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Operator
Good morning and welcome to the Blade Air Mobility, Inc. fiscal third quarter 2021 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Tom Cook, Investor Relations. Please go ahead.
Tom Cook
Thanks, Andrew. And good morning, ladies and gentlemen. Thank you for standing by and welcome to the Blade Air Mobility Fiscal Third Quarter 2021 Conference Call and Webcast. We appreciate everyone joining us today. Before we get started, I would like to remind you of the company's forward-looking statement, Safe Harbor Language. Statements made in this conference call that are not historical facts, including statements about our future 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 Form S-1 filed with the SEC on May 28th, 2021 and the Form 10-Q for the quarter ended June 30th, 2021 filed with the SEC on August 16th, 2021 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 non-GAAP financial measures, which we believe can be useful in evaluating our financial performance. A reconciliation of the most directly comparable GAAP financial measures to those non-GAAP financial measures is provided in our press release, which will be available on our website. These non-GAAP measures should not be considered in isolation or as substitute for our financial results prepared in accordance with GAAP. Hosting today's call are Rob Wiesenthal, Founder and Chief Executive Officer of Blade, and Will Hayburn, Chief Financial Officer of Blade.
Andrew
I will now turn the call over to Rob Wiesenthal. Rob? Thank you, Tom. Good morning, everyone. I'd like to thank you for your interest in Blade and welcome you to our earnings call for the fiscal third quarter ending June 30th, 2021, our first report as a public company. We had a great quarter and I'm very pleased to inform you of our 277% revenue growth versus 2020 and our 73% revenue growth compared to the pre-COVID 2019 period. Before we dive into results, I'd like to thank our employees and particularly our on-the-ground flyer experience team, for placing our flyers and their safety first as we continue to operate our business through the pandemic. The commitment of our team is particularly critical for our men and mobility service, which moves human organs for transplant by helicopter and fixed-wing aircraft. This business grew dramatically compared to last year, and it would never have been possible without our team showing up in person every single day so that we could continue providing this essential service to hospitals across the Northeast. While our other business lines have now rebounded or even shown growth versus the historical pre-COVID period, and certainly still and certainty still remains to the public our passengers trust us to get them quickly and seamlessly to wherever they need to be but the health and our safety of our flyers and employees remains paramount blade has led the way in implementing health and safety protocols and we continue to adjust our approach as needed in light of the dynamic nature of the virus We were the first aviation company to mandate in-flight masking, the first to have pre-boarding blood oxygen saturation testing, and the first to provide on-site COVID testing for our longer-haul flights. And this leadership position continues. This past Thursday, we were the first aviation company to announce a requirement for all flyers to be vaccinated starting on September 7th with exemptions as recommended by the CDC. It's an important differentiator versus our competitors on the ground and in the air, and we believe it will lead to increased flyer volume. With Blade, health protocols can scale. I'd like to take a few minutes to recap our strategic priorities and core strengths before we review our results from the most recent quarter. Our Acid Light model remains a key differentiator. The term Acid Light is used liberally by aviation companies, so let me explain what it means at Blade. Blade is a platform. We neither own nor operate aircraft. Our services are enabled through our strong and growing network of highly integrated embedded aircraft operator partnerships. This approach allows us to quickly and cost-effectively scale our business in response to fluctuations in customer demand, as well as a macro environment. There is no better example of the flexibility of this model than our performance during the pandemic. During lockdown in early 2020, We immediately reduced our supply of non-metamobility aircraft. And when the spring 2021 travel snapback occurred, we quickly brought them back online, while maintaining consistent unit economics and a great service for our flyers. We are committed to this approach today, and as we prepare for the transition to electric vertical aircraft, EVA, as we call them, or EVTOL in industry parlance, Blabe will partner with third parties that will own and operate EVA on our behalf. One of Blade's key priorities is to identify and launch short-distance routes that can be successful using the conventional aircraft of today, but that will also be appropriate for UVA once available. To achieve this, we will continue to pursue our organic growth plans, as well as undertake highly targeted acquisitions and partnerships, securing the infrastructure for these routes and enabling us to maintain our unique competitive advantages. At the same time, we will be helping our EVA manufacturer alliance partners achieve our mutual goal of bringing quiet, emission-free flight to the public. On the route growth front, we resumed our New York airport service this June, beginning with flights between Manhattan and JFK Airport after pausing the service at the start of the pandemic. By fall, we plan to once again service all three New York area airports. So far, we are pleased with the performance for the JFK restart, especially as compared to the early results of the service when we first launched it in 2019 pre-COVID. We are also preparing to launch new northeast corridor routes in 2022. We will share additional details about this before the year ends. With respect to our pipeline of strategic acquisitions and partnerships, we expect to announce two transactions before the end of this calendar year that will both fortify our strategic moat and accelerate our growth. Further, we have continued to support our transition to quiet and emission-free futures by entering into new alliances with leading EVA manufacturers. Just this quarter, we announced new partnerships with MagniX and EVE, bringing the total number of blade electric aircraft to four, all well-respected and well-capitalized companies, including Embraer, where EVE is one of their UAM divisions. Two of these partners are, in fact, flying their aircraft today with test pilots. Our agreement with MagniX will enable Blade to secure a supply of electric aircraft propulsion units for Lima, one of Blade's largest aircraft operating partners. These EPUs will enable Lima to convert its Blade-branded fleet of amphibious seaplanes to all electric aircraft starting as early as 2023 when development for commercial use is completed. Electric seaplanes will be deployed across Blade's northeastern and southeastern routes and are expected to operate emission-free at the same speed as the current generation of turbine aircraft with a significantly reduced noise footprint and lower operating costs. This alliance is uniquely important as it provides a near-term bridge to EVA given the engine's compatibility with already certified aircraft that are currently being utilized by Blade. Our agreement with EAST will enable Belay to deploy their EVA in South Florida and West Coast markets beginning in 2026 when development for commercial use is expected to be completed. blade will pay by the hour for use of these aircraft which will be operated by ease and its local partners again consistent with our asset light approach these alliances in addition to our earlier partnerships with beta technologies and wiscaro a joint venture between boeing and larry page's kitty hawk de-risk our alliance on the deployment schedule of any one manufacturer while giving Blade a portfolio of aircraft with different capabilities that are necessary for our wide variety of mission profiles. These alliances are subject to entering into additional agreements and certain FAA approvals. We will share additional developments with respect to our EVA alliances on future calls. With that, I'd like to turn it over to our CFO, Will Hayburn, to discuss our financial results in more detail.
Rob Wiesenthal
Thank you, Rob. Blade continues to make great progress in our long-term strategic plan. We relaunched our New York City airport service in June 2021 and are very encouraged by the results so far. Two months into the relaunch, we are well ahead of the same point in our 2019 launch, and we have already achieved an annualized run rate of approximately 10,000 passengers for a single route between Manhattan and JFK. For context, at our historical pre-COVID peak in late 2019, when we were running service to LaGuardia, Newark, and three JFK routes, we had an annualized run rate of approximately 20,000 passengers. This fall, we plan to expand our service back to include both LaGuardia and Newark. Moving on to the financials for the quarter into June 30th, 2021, revenue increased by 277% from 3.4 million in 2020 to 13 million in 2021, marking an impressive recovery from the COVID lows. We're especially pleased with our results compared to the pre-COVID period, with revenues up 73% from 7.5 million in the June 2019 quarter. Short distance revenues increased by 810% from $600,000 in 2020 to $5.7 million in 2021, recovering to near pre-pandemic levels with revenues at 87% of the same period in 2019. This was driven primarily by strong intra-week commuter demand that exceeded pre-pandemic levels, but was offset by lower demand for typical peak weekend travel, which remained below pre-pandemic levels as in-office work schedules are shifting dramatically. Metamobility organ transport and jet revenues grew by 147% from 2.6 million in 2020 to 6.5 million in 2021. A comparison of this business line to the same period in 2019 is not meaningful, as our metamobility did not exist at this point in 2019. Metamobility remains an important focus area for us, given the use of helicopters for short hospital-to-hospital transfers, as well as last-mile transfers from airports to congested city centers. Most of these trips are very short. Many of these trips are very short, are cargo-only, and will likely be Blade's first commercial use case for electric vertical aircraft. Even last mile transfers that are currently coordinated by blade using ground transport, we expect will often be replaced with EVA. Finally, other revenue increased from $200,000 in 2020 to $700,000 in 2021, driven primarily by brand partners who pay for exposure to blade flyers. Our cost of revenue decreased as a percentage of revenues from 82% in 2020 to 77% in 2021. If you look at this as a margin of revenue, less cost of revenue, which includes the cost of flying paid to our operators and landing fees, you see significant improvement from 18% in 2020 to 23% in 2021. This was driven by an increase in short-distance revenues and higher passenger utilization on our by-the-seat flights. Additionally, Blades saw minimal negative impact from new routes this quarter, which typically see cost of revenues higher than revenues for the first 18 months as they ramp to average utilization above break-even. Airport was our only new route operating this quarter and did not begin until June with a limited schedule at launch. Importantly, we are seeing leverage from our operating costs as demonstrated by our comparable adjusted EBITDA, which improved to negative 900,000 this period compared to negative 1.3 million in 2020 and negative 3.4 million in 2019. We expect to continue to benefit from this scalable platform as our growth continues. For the purposes of comparison to prior quarters when Blade was a private company, this comparable adjusted EBITDA metric excludes new recurring costs paid to third parties, which are associated with operating as a public company. These costs include incremental directors' and officers' liability insurance and professional services fees that were not incurred in the prior years. Our adjusted EBITDA, which includes the recurring third-party costs of being a public company, totaled negative 2.6 million this quarter, compared to negative 1.3 million in the same period in 2020 and negative 3.5 million in 2019. A few words about the future. Though we have not seen a negative impact from the Delta variant to date, it is very difficult to forecast the effect of a potential slower return to normal office work and business travel. On the one hand, hybrid remote office policies benefited us in late 2020 and early 2021 as our weekend-driven leisure routes morphed into seven-day-a-week commuter routes. If employers continue to delay full returns to the office, we could similarly benefit this year and would expect our 70-mile-plus commuter business to outperform the pre-COVID period during the fall and winter off-seasons. On the other hand, a slower return to office may delay the recovery in business travel, which would reduce demand for Blade Airport. Additionally, short-distance revenues were weighted heavily towards the September quarter pre-pandemic. Thus, we expect the fact that our short-distance business has not yet fully recovered from COVID impacts will have a more significant effect on that business line's results next quarter. Looking to our cost of revenues, we expect the predictable unit economics and strong utilization on our mature routes to continue to provide a positive contribution. Moving forward, we plan to leverage the contributions from these mature businesses along with our strong balance sheet to aggressively ramp up new routes, starting with airport this year and moving to the Northeast Corridor in calendar year 2022. As Blade Airport did not relaunch until June, this quarter saw a limited net negative cost impact from its ramp. We expect airport to be running at a loss for at least the next 18 months as we continue to aggressively invest in additional passenger capacity and new airports. As a result, we expect cost of revenue to increase as a percentage of revenues in the coming quarters. We've also been building our team in order to support our public company transition and to execute against our growth plans. Many of these additions took place recently and may not be fully reflected in the June or September quarter. Our current SG&A run rate on an unadjusted basis is a good proxy for future quarters as one-time transaction costs fall away, but new costs of employees and marketing will be added as we accelerate our growth. Given that our asset-like business model requires limited capital expenditures, as well as consistent negative net working capital position, our free cash flow profile should actually be better than EBITDA as we grow. Though this quarter we did prepay over five million of public company D&O insurance, which hit prepaid expenses. Looking ahead, blade's expansion strategy is keenly focused on new routes with significantly less seasonality such as inner city connections airport transfers and year-round commuter routes given this shift in our recent transition to reporting as a public company we have begun evaluating a change to a more typical december 31st fiscal year end we've had preliminary discussions with our board on this topic and expect them to consider a formal change in early 2022. in closing We have a strong debt-free balance sheet with more than $330 million to support our growth strategy. We will continue to focus on the largest markets where Blade can maintain its leadership status and achieve sustainable unit economics today. Moving forward, we believe the transition to electric vertical aircraft will only serve to improve our cost structure and make urban air mobility accessible to more people around the world. With that, I'll turn it back over to Rob.
Andrew
Thank you, Will. Let me take a moment as to our strategy within the broader emerging urban air mobility industry. First, a few data points. Over $5 billion have already been invested in the design and manufacturing of electric vertical aircraft. Five EVA manufacturers have either gone public or are in the process of going public with expectations to raise incremental capital of more than $4 billion during this year alone. Outside space transportation, there may be no more ambitious task than for a standalone company to build, certify, and manufacture EVA, and to do it at scale, and to do it on budget, and to do it on schedule. Simply put, that is not our business. We will continue the singular focus we have had for the past six years, building, creating, and acquiring all the necessary elements to provide best urban air mobility service layer possible, ensuring the deployment of EVA to the public in a seamless, convenient, cost-effective, and safe manner. These elements include our network of exclusive terminals and key locations in the most important markets in the country, our partnerships with leading aircraft manufacturers, our consumer to cockpit technology stack, our 24-7 on-the-ground flyer experience team, as well as our trusted brand and over 200,000 users. These are our competitive strengths, and they are extremely difficult to replicate. As we continue to build new services using conventional rotorcraft, we will be in a powerful position to enable manufacturers to deploy their EVA to the flying public as safely and as quickly as possible. Unlike many companies in the urban air mobility ecosystem, we have a strong and growing business today using conventional aircraft. As such, we've set a number of important milestones for this pre-EVA period for our investors. two accretive acquisitions by calendar year end, the addition of two remaining commercial airport routes in the New York City area by this fall, as well as the launch of an important northeast corridor business route in early 2022. This was a great quarter, both financially and operationally, and while going public and raising more than twice the amount of cash we require to execute upon our business plan. Before we close, I'd like to briefly discuss the current capital markets environment. This quarter has continued to be a volatile time in the markets for emerging growth companies like Blade. With our strong financial performance and approximately $4.80 of cash per share on our debt-free balance sheet, it is both management's and our board's view that the current share price does not adequately reflect the long-term prospects for our company. We hope that our performance, starting with the great quarter we announced today, coupled with achieving our upcoming milestones for new services and acquisitions, will serve to eliminate this gap. However, if we need to, given that we have more than twice the cash necessary to fund our business plan, we have the balance sheet strength to enhance shareholder value, and we are prepared to do so if and when the time is right. With that, I'll turn it over to Tom for questions.
Tom Cook
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.
Operator
Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Ite Michele with Citi. Please go ahead.
Ite Michele
Great. Thanks. Good morning, guys. Morning. Just to give you a first question on the recovery that you saw this past quarter, Of the passengers that were flown, Keith, maybe share how many were new to the Blade platform versus those who were prior flyers coming back.
Rob Wiesenthal
I would say the majority of the passengers this quarter were passengers that we had seen before, given that we didn't introduce airport until June. And that's the biggest driver of new passengers for us. That'll change as we go into the next quarter. But for this quarter, given our reliance on those mature core commuter routes in the Northeast, we did see a lot of the same passengers.
Andrew
At the same time, I think if you were able to disaggregate it and say who was flying during the week, We saw in a lot of our leisure routes, people that had not been flying blade prior because of the ability to fly seven days a week. And this kind of shift from this weekend only cadence to when we back in April, when we saw ourselves flying seven days a week. So that really opened up the business to a brand new flyer, which we did see during those kind of business days, but we're not breaking out the numbers for both those segments.
Ite Michele
Got it. That's very helpful. And then just maybe two questions on kind of the upcoming couple quarters. So I know it's still really tough to predict, as you mentioned, given the Delta variant. Any comments around perhaps how July trends trended for you? And then maybe, I think, Will, you mentioned some of the new gross margin dilution you can have as you bring back airport over the next 18 months. Any way to roughly quantify how we should think about that? Kind of our models going forward over the next few quarters, or that impact. You're saying impact of Delta? No, the impact of, so maybe just for Delta, if you could just comment on July trend, kind of if you've seen anything thus far early in the quarter. And then secondly, just on the Blade Airport ramp that began in June, I think you mentioned it should run at a loss typically in the beginning. Anybody quantify that? What that could mean in terms of the gross margin impact from the airport ramp.
Andrew
Sure, I'll let we'll take the 2nd part in terms of airport ramp, but in terms of what we've been seeing again, it's always kind of this mixed bag. What I would say is, because of our health and safety protocol. We did not see fall off with passengers who chose chose not to fly blade and, you know, take other forms of transportation because of safety concerns. So that's wrong. Additionally, because of Delta variant at the same time, and I'm talking about this basically whole summer to date, there were definitely a lot of blade flyers that may have had plans to travel longer distances, perhaps overseas that canceled their plans. And so we definitely saw for some of our closer term leisure routes, which is consistent with what you've seen across the travel business, you know, a much more much greater focus by our travelers on staying nearby this summer.
Rob Wiesenthal
And then in terms of the margin impact from Blade Airport, if you look at revenue, less cost of revenues, we're ramping very aggressively. And as we mentioned, we'll be adding those additional routes this year. So I would expect a low single-digit million-dollar negative impact to that revenue, less cost of revenues for the rest of the year.
Andrew
For airport, yeah. And again, we break even on airport flights, typically anything above 2.2 passengers per out of six possible passengers on that aircraft. So luckily the hurdle is not very high, but we still need a very robust schedule to really engage our flyers and let them know that they can fly at a time that's most convenient to them.
Ite Michele
Terrific. That's all very helpful. Thanks so much.
Operator
Thank you. The next question comes from Jason Helfstein with Oppenheimer. Please go ahead.
Jason Helfstein
Hey, guys. Thanks. I'll ask you three first. Maybe talk about, like, the cost to you to secure the EVA deals. You know, what's kind of the cost to you? What are you kind of committing to, et cetera? Second, will the airport service be any different when it resumes remaining airports or basically, you know, same as it was before? And then can you talk about the seasonality of MediMobility? Should, you know, should investors assume like that? Does that business just generate kind of, you know, the same revenue each quarter, give or take your ability to grow it, or is there seasonality in that tax? Okay.
Andrew
Let's talk about your first question, cost of security of VA deals. Consistent with our Astrolite model, What we do is work with third-party manufacturers who want to move to EVA, which is pretty much about everybody. And in certain instances, there are manufacturers who would like to operate the service for us, and they can take a look at the kind of flight bond that we've had in the past, or in certain instances, we can make commitments in terms of how many hours we'll fly. And with that, that will enable them to finance and purchase the aircraft on their own. And in fact, if you take a look at our conventional businesses, we often get phone calls from conventional aircraft manufacturers who say, you know, we know you work with Operator X on your platform. How many hours do you think you could do this year? And people finance against the kind of volume that we do. So we expect that model to continue going forward. That was the second question. Okay. In terms of the airport service, you're saying being any different. Are you talking about the actual service itself? Is there any aspect?
Jason Helfstein
Yeah, I mean, I guess any improvements that you guys have kind of, you know, because for some of your flyers, I imagine it's been a while since they've used it. Will there be any improvements or changes given kind of pre-COVID or just kind of same service, just bring it back to the other airports?
Andrew
Well, look, I think it's, you know, we obviously learned a lot when we first did it, and I think we're getting the turn times and the tarmac much quicker. We're dealing with recovery much more effectively in terms of when there's increment weather. But most importantly, we continue to work with airports and airlines. to enjoy behind the tarmac service like we have had with American Airlines, where you can actually get off the plane when you land at JFK and be driven by American behind the tarmac directly to your blade helicopter. That not only saves this two hour drive, which we turn into a five minute flight, it saves 20 minutes probably walking through an airport and finding a car. So I think more of those alliances, we hope for you to see that in the future. And we'll talk about metamobility.
Rob Wiesenthal
Jason, on your seasonality question, so there's a few things in that revenue disaggregation line. The metamobility business does not show seasonality. However, and it's been showing good growth. However, there is some jet charter and buy the seat jet that's also in that line. And on the buy the seat jet business, that is seasonal. So that's our blade one service that is focused on the winter months to Miami and to Aspen. So you see a couple million positive impact from that over the season. And then on the jet charter side of things, it can be a little bit unpredictable. so that piece there's not I wouldn't say a specific pattern to it but it can be lumpy quarter to quarter so hopefully that helps you break down the pieces there's a strong base of revenues in there that doesn't have seasonality but there are some moving pieces and was there a family else
Jason Helfstein
I mean, I'll go back in the queue. I'll ask another one, depending if there's other people. I'll go back in the queue there.
Andrew
Yeah, but I think, you know, the segment, obviously the vast majority is metamobility, which is fast-growing and not seasonal.
spk02
So, I mean, that's really what I'd be focusing on.
Operator
Again, if you have a question, please press star then 1 on a touch-tone phone. And we have a follow-up from Jason Helfstein from Oppenheimer. Please go ahead.
Jason Helfstein
Thanks. Why not? Just, Rob, how are you thinking about any of the potential risk of policy changing at any landing locations? To the extent you, you know, I'm particularly thinking about kind of in the Hamptons where I think there's some stuff coming up in September. Just how do you think about it? You know, kind of any commentary there? with other parties, et cetera, and just kind of concentration issues on the business there, thanks.
Andrew
Sure. The good news is with the leisure routes, especially out to Long Island, Our passengers are not going to stop flying. The Hamptons is a legacy market of ours. It's not core to our future growth strategy, which is identifying short-distance routes that are well-suited for EVA. Nonetheless, we fly to all areas there, many of which were actually even in the town of East Hampton, Montauk Airport, South Hampton. west hampton and even amphibious seaplanes uh into local bodies of water that are only 10 minutes away from um uh the east hampton airport so i think that you know the closure of the airport would be very short-sighted um our flyers are going to keep flying we have multiple opportunities for them to fly to that area so it's not something that um you know we we see is um you know, frankly, impacting our business as much as some people may think. There are just tremendous economic benefits to that community. You know, I think it was about 900 jobs, 77 million in terms of economic impact. So, you know, we're hopeful they'll continue to keep it open. It's been open for over 100 years. And if not, our flyers will keep flying and they're not going to be landing too far away from where they were originally intended to fly. One final thing I would mention is that I think there's a growing understanding that it could be very short-sighted for airports or heliports all over this country that may be considering what to do, a mitigation strategy in terms of noise, because we really are on the precipice of emission-free and quiet electric aircraft. You saw our deal with MagniX. That's 2023. That's not a... That is not a large hurdle in terms of FAA certification because you're essentially taking an existing aircraft and changing the motor to an electric motor that is quiet and emission-free.
spk02
So I think we're in pretty good shape in that front. Thank you.
Operator
This concludes our question and answer session. I would like to turn the conference back over to Rob Wiesenthal, CEO of Blade, for any closing remarks.
Andrew
No, I think we're fine. We appreciate you joining us for this call today. And we look forward to, you know, taking any questions you have. If anybody on this call had not had their questions answered because of time constraints, feel free to reach over to Tom Cook at ICR and he'll take those and refer them back to us. And we look forward to talking to all of you soon.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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