flyExclusive, Inc. Class A

Greetings, and welcome to the FLY Exclusive First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Kyle Nagarkar, Investor Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon, and thank you for joining FLY Exclusive's first quarter 2025 earnings conference call. Joining me on the call today is Jim Seagrave, FLY Exclusive's founder and chief executive officer, and Brad Garner, our chief financial officer. We announced first quarter financial results yesterday after the market closed, along with the filing of our Form 10-Q for the quarter ended March 31st, 2025. Today, we'll be providing certain non-GAAP information during today's discussion. Important disclosures about this information and a reconciliation of the non-GAAP information to comparable GAAP information is included in our Form 10-Q filed with the SEC and is available on our investor relations website. In addition, this discussion might include forward-looking statements. Actual results might differ materially for any number of reasons, including risk factors described in our annual report on Form 10-K, in our quarterly reports on Form 10-Q, and in the press release covering forward-looking statements. Rather than rereading this information, we're going to incorporate it by reference in our prepared remarks. With that, let me turn the call over to Jim.

Thank you, Kyle, and thanks to everyone for joining us today. Last quarter, I spoke about the transformation of Fly Exclusive throughout 2024. That transformation continues, and the benefits are now showing up across our operations, our customer experience, and most importantly, our financial results. We've modernized our fleet, strengthened our team, and streamlined our cost structure. Our partners, along with Jet Club and fractional members, are seeing the results in better aircraft, better service, and more reliability. And our shareholders should now be seeing the value this platform can deliver over time. Let's start with the fleet, because that's where so much of our turnaround began. At the start of 2024, as we've discussed in the past, we had 37 non-performing aircraft in the fleet. The older Gulfstreams were the biggest drag, followed by the Citation Encore and X fleets. Today, we only have one of the non-performing Gulfstreams left in the fleet, down from seven, and just two of the Encores remain, down from 11. We've eliminated half of the Citation X fleet and will wind down the remaining aircraft over the next 12 months as new challengers come online. The negative impact from these non-performing aircraft has been reduced by approximately 80% from a peak of over $3 million per month to less than 600,000 today. Over the next few quarters, we will fully eliminate this drag on our performance. From an operational standpoint, these non-performing aircraft had dispatch availability of around 30%. As we eliminated 23 of them, we improved our overall maintenance dispatch availability by nearly 100%, now reaching in the low 60% range. As we finish removing the remaining aircraft, we expect continued gains. This is how we've delivered sustained growth in flight hours and revenue with approximately 17 fewer aircraft. We estimate the old fleet structure at its peak was costing us as much as $36 million per year. The addition of challengers to the fleet, alongside our profitable CJ-3s and Excels, has had a major positive impact on performance. We now have five challengers in operation, with a sixth on-site preparing to enter service this month. We expect to accelerate Challenger additions over the remainder of 2025. We anticipate the Challenger fleet will grow to 12 to 15 aircraft and represent as much as 30% of overall revenue by year-end, just over a year after introducing the first Challenger 350. Again, speaking to how fast we are transforming the landscape. These aircraft are delivering dispatch availability in the 80% range as projected. And with the sixth arriving this month, we've extended super midsize access to our Jet Club members. Each challenger should generate $8 to $10 million in annual revenue and deliver stronger margins than any other aircraft in our fleet. When paired with the high-performing CJ-3s and XLSs in our fleet, the story is clear. Our fleet is more reliable, more profitable, and better aligned to deliver what our customers want and expect. Two new XLS Gen 2s are scheduled for delivery from Textron in the second half of 2025, and we continue to add CJ3s to our fleet as the customer base grows. Now let's talk about how that's translated into our performance in Q1. We flew 17,333 hours in the quarters. a 6% increase from a year ago, and we did that with nearly 20% fewer aircraft. What's even more impressive is that this performance essentially matched Q4, which is always our busiest quarter due to the very high demand over the holidays. We are extremely pleased with this performance. Revenue tells the story even better. We generated $88 million in Q1, up 10% year over year, again with nearly 20% fewer aircraft. Nothing speaks more clearly to our transformation than delivering more flight hours and revenue with far fewer aircraft. This performance has been driven by strong customer demand, better fleet utilization, and much higher aircraft availability. To add more color, although we removed more than 20 revenue-generating aircraft over the past year, our active membership grew by 38%. This kind of leverage is exactly what our vertically integrated model is designed to capture. Our membered aircraft ratio is now 12.8, still the lowest in the industry among the major players, giving us ample runway to grow while continuing to deliver the service our customers expect. Rates were up nearly 4% with some benefit from favorable aircraft mix. As we add more challengers, We expect this trend to continue throughout 2025 and beyond. Non-program charter revenue per aircraft, while now a smaller share of total revenue due to rapid growth in our direct to customer recurring programs, still increased 9% year over year. Utilization per member increased by 13%. That's a healthy trend. And when combined with improving flight margins and rising dispatch availability, it makes the foundation even stronger. I also want to remind everyone again, at our current scale, each 1% improvement in dispatch availability adds roughly $3 million to our bottom line annually. So this isn't just about service quality. It's a major driver of profitability. And we fully expect to continue improving our dispatch availability through operational enhancements. We have been asked how financial market volatility or trade developments might affect our business. Let me speak to what we're actually seeing. Contrary to reports of weakening demand in both leisure and business travel, our Q1 2025 revenue of retail charter activity was up 10%, and April was up 15% year over year. Engagement from new and existing members continues to grow. Utilization trends remain strong. While formal market share data has not been published yet, based on Q1 and April, we are confident we are continuing to take share, both from competitors and new entrants. Our improved fleet reliability and service are accelerating this growth. While our customer base isn't overly sensitive to interest rates or currency fluctuations, what we are seeing is a modest shift from international to domestic travel, which plays to our strengths given the our U.S.-based fleet. On the cost side, there's been a lot of speculation around tariffs and trade policy. We believe the uncertainty has slowed some whole aircraft and fractional purchases, but customer confidence continues to rise each day. I will not attempt to predict global trade negotiations, but if policies make it harder to build aircraft outside the U.S., it is likely this will only increase the value of our fleet. This is where we could have a real advantage. We built Fly Exclusive to be vertically integrated. We manage, fly, maintain, refurbish, and repair our own aircraft. That gives us control over quality, cost, and uptime. If the industry faces bottlenecks, we believe we'll be in a stronger position than most, ready to capture market share and serve our customers without disruption. Let's turn to customer programs. Jet Club had another strong quarter. Sales were up 25% compared to Q1 last year, and active members grew by 192 over the same period. On the fractional side, Q1 is typically slower for new purchases. But in Q1, we recorded $16.2 million in fractional program activity, including $7.6 million in new fractional share sales and $8.6 million in fractional flight revenues. That's up 100% year-to-date versus Q1 2024, and that's with many customers still waiting for clarity around the new tax bill and whether it includes 100% bonus depreciation. Interest remains strong, especially as more challengers enter service and our new XLS Gen 2 is near delivery. These assets are in high demand, and we expect conversations to accelerate as the year progresses. I also want to highlight the continued growth of our MRO paint and interior business. We generated $1.8 million in external MRO revenue in Q1, up 18% over Q1 2024. While a small portion of our total revenue, we see very strong long-term growth potential for this division. And as I've said before, it's a clear competitive advantage. Few operators do what we do in-house. If supply chains tighten from trade issues, our MRO business becomes even more valuable as a revenue stream, a profit center, and a driver of fleet uptown. Turning to profitability, we reduced our adjusted EBITDA loss to $6.3 million in Q1. That's a $13 million improvement over Q1 2024, nearly a 70% year-over-year improvement. We made that progress by expanding flight margins and continuing to improve SG&A. Compared to last year, SG&A was down 17% and SG&A as a percent of revenue declined over seven points to roughly 24%. That seven point improvement saved us over $6 million this quarter alone, or 24 million on an annualized basis. We've built a more efficient and scalable public company infrastructure. and we expect SG&A to continue declining as a percentage of revenue. SG&A revenue per employee increased more than 40% in 2024 and continues to rise in 2025. Moving to capital markets and our 2025 financing plans, we announced the first quarter. We believe this transaction will create operational efficiencies and support continued growth. As an update, we filed the S-4 a few weeks ago and anticipate closing in the next 60 days as planned. JetAI has already met the minimum cash condition, and we expect that cash position to increase further before close, further strengthening our balance sheet. Over the last few quarters, we've developed multiple financing options to support our challenger acquisitions and incoming XLS deliveries in the second half of the year. This puts us in a strong position to execute our growth plan in 2025. We are optimistic that we'll be included in the RUSLE 2000 in the coming weeks. We now meet all qualification criteria. While inclusion is never guaranteed, we've checked every box to reach that milestone. Lastly, With the filing of our Q1 2025 financials, we are now shelf eligible and plan to file an S3 shelf registration on or around June 2nd. This will provide access to additional funds to accelerate aircraft acquisition. And just as important, the funds we expect to raise will further solidify our liquidity, reduce leverage, improve cash flow, and eliminate our warrant overhang. To wrap up, we believe 2025 will be the year we establish a clear, sustained record of EBITDA growth and positive free cash flow. Q1 started strong with meaningful improvements across the board. We are more confident than ever in our strategy. I couldn't be more proud of our team, and I'm grateful to our shareholders, analysts, and partners for their continued support. To our employees, from our administrative and accounting staff, to our pilots and technicians, our dispatchers, customer service teams, and our sales and marketing organization, thank you. Your hard work and dedication to our company, our shareholders, our members, and our customers is what makes this all possible. With that, I'll turn it over to Brad to walk through the financials.