PR Newswire
DUBLIN, July 31, 2023
- Net income for the second quarter of 2023 was $493 million, or $2.12 per share.
- Adjusted net income for the second quarter of 2023 was $596 million, or $2.56 per share.
- Raising full year 2023 adjusted earnings per share guidance to range of $8.50 - $9.00.
- New $500 million share repurchase program authorized.
DUBLIN, July 31, 2023 /PRNewswire/ -- AerCap Holdings N.V. (NYSE: AER), the industry leader across all areas of aviation leasing, today reported financial results for the second quarter of 2023 ended June 30, 2023.
"AerCap produced another strong performance for the second quarter of 2023. We continue to benefit from strong demand for our aviation assets, as well as a robust sales market. Our confidence in the future is demonstrated by our increased 2023 full year EPS guidance as well as our new $500 million share repurchase program, which takes our share repurchase authorizations so far this year to $1.5 billion," said Aengus Kelly, Chief Executive Officer of AerCap.
Highlights:
- Return on equity of 12% and adjusted return on equity of 15% for the second quarter of 2023.
- Adjusted debt/equity ratio of 2.51 to 1 as of June 30, 2023.
- 25% margin on gain on sale of assets in the second quarter of 2023.
- Cash flow from operating activities was $1.2 billion for the second quarter of 2023.
- Executed 215 transactions in the second quarter of 2023, including 124 lease agreements, 32 purchases and 59 sales.
- 100% of new aircraft order book placed through 2024.
- Book value per share of $71.46 as of June 30, 2023, an increase of ~14% from June 30, 2022.
- ~5.1 million shares repurchased in the second quarter of 2023, at an average price of $58.54, for a total of $296 million.
- Increased full year 2023 adjusted earnings per share guidance to a range of $8.50 - $9.00, which does not include 2H 2023 gains on sale.
Revenue and Net Spread
Three months ended June 30, | Six months ended June 30, | |||||||||||
2023 | 2022 | % increase/ | 2023 | 2022 | % increase/ | |||||||
(U.S. Dollars in millions) | (U.S. Dollars in millions) | |||||||||||
Lease revenue: | ||||||||||||
Basic lease rents | $1,561 | $1,462 | 7 % | $3,098 | $3,015 | 3 % | ||||||
Maintenance rents and other receipts | 156 | 103 | 52 % | 343 | 289 | 19 % | ||||||
Total lease revenue | 1,717 | 1,564 | 10 % | 3,441 | 3,304 | 4 % | ||||||
Net gain on sale of assets | 166 | 35 | 371 % | 265 | 38 | 589 % | ||||||
Other income | 41 | 71 | (42 %) | 83 | 118 | (29 %) | ||||||
Total Revenues and other income | $1,924 | $1,671 | 15 % | $3,790 | $3,461 | 10 % | ||||||
Basic lease rents were $1,561 million for the second quarter of 2023, compared with $1,462 million for the same period in 2022. Basic lease rents for the second quarter of 2023 were impacted by $41 million of lease premium amortization.
Maintenance rents and other receipts were $156 million for the second quarter of 2023, compared with $103 million for the same period in 2022. Maintenance rents for the second quarter of 2023 were impacted by $29 million as a result of maintenance rights assets that were amortized to revenue.
Net gain on sale of assets for the second quarter of 2023 was $166 million, relating to 52 assets sold for $818 million, compared with $35 million for the same period in 2022, relating to 29 assets sold for $386 million. The increase was primarily due to the volume and composition of asset sales.
Other income for the second quarter of 2023 was $41 million, compared with $71 million for the same period in 2022. The decrease was primarily driven by higher proceeds from unsecured claims recognized in the second quarter of 2022.
Three months ended June 30, | Six months ended June 30, | |||||||||||
2023 | 2022 | % increase/ | 2023 | 2022 | % increase/ | |||||||
(U.S. Dollars in millions) | (U.S. Dollars in millions) | |||||||||||
Basic lease rents | $1,561 | $1,462 | 7 % | $3,098 | $3,015 | 3 % | ||||||
Adjusted for: | ||||||||||||
Amortization of lease premium/deficiency | 41 | 52 | (21 %) | 84 | 109 | (23 %) | ||||||
Basic lease rents excluding amortization of lease premium/deficiency | $1,603 | $1,514 | 6 % | $3,182 | $3,124 | 2 % | ||||||
Interest expense | 427 | 400 | 7 % | 864 | 781 | 11 % | ||||||
Adjusted for: | ||||||||||||
Mark-to-market of interest rate caps and swaps | 3 | 3 | — | (11) | 39 | NA | ||||||
Interest expense excluding mark-to-market of interest rate caps and swaps | 430 | 403 | 7 % | 853 | 820 | 4 % | ||||||
Adjusted net interest margin (*) | $1,172 | $1,110 | 6 % | $2,329 | $2,304 | 1 % | ||||||
Depreciation and amortization | (616) | (581) | 6 % | (1,226) | (1,215) | 1 % | ||||||
Adjusted net interest margin, less depreciation and amortization | $557 | $530 | 5 % | $1,103 | $1,089 | 1 % | ||||||
Average lease assets (*) | $59,656 | $59,064 | 1 % | $59,432 | $60,601 | (2 %) | ||||||
Annualized net spread (*) | 7.9 % | 7.5 % | 7.8 % | 7.6 % | ||||||||
Annualized net spread less depreciation and amortization (*) | 3.7 % | 3.6 % | 3.7 % | 3.6 % | ||||||||
(*) | Refer to "Notes Regarding Financial Information Presented in This Press Release" for details relating to these non-GAAP measures and metrics |
Interest expense excluding mark-to-market of interest rate caps and swaps was $430 million for the second quarter of 2023, compared with $403 million for the same period in 2022. AerCap's average cost of debt was 3.4% for the second quarter of 2023 and 3.0% for the same period in 2022, excluding debt issuance costs, upfront fees and other impacts.
Selling, General and Administrative Expenses
Three months ended June 30, | Six months ended June 30, | |||||||||||
2023 | 2022 | % increase/ | 2023 | 2022 | % increase/ | |||||||
(U.S. Dollars in millions) | (U.S. Dollars in millions) | |||||||||||
Selling, general and administrative expenses (excluding share- | $98 | $78 | 25 % | $182 | $148 | 23 % | ||||||
Share-based compensation expenses | 22 | 27 | (19 %) | 49 | 54 | (9 %) | ||||||
Selling, general and administrative expenses | $120 | $105 | 14 % | $230 | $202 | 14 % | ||||||
Selling, general and administrative expenses increased to $120 million for the second quarter of 2023, compared with $105 million for the same period in 2022. The increase was primarily driven by higher personnel and travel-related expenses.
Other Expenses
Leasing expenses were $229 million for the second quarter of 2023, compared with $193 million for the same period in 2022. The increase was primarily due to higher maintenance rights asset amortization.
Effective Tax Rate
AerCap's effective tax rate was 14.1% for the second quarter of 2023, compared to an effective tax rate of 14.0% for the second quarter of 2022. The effective tax rate is impacted by the source and amount of earnings among our different tax jurisdictions as well as the amount of permanent tax differences relative to pre-tax income or loss, and certain other discrete items.
Book Value Per Share
June 30, 2023 | June 30, 2022 | |||
(U.S. Dollars in millions, | ||||
Total AerCap Holdings N.V. shareholders' equity | $16,312 | $15,034 | ||
Ordinary shares outstanding | 232,505,493 | 245,848,357 | ||
Unvested restricted stock | (4,233,182) | (5,032,769) | ||
Ordinary shares outstanding (excl. unvested restricted stock) | 228,272,311 | 240,815,588 | ||
Book value per ordinary share outstanding (excl. unvested restricted stock) | $71.46 | $62.43 | ||
Financial Position
June 30, 2023 | December 31, 2022 | % increase/ (decrease) over December 31, 2022 | ||||
(U.S. Dollars in millions) | ||||||
Total cash, cash equivalents and restricted cash | $1,317 | $1,757 | (25 %) | |||
Total assets | 69,928 | 69,727 | — % | |||
Debt | 46,256 | 46,533 | (1 %) | |||
Total liabilities | 53,538 | 53,532 | — % | |||
Total AerCap Holdings N.V. shareholders' equity | 16,312 | 16,118 | 1 % | |||
Total equity | 16,391 | 16,195 | 1 % | |||
Flight Equipment
As of June 30, 2023, AerCap's portfolio consisted of 3,467 aircraft, engines and helicopters that were owned, on order or managed. The average age of the company's owned aircraft fleet as of June 30, 2023 was 7.3 years (4.3 years for new technology aircraft, 13.8 years for current technology aircraft) and the average remaining contracted lease term was 7.2 years.
Share Repurchase Program
In July 2023, our Board of Directors approved a new share repurchase program authorizing total repurchases of up to $500 million of AerCap ordinary shares through December 31, 2023. Repurchases under the program may be made through open market purchases or privately negotiated transactions in accordance with applicable U.S. federal securities laws. The timing of repurchases and the exact number of ordinary shares to be purchased will be determined by the Company's management, in its discretion, and will depend upon market conditions and other factors. The program will be funded using the Company's cash on hand and cash generated from operations. The program may be suspended or discontinued at any time.
Notes Regarding Financial Information Presented in This Press Release
The financial information presented in this press release is not audited.
Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
The following are definitions of non-GAAP measures and metrics used in this press release. We believe these measures and metrics may further assist investors in their understanding of our performance. These measures and metrics should not be viewed in isolation and should only be used in conjunction with and as a supplement to our U.S. GAAP financial measures. Non-GAAP measures and metrics are not uniformly defined by all companies, including those in our industry, and so this additional information may not be comparable with similarly-titled measures and metrics and disclosures by other companies.
Adjusted net income / earnings per share and adjusted return on equity
Adjusted net income is calculated as net income excluding the after-tax impact of the amortization of maintenance rights and lease premium assets recognized under purchase accounting and net recoveries related to the Ukraine Conflict. Adjusted earnings per share is calculated by dividing adjusted net income by the weighted average of our ordinary shares outstanding. Adjusted return on equity is calculated by dividing adjusted net income by average shareholders' equity. Given the relative significance of these items during 2023, we have chosen to present this measure in order to assist investors in their understanding of the changes and trends related to our earnings.
Three months ended June 30, 2023 | Six months ended June 30, 2023 | |||||||
Net income | Earnings per share | Net income | Earnings per share | |||||
(U.S. Dollars in millions, except per share data) | ||||||||
Net income / earnings per share | $493 | $2.12 | $925 | $3.90 | ||||
Adjusted for: | ||||||||
Amortization of maintenance rights and lease premium | 132 | 0.57 | 299 | 1.26 | ||||
Net recoveries related to Ukraine Conflict | (14) | (0.06) | (28) | (0.12) | ||||
Income tax effect of above adjustments | (15) | (0.06) | (34) | (0.14) | ||||
Adjusted net income / earnings per share | $596 | $2.56 | $1,162 | $4.90 | ||||
Average AerCap HoldingsNV. shareholders' equity | $16,179 | $16,158 | ||||||
Return on equity | 12 % | 11 % | ||||||
Adjusted return on equity | 15 % | 14 % | ||||||
(*) Includes $41 million adjustment to basic lease rents, $29 million adjustment to maintenance revenues and $62 million adjustment to leasing expenses for the three months ended June 30, 2023, and $84 million adjustment to basic lease rents, $74 million adjustment to maintenance revenues and $141 million adjustment to leasing expenses for the six months ended June 30, 2023 | ||||||||
Adjusted debt/equity ratio
This measure is the ratio obtained by dividing adjusted debt by adjusted equity.
- Adjusted debt means consolidated total debt less cash and cash equivalents, and less a 50% equity credit with respect to certain long-term subordinated debt.
- Adjusted equity means total equity, plus the 50% equity credit relating to the long-term subordinated debt.
Adjusted debt and adjusted equity are adjusted by the 50% equity credit to reflect the equity nature of those financing arrangements and to provide information that is consistent with definitions under certain of our debt covenants. We believe this measure may further assist investors in their understanding of our capital structure and leverage.
June 30, 2023 | December 31, 2022 | |||
(U.S. Dollars in millions, | ||||
Debt | $46,256 | $46,533 | ||
Adjusted for: | ||||
Cash and cash equivalents | (1,154) | (1,597) | ||
50% credit for long-term subordinated debt | (1,125) | (1,125) | ||
Adjusted debt | $43,977 | $43,811 | ||
Equity | $16,391 | $16,195 | ||
Adjusted for: | ||||
50% credit for long-term subordinated debt | 1,125 | 1,125 | ||
Adjusted equity | $17,516 | $17,320 | ||
Adjusted debt/equity ratio | 2.51 to 1 | 2.53 to 1 | ||
Adjusted net interest margin, annualized net spread, annualized net spread less depreciation and amortization and average cost of debt
Adjusted net interest margin is calculated as the difference between basic lease rents, excluding the impact of the amortization of lease premium/deficiency recognized under purchase accounting, and interest expense, excluding the impact of the mark-to-market of interest rate caps and swaps. Annualized net spread is adjusted net interest margin expressed as a percentage of average lease assets. Annualized net spread less depreciation and amortization is adjusted net interest margin less depreciation and amortization expressed as a percentage of average lease assets.
Average cost of debt is calculated as interest expense, excluding mark-to-market on interest rate caps and swaps, debt issuance costs, upfront fees and other impacts, divided by average debt balance.
Three months ended June 30, | ||||
2023< | ||||
