of fixed rate notes.

The notes are secured by, among other things, WEST VII’s direct and indirect interests in a portfolio of aircraft engines and airframes.

The notes have a fixed coupon of 8.00%, an expected maturity in October 2029, and a final maturity date in October 2048.

The notes were issued at a price of 98.84814% of par.

Principal on the notes is payable monthly to the extent of available cash in accordance with a priority of payments included in the indenture.

The assets of WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL are not available to satisfy the Company’s obligations other than the obligations specific to that WEST entity or WWFL.

WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL are consolidated for financial statement presentation purposes.

WEST III’s, WEST IV’s, WEST V’s, WEST VI’s, WEST VII’s, and WWFL’s abilities to make distributions and pay dividends to the Company are subject to the prior payments of their debt and other obligations and their maintenance of adequate reserves and capital.

Under WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL, cash is collected in restricted accounts, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company.

The assets of WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL are not available to satisfy the Company’s obligations other than the obligations specific to that WEST entity or WWFL.

WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL are consolidated for financial statement presentation purposes.

WEST III’s, WEST V’s, WEST VI’s, WEST VII’s, WEST VIII's, WEST IX's, and WWFL’s abilities to make distributions and pay dividends to the Company are subject to the prior payments of their debt and other obligations and their maintenance of adequate reserves and capital.

Under WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL, cash is collected in restricted accounts, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company.

Additionally, a portion of maintenance reserve payments and lease security deposits are formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively.

The WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL indentures require that a minimum threshold of maintenance reserve and security deposit balances be held in restricted cash accounts.

The WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL indentures require that a minimum threshold of maintenance reserve and security deposit balances be held in restricted cash accounts.

Virtually all of the Company’s debt requires ongoing compliance with the covenants of each financing, including debt and tangible net worth ratios, minimum interest coverage ratios, and other eligibility criteria including asset type, customer and geographic concentration restrictions.

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The Total Leverage Ratio, as defined in the credit facility, is the ratio of total indebtedness to tangible net worth.

At December 31, 2024, we were in compliance with the covenants specified in the WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL indentures and servicing and other debt related agreements.

At December 31, 2025, we were in compliance with the covenants specified in the WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL indentures and servicing and other debt related agreements.

Contractual Obligations and Commitments

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From time to time, we enter into contractual commitments to purchase engines directly from original equipment manufacturers.

We are currently committed to purchasing six additional new LEAP-1B engines and 15 additional new LEAP-1A engines for an aggregate total of $374.6 million by 2027.

We are currently committed to purchasing 18 additional new LEAP-1B engines and 28 additional new LEAP-1A engines for an aggregate total of $857.4 million by 2030.

Further, we are currently committed to purchasing six PW1133 engines for approximately $104.0 million in 2026.

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.

These deferrals or cancellations 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.

In December 2020, we entered into definitive agreements for the purchase of 25 Pratt & Whitney aircraft engines.

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Actual interest payments made will vary due to actual changes in the rates for one-month term SOFR.

We believe our equity base, internally generated funds and existing debt facilities are sufficient to maintain our level of operations through 2025.

We believe our equity base, internally generated funds, existing debt facilities, and access to capital markets are sufficient to maintain our level of operations through 2026.

A decline in the level of internally generated funds could result if the amount of equipment off-lease increases, there is a decrease in availability under our existing debt facilities, or there is a significant step-up in borrowing costs.

Such decline would impair our ability to sustain our 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 limited to that which can be funded from internally generated capital.

MANAGEMENT OF INTEREST RATE EXPOSURE

At December 31, 2024, $914.9 million of our borrowings were on a variable rate basis at various interest rates tied to one-month term SOFR.

At December 31, 2025, $732.7 million of our borrowings were on a variable rate basis at rates tied to one-month term SOFR.

Our equipment leases are generally structured at fixed rental rates for specified terms.

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such investments are not intended to speculate or trade in derivative products.

As of December 31, 2024, we have six interest rate swap agreements.

During 2021, the Company entered into four fixed-rate interest swap agreements, each having notional amounts of $100.0 million, two of which matured during the year ended December 31, 2024 and two of which had remaining terms of 13 months as of December 31, 2024.

One interest rate swap agreement was entered into during 2019, having a notional amount of $100.0 million, which matured during the year ended December 31, 2024.

During the year ended December 31, 2024, the Company entered into three fixed-rate interest swap agreements, each having notional amounts of $50.0 million, and with remaining terms of 53 months as of December 31, 2024.

During the year ended December 31, 2024, the Company also entered into one fixed-rate interest swap agreement, having a notional amount of $75.0 million, and with a remaining term of 53 months as of December 31, 2024.

As of December 31, 2025, the Company had five interest rate swap agreements, with a total notional amount of $334.5 million.

During the year ended December 31, 2024, the Company entered into three fixed-rate interest swap agreements, each having notional amounts of $50.0 million, two of which were terminated during the year ended December 31, 2025 and one of which had a remaining term of 41 months as of December 31, 2025.

During the year ended December 31, 2024, the Company also entered into one fixed-rate interest swap agreement, having a notional amount of $75.0 million.

During the year ended December 31, 2025, this fixed-rate interest swap agreement was partially terminated, reducing its notional amount to $34.5 million.

It had a remaining term of 41 months as of December 31, 2025.

During the year ended 2025, the Company entered into one fixed-rate interest swap agreement, having a notional amount of $50.0 million, and with a remaining term of 46 months as of December 31, 2025.

The derivative instruments were each designated as cash flow hedges at inception and recorded at fair value.

The net fair value of the interest rate swaps as of December 31, 2024 and December 31, 2023 was $11.0 million and $16.5 million, respectively, each representing an asset and reflected within Other assets on the Consolidated Balance Sheets.

The net fair value of the interest rate swaps as of December 31, 2025 was $0.1 million, representing an asset of $0.4 million and a liability of $0.3 million, and reflected within Other assets and Accounts payable and accrued expenses on the Consolidated Balance Sheets, respectively.

The net fair value of the interest rate swaps as of December 31, 2024 was $11.0 million, representing an asset and reflected within Other assets on the Consolidated Balance Sheets.

We record derivative instruments at fair value as either an asset or liability.

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Joint Ventures

In May 2025, WAML, a wholly-owned subsidiary of the Company entered into a SPA, by and between WAML and WMES.

Pursuant to the SPA, WAML sold the entire issued share capital of BAML, a United Kingdom-based aviation consultancy business, to WMES for a total purchase price of $45.0 million subject to certain working capital adjustments.

The transaction closed on June 30, 2025, resulting in a gain on sale of business of approximately $43.0 million for the Company.

“Other revenue” on the Consolidated Statements of Income includes management fees earned of $7.8 million and $4.8 million during the years ended December 31, 2025 and 2024, respectively, related to the servicing of engines for the WMES lease portfolio.

The Company recognized $3.0 million as a financial arrangement fee from WMES for assisting with the establishment of their new revolving credit facility.

During 2025, the Company sold four engines and one airframe to WMES for a total of $52.7 million, which resulted in a total gain of $3.7 million for the Company.

Additionally, during 2025, the Company sold three engines to WMES for $55.6 million, which resulted in a trading profit of $1.4 million for the Company and is included in Spare parts and equipment sales and Cost of spare parts and equipment sales on the Company’s Consolidated Statements of Income.

During 2024, the Company sold four engines to WMES for $50.5 million, which resulted in a net gain of $12.7 million for the Company.

During 2023, WMES sold one engine to the Company for $22.3 million, and the Company sold two engines to WMES for $28.8 million, which resulted in a net gain of $6.5 million for the Company.

During 2024, the Company paid approximately $0.1 million expense to Mikchalk Lake, LLC, an entity in which our Executive Chairman retains an ownership interest.

During 2025, the Company purchased one engine from WMES for $7.2 million.

During 2024, the Company did not purchase any engines from WMES.

During 2025, the Company sold two engines to CASC Willis for $13.6 million, which resulted in a total gain of $1.5 million for the Company.

During 2024, the Company did not sell any engines to CASC Willis.

As of December 31, 2025 and December 31, 2024, the Company subleased one WMES engine to a third party, with WMES as the head lessor.

As of December 31, 2025 and 2024, the Right-of-Use (“ROU”) asset and lease liability balances under the lease were $0.1 million, each, and $1.6 million, each, respectively.

During 2025, the Company paid WMES $1.2 million for fleet management services, which WMES provided in connection with its purchase of BAML.

During 2025 and 2024, the Company paid approximately $0.1 million, each, to Mikchalk Lake, LLC, an entity in which our Executive Chairman retains an ownership interest.

These expenses were for lodging and other business-related services and were approved by the Board’s Independent Directors.

During 2025, in a transaction approved by a Special Committee of the Board’s Independent Directors, the Company purchased 30,000 shares of common stock directly from our Executive Chairman.

The purchase price was $126.2782 per share, a 2% discount to the volume weighted average price on December 4, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis