Blade Air Mobility, Inc.

good morning ladies and gentlemen and welcome to the blade air mobility fiscal third quarter 2024 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 over to matt schneider vice president of investor relations and strategic finance. Matthew, you may begin.

Thank you for standing by and welcome to Blade Air Mobility conference call and webcast for the quarter ended September 30th, 2024. 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 in 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, historical, comparable, consolidated GAAP financial measures to those historical non-GAAP financial measures is provided in our earnings press release and investor presentation. Our press release, investor presentation, and our Form 10Q and 10-K filings are available on the investor relations section of our website at ir.blade.com. These non-GAAP measures should not be considered in isolation or as 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 Hayburn, Chief Financial Officer. I will now turn the call over to Rob.

Thank you, Matt, and good morning, everyone. I'm extremely proud of our team's effort in achieving an important milestone this quarter in our passenger business, achieving positive segment adjusted EBITDA in a trailing 12-month period ending September 30th, 2024, more than a full year ahead of our previous guidance to achieve profitability by the end of 2025. In Q3 2024, we saw significant margin expansion driven by both our passenger and medical segments resulting in a 27.3% year-over-year increase in flight profit, while adjusted EBITDA of $4.2 million increased more than fivefold compared to the $0.8 million in the prior year period. We're also pleased to see strong conversion of adjusted EBITDA into cash flow as we generated $6.4 million of operating cash flow and $3.7 million of free cash flow before aircraft acquisitions in the quarter. I will now review the key business, operational, and strategic highlights for Q3 2024, starting with passenger. We had a strong summer season, particularly for Northeast Leisure, that drove Q3 2024 short-distance revenue up 6.5% year-over-year or 9.8%, excluding our discontinued Canadian operations. Our passenger segment enjoyed a significant improvement in profitability in the quarter, with passenger flight profit rising 31% the prior year period, while passenger segment adjusted EBITDA doubling versus the prior period, and passenger segment adjusted EBITDA margin rising to 14.4% versus 7.3% in the year-ago period. On top of strong underlying customer demand, several factors contributed to our faster path to profitability in passenger. We've taken action to exit unprofitable business lines and focus on roots with the most attractive growth and profitability characteristics that are strategic in nature. For example, we formally exited the Western Canada market during Q3 2024, an intention we discussed on our Q2 earnings call. In Europe, our management team has taken several aggressive steps to improve profitability. During Q3, we restructured our European operations, which is expected to generate significant cost savings and enable stronger organizational and commercial alignment with our local partners. As a result, we expect to see improvement in profitability for Europe, which will mostly manifest itself during the busy summer months given the seasonality of that market. We've also been laser-focused on maximizing cost efficiencies across passenger, with the year-to-date segment-adjusted SG&A falling approximately 6% compared to the same period in 2023. Blaze's vertical transportation platform is now stronger than ever and well-positioned for the transition to electric vertical aircraft, or what we call EVA or EVTOL in industry parlance. This transition from conventional rotorcraft and seaplanes to EVA is now coming closer into focus following the FAA's recent release of the necessary guidelines for EVA operations, as well as the incoming administration's stated agenda of achieving adoption ahead of other countries. The timing couldn't be better for Blade. We've always said that our strategy is to create an urban aerobility platform that can operate profitably at scale today using conventional aircrafts Before the introduction of EVA, which we expect will lead to an abundance of conveniently located landing locations throughout all major metropolitan areas, as well as lower cost of operations. Today, we've achieved the key milestone passenger segment adjusted EBITDA positive year for the 12 months ending September 30th, 2024, over one full year earlier than expected. I couldn't be more proud of the hard work from our team to make this possible. Our passenger business, given its captive infrastructure, proprietary technology, large flyer base, and strong brand, has never been more valuable to our customers and the manufacturers of EVA. Blay has only fortified its position as the largest operating vertical transportation company for commuters in the world, and we are without competitors for many of our key services. Turning to medical, segment adjusted EBITDA improved 15.1% in Q3 2024 versus the prior year period, with margins expanding 70 basis points year-over-year, despite a softer-than-expected quarter for U.S. Oregon transplant volumes. Will is going to provide more detail on medical margins later in the call, but I'm pleased to report that we saw a significant rebound in activity for October, with our medical segment achieving one of the highest monthly revenue levels in company history. We remain extremely bullish regarding the long-term opportunities for our medical business. The fundamental growth drivers of organ transplants in America continue to gain momentum as well as our ability to continue to gain market share. We're seeing increased adoption of existing and rapidly emerging technologies. to increase the supply of donor organs in the U.S., including organ perfusion and preservation devices, procedures like normothermic regional perfusion or NRP, and a thriving industry of companies to provide the surgical staffing necessary for hospitals to increase recovery volumes. This reinforces the validity of our strategy to remain agnostic as to the technologies, procedures, and services embraced by our hospital partners, and we welcome the opportunity to work directly with these innovative companies whenever the need arises. To that end, we're excited to announce our strategic alliance with Organox to broaden access to their Netra perfusion device, which extends liver preservation times, aids in identification of viable donor livers, enables longer distance transportation, and increases the utilization of donor organs. Organox will pre-position Metro devices at strategic locations across the United States, utilizing Blade's air and ground logistics to enable rapid deployment to transplant centers for on-ground use. We know from speaking with our customers that demand for Organox's Metro device currently exceeds the supply of available machines. This partnership will enable higher utilization of available devices through rapid distribution to centers who need them on a case-by-case basis. As livers make up for more than half of all heart, liver, and lung transplants in the U.S., this illustrates the significant potential impact on our medical business. Our medical platform continues to strengthen with 10 owned and 20 dedicated aircraft, strategically positioned near our customers a growing ground logistics capability with nine hubs and 45 vehicles around the country and an organ placement services offering that we call TOPS that is gaining traction in the industry with five signed customers and a strong sales pipeline. Looking through the quarter to quarter volatility, Our continued market share gains are highlighted in our performance and reinforce the strength of our platform. In fact, in the last two months, we won competitive RFPs for two new high-volume transplant centers that we expect to begin flying for in early 2025. Importantly, over the last year, we have not lost a single contracted customer, a testament to the service and value that we are providing. Turning to our medical aircraft strategy, seven of the eight previously announced aircraft acquisitions were operational in the quarter, with the eighth aircraft entering service in the last week of September after a significant entry into service delay. We signed agreements to acquire two additional aircraft during Q3 that are expected to enter service by early 2025 and increase our own fleet size to 10 aircraft. This strategy is already bearing fruit, enabling us to win new medical contracts in recent months that required aircraft ownership. It's important to note that at a fleet size of 10, our own fleet will only represent approximately one-third of our medical flying hours, with a majority remaining on third-party aircraft. We remain focused on maintaining a strong balance sheet at Blade, and our capital allocation priorities remain unchanged, prioritizing low-risk, financially creative investments in medical aircraft, ground vehicles, as well as bolt-on acquisitions in medical that enhance our competitive posture or enable the expansion to other time-critical logistics verticals that include industrial manufacturing, parts for grounded aircraft, or other medical cargo use cases. During Q3, we completed a tuck-in acquisition in medical to geographically expand our captive network of ground vehicles. We will continue to weigh these acquisition priorities relative to opportunistic share repurchases as well. With that, I'll turn it over to Will. Thank you, Rob. I'll now walk through the financial highlights from the quarter, starting with passenger. Short-distance revenue for Q3 2024 increased 6.5% year-over-year, or 9.8% excluding Canada, as we formally exited the Western Canada market at the end of August. In jet and other, revenues declined 15% year-over-year, driven primarily by lower revenue per flight given softer jet charter industry pricing. As Rob mentioned, we saw significant margin improvement in passenger this quarter, as passenger flight margin and adjusted EBITDA margin expanded by approximately 700 basis points year-over-year. The profitability improvement in passenger was driven by several factors, including strength in our Northeast leisure routes, improved pricing, higher load factor in New York airport transfers, and early benefits from our European restructuring. Turning now to our medical business. Medical revenue rose 7.8% year-over-year to $36.1 million. On a sequential basis, medical revenue fell 5.9% first Q2 2024. Blade's air trip volumes declined in line with industry heart, liver, lung transplant volumes in Q3 versus QT 2024, though our sequential revenue decline was slightly higher than the industry given a reduction in empty leg aircraft repositioning. As we've increased the size of our dedicated aircraft fleet and may face more aircraft at the home airports of our customers, we're able to significantly reduce empty aircraft repositioning time and cost. fortifying our value proposition to hospitals, and making many other operators uncompetitive in these regions. This had a discreet impact on revenue in Q3, but it is the right decision for us and for our customers. Long-term, this is a win-win, saving money for our customers, enabling shorter call-out times and longer trips, while at the same time, these well-positioned, dedicated aircraft generate more flight profit dollars per hour and per trip. For example, even in Q3 2024, order with unusually high owned aircraft-related expenses and lower than expected volumes. We saw a nearly 20% increase in flight profit per flight hour and an approximately 10% increase in average flight profit per air trip, despite only a low single-digit increase in flight revenue per hour flown, which is consistent with our contractual annual escalators with customers. Medical segment profitability metrics continued to improve on a year-over-year basis, but declined sequentially in the quarter. Medical flight margin expanded 240 basis points year-over-year to 20.8% in Q3 2024, up from 18.4% in the year-ago period. On a sequential basis, medical flight margin declined by 280 basis points. Medical segment adjusted EBITDA margin increased by 70 basis points year-over-year to 10.7% in Q3 2024, up from 10% in Q3 2023, but declined 370 basis points sequentially. Several factors contributed to the sequential medical margin decline in the quarter, the majority of which are timing-related and set to improve from here. The lower revenue sequentially drove negative fixed cost leverage in the quarter. In addition, above-average maintenance downtime and owned fleet expenses also contributed to the sequential margin decline, including startup costs and delays in aircraft onboarding for the owned fleet. The good news is we've seen a quick rebound in industry volumes and medical segment revenue, and we expect to see a meaningful improvement in margins and our own fleet performance in Q4 2024 relative to Q4 2023, driven by increased volumes, a normalization in maintenance downtime, the entry into service of our eighth aircraft, and a normalization of other own fleet costs. This outlook is consistent with our actual financial performance in the month of October. Moving forward, we think it's reasonable to expect quarter-to-quarter variability in our medical business, given the nonlinear growth of organ transplant volumes in our own fleet that brings with it some unpredictability with respect to timing of certain expenses and maintenance downtime. As Rob mentioned, in Q3, we completed a small tuck-in acquisition of one of our ground organ transportation providers at approximately four times normalized cash flow. We'll continue to look for accretive opportunities like this to deploy our significant cash positions. Before moving off medical, I'd also like to highlight some data around an exciting industry trend poised to drive even faster growth and availability of donor organs, normothermic regional perfusion, or NRP. We're seeing higher adoption of this technique, which improves transplant outcomes and yields, meaning the total number of usable organs recovered from one donor, and recoveries from donors that have undergone cardiac death. Hospitals and organ procurement organizations can often utilize off-the-shelf equipment to perform this technique at low cost, and we've seen a more than three-fold increase in the number of NRP recoveries performed by our transplant center customers year-to-date in 2024 versus 2023. NRP is still a low single-digit percentage of our total recoveries, and based on our conversations with customers, we believe it's still early days for this exciting growth driver. Moving to unallocated corporate expenses. We continue to focus on controlling these overhead costs, which declined 1.3% year-over-year in Q3 2024 and shrunk 50 basis points as a percentage of revenues to 7%. On the cash flow front, the difference between our adjusted EBITDA of $4.2 million and cash from operations of $6.4 million in the quarter was primarily driven by cash inflow from working capital. Our capital expenditures, inclusive of software development costs, were $9.9 million in the quarter and driven primarily by $7.3 million of aircraft acquisition payments, while capitalized aircraft maintenance was approximately $900,000. This aircraft acquisition amount includes payments for our eighth aircraft, delivered in the last week of the quarter, along with two additional aircraft that we purchased during the quarter but that did not begin flying. We have approximately $1.9 million of remaining payments on the 10 aircraft that we expect to pay in Q4 2024. Beyond the 10 aircraft acquisitions previously discussed, we do not have any other aircraft purchases in process currently, and our focus right now is on onboarding the final two planes and optimizing the financial performance of the current fleet. However, given the significant strategic and financial benefits of our owned aircraft, we will opportunistically consider adding a low single-digit number of similarly priced aircraft to the fleet, over the next 9 to 12 months. We ended the quarter with no debt and $136 million of cash in short-term investments, providing flexibility for strategic investments in aircraft, acquisitions in medical, and opportunistic share repurchases. Turning to the outlook, we are reiterating our 2024 revenue guidance for between $240 and $250 million and our guide for positive 2024 adjusted EBITDA. For 2024, While stronger passenger segment adjusted EBITDA performance in Q3 was partially offset by a lower medical segment adjusted EBITDA in Q3, we expect Q4 to land on plan, leading to our reiteration of prior guidance. In medical, we expect revenue to grow a low single-digit percentage sequentially in Q4 2024 versus Q3. We expect medical flight margin to rebound in Q4 2024 to the low to mid 20% range versus our prior expectation to exit the year at 25%. This is largely driven by the ramp up of our top service offering that currently has a lower than segment average margin as we rapidly scale the business along with an assumption that own fleet costs could remain elevated in Q4 as we work to onboard two recently acquired aircraft that are not yet performing revenue flights. Going forward, we are shifting our medical segment profitability guidance from tight profit to adjusted EBITDA in order to provide a more comprehensive view of our profitability expectations for the segment. We expect medical segment adjusted EBITDA margins to rebound in Q4 2024 versus Q3 2024 levels. For 2025, we expect medical segment adjusted EBITDA margins of approximately 15%. While we don't expect to provide medical flight margin guidance moving forward, this 2025 medical segment adjusted EBITDA margin implies a mid-20% medical flight margin. Over the next few years, we expect medical segment adjusted EBITDA margins to rise towards the high teens. In passenger, we expect revenue of approximately $13 million in Q4 2024, reflecting a $3 million year-over-year impact from our Western Canada exit. low single-digit year-over-year growth in short distance, and yet another revenue that is about flat compared to the prior year. Lastly, we expect adjusted unallocated corporate expenses to be flat down in Q4 2024 versus last year. For 2025, we are reiterating our expectation of double-digit adjusted EBITDA. We expect medical revenue to grow double digits year-over-year, And in passenger, we expect revenue of $85 to $95 million in 2025, reflecting an approximate $7 million impact from our exit in Canada, low single-digit revenue growth in our core short-distance business, and flat-to-down jet and other revenue. In 2025, we expect to generate positive free cash flow before aircraft acquisitions, barring any large unforeseen non-recurring items. With that, I'll turn it back over to Matt for Q&A.