Blade Air Mobility, Inc. (NASDAQ:BLDE) Q4 2022 Earnings Call Transcript

Blade Air Mobility, Inc. (NASDAQ:BLDE) Q4 2022 Earnings Call Transcript March 14, 2023

Operator: Good day, ladies and gentlemen, and welcome to the Blade Air Mobility Fiscal Fourth Quarter 2022 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to turn the conference call over to Mr. Ravi Jani, Vice President of Investor Relations. You may begin.

Ravi Jani: Thanks, and good afternoon. Thank you for standing by, and welcome to the Blade Air Mobility conference call and webcast for the quarter ended December 31, 2022. We appreciate everyone joining us today. Before we get started, I would like to remind you of the company’s forward-looking statement and safe harbor language. Statements made on this conference call that are not historical facts, including statements about future time periods, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, and actual future results may differ materially from those expressed or implied by the forward-looking statements.

We refer you to our SEC filings, including our annual report on Form 10-K filed with the SEC, for a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this conference call are made only as of the date of this call. As stated in our SEC filings, Blade disclaims any intent or obligation to update or revise these forward-looking statements except as required by law. During today’s call, we will also discuss certain non-GAAP financial measures, which we believe may be useful in evaluating our financial performance. A reconciliation of the most directly comparable consolidated GAAP financial measures to those non-GAAP financial measures is provided in our earnings release, and with respect to our segment non-GAAP measures in our annual report on Form 10-K.

Our press release, investor presentation and our Form 10-K will be available on our website. These non-GAAP measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Hosting today’s call are Rob Wiesenthal, Founder and Chief Executive Officer of Blade; and Will Heyburn, Chief Financial Officer. I will now turn the call over to Rob Wiesenthal. Rob?

Rob Wiesenthal: Thank you, Ravi. Good morning, everyone. I’d like to thank you for your interest in Blade and welcome you to our earnings call for the fourth quarter ended December 31, 2022. Our financial performance in the fourth quarter was once again well ahead of our expectations. Revenue in the December quarter increased 55% to $38.1 million versus $24.6 million in the comparable 2021 period. For the full year 2022, revenue increased 118% to a record $146.1 million compared to $67.2 million in 2021. Importantly, 2022 was a record year for flight profit, while corporate expenses continued to significantly decline as a percentage of revenues versus the prior year. These are not only the key building blocks that will drive us to profitability and cash generation, but also highlight the leverage provided by our shared services platform.

Our laser focus on the pursuit of profitable revenue growth should enable improvement on both of these metrics. Turning to some highlights from the quarter. Short Distance delivered another quarter of impressive growth, driven by our acquisitions in Europe and Canada, and the continued ramp of Blade Airport, which flies travelers between Manhattan and New York area airports in just five minutes. Q4 was our best quarter yet for Blade Airport, both in terms of passengers and revenue. I am also pleased with the progress we have made in integrating our European acquisitions and look forward to rolling out the Blade brand across all key European markets ahead of this summer’s peak season. MediMobility Organ Transport delivered another fantastic quarter, with growth driven by new customer wins, continued expansion with existing customers, and strong end market trends.

Today, we are the largest dedicated air transporter of human organs for transplant in the country, and, in February, we rolled out a new television and online video corporate awareness campaign for our MediMobility business titled “Saving Lives. Every Day”, highlighting the important role we play supporting transplant centers and organ procurement organizations in improving patient outcomes. All of this hard work led to another quarter of significant growth in flight profit, which increased 38% versus the prior year period, while adjusted corporate expenses as a percentage of revenue declined to 35% in the fourth quarter of 2022 versus 40% in the prior year period; again, demonstrating our strength across key metrics that will bring us to profitability.

In addition to our financial success, we continued to make progress in other strategic initiatives. In January, institutional investor RedBird Capital Partners announced that it had increased its ownership position in Blade to over 5%. RedBird’s founder, Gerry Cardinale and I have been working together for over two decades, and he has been an investor in our company since 2016. Blade’s core competencies in last mile air mobility, jet charter, and organ transplant flights overlap well with RedBird’s existing aviation portfolio, which we hope to leverage to support our continued growth across both Passenger and Medical businesses. Additionally, RedBird’s global sports and media properties provide a natural complement to Blade’s urban air mobility solutions for fans attending large sports and entertainment events.

This includes the AC Milan football club, which fits nicely within our European footprint. Lastly, both RedBird and Blade are leading supporters of aviation’s transition towards Electric Vertical Aircraft, or EVA technology. To that end, in February, we were proud to be a part of an historic moment for the EVA industry, as we demonstrated the first piloted EVA in flight in the greater New York City area in partnership with BETA Technologies. At the demonstration, government officials, media, investors, and the local community were all able to witness the ALIA-250 aircraft, with Blade livery, take flight, powered by an all-electric propulsion system. The crowd was also able to experience the dramatic noise reduction offered by the ALIA, with a live comparison against a conventional helicopter in flight, highlighting the aircraft’s sound profile that is one-tenth the decibel level of its conventional counterpart.

We thank our partners at BETA for allowing us to showcase this incredible technology to our home market in New York City as part of our effort to bring safe, quiet, and sustainable air transportation to commuter and commercial customers alike. In the meantime, we remain focused on providing best-in-class air mobility solutions for all of our fliers around the world using conventional aircraft, always improving the experience, terminal infrastructure and technology that will fortify our transition to EVA, while continuing to scale our Passenger business towards profitability and free cash flow. Given our tremendous progress in 2022, it is clear that the significant investments we’ve made in our people, technology, and products have enabled us to successfully navigate an unprecedented macro environment and further build on our strengths as a company.

Across both our Passenger and Medical businesses, our team has worked tirelessly to deliver our fliers and organ transportation customers the best service in the industry, the greatest level of availability and flexibility, and fair prices; not an easy feat, however, we are seeing the results of these efforts in our continued competitive posture, increased market share, and continued strong financial performance. With that, I’ll turn the call over to Will.

Will Heyburn: Thank you, Rob. Before diving into the details from the quarter, I just wanted to highlight a remarkable year of growth across all business lines. In the full year 2022, flight profit grew by 79%, driven by revenue and flight profit growth across both our Passenger and Medical segments. With that, I’ll walk through a few highlights from our business lines during this fourth quarter. In Short Distance, revenues were up 51% to $9.4 million in the fourth quarter of 2022 versus $6.3 million in the comparable 2021 period. Growth was driven by our acquisition of Blade Europe, which closed on September 1, 2022, our acquisition of Helijet’s passenger routes in Vancouver, which closed on December 1, 2021, and growth in our Blade Airport service, which relaunched in June 2021.

A few quick highlights from specific Short Distance products. In our New York Airport business, we saw another quarter of sequential passenger growth and revenue per seat growth in Q4 2022. We’ve continued to see strong uptake from the introduction of enhanced cancellation and flexibility options for our fliers. Though Q1 is seasonally slower than Q4, we are encouraged that quarter-to-date Q1 2023 Airport revenues and seats are running at approximately double comparable Q1 2022 levels. In the off-season for our New York commuter products, we saw slightly lower demand in the fourth quarter of 2022 versus the same quarter last year, as fliers returned to pre-COVID travel patterns. Canada performance continued to improve, and was profitable in Q4 2022 after reaching breakeven during Q3 2022.

We remain upbeat on the opportunity to expand our business in Canada, following the country’s slower re-emergence from the pandemic, and we look forward to rolling out new products and deploying our technology to improve customer acquisition, operational flexibility, and flier experience. Europe performance in the quarter was impacted by an unseasonably warm winter on the continent, which weighed on seasonal ski demand. This, coupled with poor flying conditions in the Alps, resulted in additional flight cancellations and lower volumes versus the record 2021-2022 ski season. As a reminder, Q4 is seasonally the lowest volume quarter for Europe. We’re already seeing improvement thus far in Q1, which is the second lowest volume quarter in Europe from a seasonality perspective.

The softer ski season in Europe and a return to pre-COVID off-season demand for our New York commuter products more than offset growth in Canada and Blade Airport, resulting in a 5% year-over-year decline in pro forma organic revenue for Short Distance in the fourth quarter of 2022. This includes results from acquisitions in both periods and adjust for currency. The performance in Short Distance this quarter, in what is seasonally a low revenue quarter, should not eclipse the fact that 2022 was a record revenue year for the Short Distance business, with 70% revenue growth for the full year versus the prior-year period. Turning now to MediMobility Organ Transport. Revenue increased 120% to $21.6 million in the fourth quarter of 2022 versus $9.8 million in the comparable 2021 period.

Revenue increased 7% sequentially in the fourth quarter of 2022 versus the third quarter of 2022. I would note that given our acquisition of Trinity Air Medical was completed in September of last year, all of the growth this quarter was organic, with more than half of the quarter’s growth driven by the addition of new customers, and the remainder driven by growth with existing clients, in addition to strong overall market growth. In Jet and Other, revenue declined by 17% to $7.1 million in the fourth quarter of 2022 versus $8.5 million in the prior-year period. Although average price per jet charter increased in the fourth quarter of 2022 versus the prior year, the increase was offset by a decline in the volume of charter flights, as the prior-year fourth quarter benefited from unprecedented strong demand driven by the emergence of the COVID-19 Omicron variant.

Based on industry data and what we’re seeing in the first quarter of 2023 quarter-to-date, we expect continued year-over-year declines in jet charter volume and we do see pricing declining across the board. As a reminder, though jet charter is not core to our strategy, the additional flight volumes generated by this business line provide a significant aircraft sourcing benefit for our medical business and generate incremental flight margin dollars with very limited fixed costs. Given the flexibility of our asset-light model, we expect to continue achieving consistent flight margin in Jet and Other around the 10% range, irrespective of volume and pricing. Turning to flight profit. Flight profit increased 38% to $5.4 million in the current quarter versus $3.9 million in the prior-year period.

Flight profit excludes non-cash operator revenue guarantee amortization related to our European acquisitions, which was expensed to cost of revenue in the quarter. This unique non-cash item only impacts 2022 due to the timing of our acquisition closed for Europe on September 1, and the timing of our negotiated contract with our European operator partners, which began on January 1, 2023. Flight margin percentage of 14.3% declined in the fourth quarter of 2022 versus 16% in the prior-year period, as expected. Key drivers of the year-over-year decline include, lower utilization in our seasonal by-the-seat jet service between New York and South Florida and faster-than-expected growth in our MediMobility Organ Transport business, which saw revenues increase 120% year-over-year and now represents 57% of total revenue in the fourth quarter 2022 versus 40% in the prior-year period.

Recall that MediMobility Organ Transport tends to have lower flight margin versus our historical company average, but benefits from multi-year customer contracts, no utilization risk, limited marketing costs and demand that is uncorrelated with the overall economic environment. In Blade Airport, though we’re encouraged by continued revenue and flier growth, we continued to operate below breakeven the fourth quarter of 2022. Absent the Blade Airport ramp up, we estimate that flight margin would have been approximately 150 basis points higher in the fourth quarter. Looking ahead to the first quarter of 2023, we expect both revenue and flight margin to be similar to or slightly above our fourth quarter 2022 levels. From a seasonality perspective, we continue to expect Q1 and Q4 to remain the lowest flight margin quarters of the year, with Q1 slightly better, while our third quarter should have the highest flight margin, driven primarily by mix shift towards higher margin seasonal businesses in New York and Europe during Q3 and part of Q2.

Let’s turn now to corporate expense, which includes software development, general and administrative, and selling and marketing expenses. On a reported basis, it’s worth noting that this quarter had several unique items, in particular, an earnout payable to the Trinity management team for significantly exceeding the EBITDA target contemplated at the time of our acquisition. While we view this earnout as a purchase price adjustment, generally accepted accounting principles require us to expense this payment to G&A. When adjusting for the earnout and other non-cash or non-recurring items, we’re pleased that our adjusted corporate expense as a percentage of revenues declined to 35% of revenue in the fourth quarter of 2022, versus 40% in the prior-year period.

Like every company operating in this environment, we continue to look for opportunities to optimize our cost structure to drive further operating expense leverage, including making tough decisions where necessary. As we look to the first quarter of 2023, we expect total adjusted corporate expense to be $1 million to $2 million higher than the fourth quarter of 2022. Adjusted EBITDA in the fourth quarter of 2022 was a loss of $8 million compared to a loss of $5.9 million in the prior-year period, but improved as a percentage of revenues to negative 21% in the fourth quarter from 24% in the prior-year period. The increased loss versus the prior-year period is primarily attributable to additional corporate expenses related to Blade’s recent growth and expected future growth, including marketing and software development, in addition to Blade Europe, where this quarter felt the full burden of SG&A related to our acquisitions, despite limited revenue and flight profit, which did not cover Europe’s SG&A in the seasonally weakest fourth quarter.

With respect to our balance sheet, we continue to have zero debt and approximately (ph) in cash and short-term securities as of the end of the fourth quarter of 2022. We remain confident in our tangible and forthcoming path to profitability, and as a result, we expect a significant majority of our remaining cash will be available for tactical acquisitions that can expand the breadth of air mobility offerings and accelerate Blade’s trajectory to free cash flow generation. To that end, I wanted to direct your attention to the new segment disclosure in our investor presentation, which will also be included in our 10-K that will be filed with the SEC. You will notice from the presentation that we have broken out segment revenue, flight profit and adjusted EBITDA metrics for both our Passenger and Medical businesses, as well as our unallocated corporate expenses for the fiscal year ended December 31, 2022, and the prior year.

We hope that this added level of disclosure, which we plan to continue and enhance in the future, will help to shine light on both the strong profitability of our MediMobility Organ Transport business in addition to the historical profitability and attractive unit economics of our Passenger business. To give some additional context, total Medical segment adjusted EBITDA was positive $5.1 million in the full year 2022 versus $1.1 million in the prior-year period. The significant year-over-year improvement is a result of the tremendous work that Trinity team did to bring our MediMobility Organ Transport solutions to more customers and patients. In our Passenger segment, which includes both our Short Distance and Jet and Other business lines, segment adjusted EBITDA was negative $6.4 million in the full year 2022 versus positive $1.3 million in the prior-year period.

There are three principal drivers of the year-over-year change in Passenger segment adjusted EBITDA that are worth calling to your attention. First is the relaunch of Blade Airport, which began in June 2021 and where we continue to operate below breakeven on a flight margin basis in addition to incurring additional selling and marketing costs. As mentioned previously, the timing of the closing of our European acquisitions resulted in a level of flight profit that was insufficient to cover the fixed cost of the business during the months we owned them during calendar year 2022. We continue to expect the business to be accretive to our financials in the first full year after acquisition and thus this will result in a year-over-year tailwind in 2023.

Lastly, our Vancouver business was not profitable on a full year basis in 2022 due to the impact of Omicron primarily during our first quarter. Note that these segment adjusted EBITDA metrics exclude unallocated corporate expenses as well as non-cash and non-recurring items. For more information on our segment cost allocation methodology, please refer to our 10-K and latest investor presentation, which will be available on the Investor Relations section of our website at ir.blade.com. Before I turn it back to Rob, I wanted to briefly address the recent disruptions in the banking sector. First and foremost, Blade does not maintain an account, hold cash, or hold securities at Silicon Valley Bank or Signature Bank. Our primary depository relationship is JPMorgan Chase, and we have not identified any material exposure to Silicon Valley Bank or Signature Bank amongst our critical vendors or large customers.

With that, I’ll turn it back over to Rob for a few closing remarks.

Rob Wiesenthal: Thanks, Will. Before going into Q&A, for those on the call who may be new to the Blade story, I will take a moment to talk about our growth strategy and what sets us apart from others in our industry, including those who expect to enter our industry in the future. First, we are building the ecosystem and aggregating the world’s best use cases for air mobility that can be profitable today with existing aircraft technology. This disciplined strategy has served our company and our shareholders well, as we have built a diverse, manufacturer-agnostic portfolio of air mobility businesses, where we are a market leader and possess durable competitive advantages from our proprietary technology, exclusive terminal and passenger infrastructure, favorable cost position, superior brand and safety track record.

Second, we serve resilient customers and end markets across both our Passenger and Medical businesses. On the Passenger side, we offer fliers the opportunity to significantly reduce travel times in highly congested or geographically contested markets. For example, in our largest market of New York City, we turn two hour drives to the airport into five-minute flights at a price that is not only accessible, but competitive verses Uber ground options. In MediMobility, we are the largest dedicated air transporter of human organs for transplant in the country, a market that we believe is as recession-proof as it gets. We provide transplant centers and organ procurement organizations with unparalleled access to the right crewed aircraft at the right time at the right price, saving our customers time, and most importantly, improving patient outcomes.

Our fliers and transplant center customers value the time savings, flexibility and our unmatched technology platform and customer service, which gives us the confidence that our business is uniquely positioned versus our competitors, and will continue to thrive regardless of the broader macro environment. Third, we see significant opportunity for organic growth and a clear path to profitability from our existing business lines using conventional aircraft today. However, our business was designed from day one to allow for the rapid introduction of electric vertical aircraft, or what we call EVA, once they are certified. Over time we expect those aircraft to: one, enhance our addressable market by increasing the number of landing zones available in the key markets where we operate; two, lower the cost of urban air mobility, resulting in increased customer adoption of our services; and three, improve our margins and earnings growth outlook by reducing our average hourly flight cost.

Unlike those who may choose to compete with us in an EVA world, we have existing passenger infrastructure that is exclusive to our flyers in key markets. We do not need to wait for the build out of new landing infrastructure to begin EVA operations. Over the past few months we have been pleased by the interest from new and prospective investors who view the significant dislocation and volatility in equity markets as a unique opportunity, and who share our view that the strength of our business today and the prospects for future growth are not reflected in the current market valuation of Blade, even with consideration for our debt-free balance sheet, and nearly $200 million of cash on hand. While we do not control our stock price, we remain supremely focused on what we can control, which is pursuing profitable growth while aggressively managing our discretionary costs under the lens of ROI.

You have my commitment that we will continue to work tirelessly in the year ahead to deliver exceptional results for all of our stakeholders. With that, I’ll turn it over to Ravi for questions.

Ravi Jani: Thanks, Rob. As a reminder, we will take questions from analysts and investors on this call today. Reporters should send inquiries to me directly. Operator, we’re now ready for questions.

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Q&A Session

Operator: Thank you. And our first question coming from the line of Jason Helfstein from Oppenheimer. Your line is open.

Jason Helfstein: Hey, thanks. So, two questions. So, obviously, we continue to see steady improvement in gross profit in MediMobility. Rob, can you just talk philosophically, do you plan to use basically the profit — incremental profits generated by MediMobility to basically fund growth in Short Distance, namely airport? And how are you thinking about kind of trade-off between schedule, I guess, service and margin, particularly around Short Distance in the airports? And then, I’ve got a follow-up. Thank you.

Rob Wiesenthal: Sure. With respect to MediMobility, obviously, we’re quite pleased with the tremendous growth that we have there. And even when you’re conservative going forward, it still keeps us on track for improving our EBITDA position and making sure that losses are reduced this coming year. But given our cash balance, the amount of cash that’s generated by MediMobility is not critical in terms of our growth plans that can happen just with the cash in the balance sheet not only the cash generated by Medical, but obviously, Medical does contribute to the overall bottom-line. With respect to airport, Jason, I think that right now as we get to a busier travel season later in the year, in terms of the trends that we’re seeing, I think the growth in the passenger account also with the average seat price is positive.

I think we’re dealing with right now about $245 average seat price despite the fact that you can fly for as low as $195. And this is because the introduction of fare classes and other add-ons such as car connection, that multi-modality is really important to us. So, I think that the growth, which will improve utilization and the increase of average sales price, that’s going to hopefully accelerate our movements of profitability on airport. With respect to schedule, we are trying to be a lot more surgical in terms of our flight schedule. But that being said, we need to offer a product that when you want to go to the airport, we’re there. So, clearly, we wanted a median profitability on the airport. We could fly from four to seven in the afternoon in all the airports and they’ll be wildly profitable, but that’s not a product for the long term.

That may help us in the short term, but if we want to be competitive in what we know is the largest Short Distance urban air mobility opportunity in the world with 28 million going between Manhattan (ph) area airports, we want to offer a product that can be completely — a product that can be completely fulfilling to our customer base now. Flight margin profitability, you will see during a quarter this year. We are quite confident that this year we will see a flight margin profitable quarter. It’s already there in the numbers and the combination of the growth and the average sales price per seat going up.

Jason Helfstein: And then, just a quick follow-up. You did comment about kind of using cash for acquisitions. Maybe just help us understand kind of in what area you’re thinking about? Thanks.

Rob Wiesenthal: Well, look, there’s a tremendous opportunity right now. There’s a lot of dislocations. A lot of companies that don’t have a fair amount of cash on hand. We’re seeing a lot of reverse inquiries on the acquisition side. And what I can tell you is that everything needs to fit in, needs to be tactical and also needs to leverage our shared service platform. As you’ve noticed, every quarter or every — during — over the course of the year, our percentage — our corporate expense as a percentage of sales goes down. So, we need to leverage this great shared service platform that we have to accelerate profitability of any company we purchase. We’ve always committed to buying companies and assets that are profitable day one and accretive day one.