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.

Thanks, Will. We'll start by taking questions from the analyst community and we'll follow with questions from the Say Q&A platform. I'll now turn it over to the operator for analyst questions.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. And our first question comes from Jason Helfstein at Oppenheimer and Company. Your line is open.

Thanks. Good morning, everybody. So just first some questions on medical. So just to elaborate a bit more, obviously there were some factors that went on in the quarter in the industry. Transmedics talked about it. But broadly talk about why the industry had kind of headwinds in the quarter and ultimately, again, kind of why you see those headwinds abating. And then it also seemed like both there was general, I guess, more downtime of the planes, like you cited that and Transmedic cited it. And so I'm just curious, like, was there something going on with just getting kind of, I don't know, necessary, you know, maintenance work, et cetera, but just why were there more planes down on average this quarter? And then with the higher fleet ownership, Is there a way to leverage potentially any downtime in those planes for passengers or any synergies there? And then I might have one follow-up, but let's just start with that on medical. Thank you.

Thanks, Jason. Will here. We'll start on the Q3. Look, what I would say is that you look at Q1 and Q2 for us, our sequential trip growth was well ahead of the industry volume growth. And then in Q3, if you look at our trip volumes, we were right in line with the industry volume declines. So there's always going to be some lumpiness. It has to do with a lot of different factors. It can be vacation schedules for individual surgeons. It can just be ebbs and flows of the availability of donors. But what we're really confident in is that we're going to continue to outperform the market in the long term for two simple reasons. We continue to take market share. We're winning new customers. and we're not losing any customers. So you might see some quarter-to-quarter volatility, but because of that fact, we feel really good that we're going to keep outpacing the market like we did in the beginning of the year. Moving over to your question around the downtime of aircraft, This is a new program for us, but let's sort of just put the strategy in broader context. There's always going to be some quarter-to-quarter unexpected maintenance, but if you look at the trend of the strategy and you look year over year at Q3 this year versus Q3 last year, We're seeing growth in our flight profit per flight hour flown. That's up 18% year over year. We're seeing growth in the average flight profit generated per trip. That's up about 11% year over year. And we're doing that without having to take price beyond the built-in revenue growth that's in our contractual escalators in our contracts. So I think looking at the overall trend here, we're happy that things are going in the right direction. And then you look to October, we've seen a bounce back not only in the overall volumes that we're performing for our customers, but also in the performance of the fleet. So I don't think there's anything industry-wide, Jason, to your question that's causing the downtime, but we're happy to see that things are bouncing back to the level that we expected. And Q2, of course, was an exceptionally great performance, both on the volume side, and we got the fixed cost leverage there, but also in just not having much maintenance downtime at all. Jason, I'll just add, despite any month-to-month vagaries in terms of when you own the aircraft, whether it be unscheduled maintenance or any kind of lumpiness that you would see, the margins from owning these aircraft, even in this kind of quarter versus the margins on a non-owned aircraft are far superior. At the same time, we're trying to strike a balance between owned and dedicated aircraft versus non-dedicated aircraft. And it's still a minority of our trips that are done on the dedicated aircraft. Also, as I said earlier, if you take a look at October, I mean, October was an incredibly strong performance. So I think you're going to continue to see this kind of thing. And obviously, Q3, as Will said, Because of the summer, certain is on vacation. I mean, there are a whole bunch of reasons why Q3 historically has been soft versus other cores. And I think your last question was around just opportunities to leverage the fleet for other business lines. Certainly, there's some incremental capacity on those aircraft, and we're exploring opportunities currently. to use, for example, empty legs to move passengers and also exploring that same opportunity within other time-critical cargo. So we definitely see that as an opportunity. Fortunately, we've been blessed that we have so much demand on the medical side that these planes are flying quite a bit, but that's definitely something we'll look to leverage more as the fleet gets to kind of the steady state size we want it to be. And Jason, as you would know very well, when you think even about the largest charter corridor in the world, which is New York to South Florida, having planes in Teterboro, if you had a situation where there might not be enough cushion of duty hours for a medical mission, that plane could easily go down into a passenger mission for Florida, Southern Florida under certain circumstances.

And Rob, just a bigger picture question. So with kind of a Republican kind of sweep of the election, how do you think about that impacting potential expansion of the passenger business on the traditional side? So you did highlight you think it would accelerate eVTOL kind of potential approval, et cetera, but did you think you get more reprieve around helicopter access? or really this is still... Yeah, that's a very good question.

I think, you know, as you know, there's been, you know, a fair amount of discussion about existing, you know, heliports and airports, curfews, you know, issues on fueling, types of fuel, you know, a whole bunch of things. And I think that it's clear that this administration and even a lot of the local representatives that were elected at this time are very, you know... pro-urban air mobility, whether it be with helicopters today or electric vertical aircraft tomorrow. So we definitely are looking forward to a bit of a reprieve. And I really think that the people who I've spoken to who are amidst this current and this incoming administration understand the importance of the infrastructure we have now because when the electric vertical aircraft are here, they'll be using our infrastructure to start or the infrastructure that we use and then clearly our, as you know, our proprietary terminals and such are going to be critical for that early period before new infrastructure is built. So I agree with the statement you said.

Thank you. Thank you. Our next question comes from Laura Lee of Deutsche Bank.

Your line is open.

Hey, thank you for taking my question, and congratulations on a great quarter. So my first question is about the passenger segment, about like what's your thoughts on 2025? I think the guidance is around 85 to 95 million, so the midpoint should be down to flight year on year. I just want to make sure, are there any other factors we should consider except the Canada exit?

The biggest factor on the top line for passenger is just as part of our overall drive towards profitability, we decided to exit the Western Canada market, which was not giving us the strategic advantage we thought and we didn't believe it had the growth or profitability that we were looking for in the near term. So that's why you're seeing the new guidance on passenger. For the remainder of the short-distance business, we continue to expect single-digit revenue growth, and we're very enthusiastic about continued performance improvements we're seeing for growing products like our airport transfer products here in New York City and also profitability improvements that come along with that. Just a couple of things. I would add we're in this period right now, since in many markets, we're one of one without competition. So, you know, there's been a definitely a focus. It's not growth at all costs. It's smart growth and being profitable, which we've accelerated through our restructuring in Europe, which is just completed. And by getting out of Western Canada, which we just didn't see the short to midterm opportunity there. And as we'll sit on airport, you know, in October, Just as an example, we had a record passenger count, monthly passenger count this past October. So I would call it considered growth is what our strategy is to ensure that we have a continued profitability in passenger. As you saw, we originally said in our last couple of calls when we put out guidance on passenger that we'd be profitable in 2025, and we've actually achieved that over a year early today. this last 12 months and obviously for all of 24. So I think the strategy is working.

Okay. Appreciate that. Also, I've got a question about the medical segment. I think you mentioned there's, for this quarter, there's a reduction in the block hours for trips, something like that. Just curious, like think about your strategy of moving the fleet closer to the large hospital clients. Does that make economic sense for Blade, or is it mainly for pushing out the competitors?

It does make economic sense for Blade because our margins on a per-hour and per-trip basis, the flight profit dollars that we make are higher with dedicated aircraft. And then by moving the aircraft closer to our customers, we get a number of advantages for our customer and for us. Most importantly, we don't have to bill our customers for repositioning, And still on average, we're making more dollars of flight profit per trip. So that's a win-win there. But also operationally, when your aircraft is based near your customer, you have more time to go pick up an organ because you're not burning crew duty to reposition that aircraft in. So it gives our customers more flexibility and it increases the aperture of how far they could fly and how long they can afford to wait to pick up an organ and also reduces the call-out time. If something comes in very last minute and the aircraft is already sitting right next to your customer, you have a much better chance of being able to go right away. So strategically, we think it's absolutely the right move. To your point, it does help us competitively as well because that's difficult to compete with if we've built a strategy around that. And financially, it still makes sense. But most important to us is it gives us the strategic advantage that we think is leading to us continuing to win new customers and not losing our existing customers. Laura, I would say put it in three things. Better economics on a per-trip basis for these kind of trips. Strategic in terms of really improving outcomes, which is the most important thing because we're getting to do the mission faster, thus the transplant happening faster. And then versus our competition, if you're competing for a contract versus Blade and you have just aircraft all over the place or where your home base is, and you're not going to be at the hospital, you're not going to be competitive. So that helps getting new customers. And the fact that we have owned aircraft now has also been extremely important in getting those new customers as well.

Okay, gotcha. Yeah, that's helpful. Thank you.

Thank you. Our next question comes from Bill Peterson of JP Morgan. Your line is open.

Hi, this is Mahima Kakani on for Bill. Thanks so much for sharing more about the partnership with Organox. Can you maybe elaborate on what share of the market that Metro Profusion currently accounts for? And was this sort of incremental market opportunity on top of what you were already expecting to support medical growth? And then maybe as a follow-up, it sounds like Organox's technology is supply constrained rather than demand constrained. Does that give you additional pricing power on that share of trips?

Thanks. Hey, Maven, thanks for the questions. Look, we don't have market share data across the country for Organox specifically, but what we can tell you is from talking to our customers, there is more demand for this machine than the current available supply. We talked about that a little bit in the press release. And so what we're going to do with them is take extra machines that will be around the country, and rather than have them sit at one customer for the occasional use, if that's a low-volume customer, we'll fly or drive the machine to folks that need them on a one-off basis and then fly them over to the next customer. So we expect to be able to significantly increase increase the utilization of those machines and help organ ops get greater market penetration there. One of the reasons from talking to our customers that we think they're really interested in this machine is just it's really economical relative to some of the alternatives that are out there. And that's going to allow them to allocate their dollars towards more organs by using a machine like this and all sorts of benefits in terms of giving centers additional time to evaluate if a liver is a good fit for their recipient, extending the amount of time that it can travel. So hard to put sort of firm numbers around what the market share is today and what it's going to be in the future. But really, this is an example of us hearing from our customers that this is something that they want greater access to, and then working directly with the manufacturer to come up with a win-win strategic alliance to make that possible.

Okay, thank you. That's helpful. And then passenger margins really outpaced this quarter. With optimizations made in Europe with the restructuring and the exit from Canada, can you touch on your steady state assumptions for this business? And do you see further pricing power from the tiered pricing that you guys have used or have seen in the past?

Yeah, I think one of the more underappreciated benefits that we've seen in the passenger business is just increasing the load factor and products like our New York Airport Transfer Service. You know, if you rewind the clock, that was really almost at break-even flight profit a year ago, and now it's starting to get closer to where we'd like it to be targeted. It's still not at our overall target margins for the passenger business so we have some room to continue there, particularly using strategies like the one you just described of having folks pick a higher priced fare class for more flexibility. So I think that there's definitely an opportunity to see continued margin expansion and passenger. And also remember, we've just completed our restructuring in Europe, which we think is going to improve the profitability of that business. And we've just exited the Western Canada market, which was a drag on our overall profitability. So it's pretty exciting to me that in Q3, when you really aren't seeing the full benefit of either of those things, that we had such a fantastic performance in passenger, and I do think the best is yet to come. One last thing on your point about different fare classes and upgrades and things like that. We've consistently added more fare classes with more benefits for our passenger, more add-ons, and what you find is when this business started, when it was $195 a a seat. I think now we're, you know, well north of 300 on an average checkout. But the important thing is it's giving passengers the ability to play the spectrum. They want something that's kind of, you know, low cost and low flexibility. With a lot of perks, they can purchase that. Or if they want something where they have flexibility in changing their fare, they have extra luggage, they want a car on the other end when they arrive, people are opting for that. And that has helped, you know, over the past year kind of supercharge those average checkout prices, which ultimately ends up with higher margins for us. So we're pretty happy with that performance.

Okay, thank you so much. I'll hop back in the queue. Thank you. Our next question comes from John Hickman of Ladenburg-Thalman. Your line is open. John, your line is open.

Hi, can you hear me?

We can hear you now.

Okay, thanks. Sorry. Will, my questions have actually been answered. I was just about to de-raise my hand. But could you go over your guidance for the... I couldn't write down fast enough, but could you go over your guidance for the passenger side

for Q4? Sure. For Q4 and passenger, we expect about $13 million of top-line revenue, and that reflects the Canadian business being discontinued, and then we expect to see roughly flat jet and other revenue year-over-year and continued single-digit year-over-year growth in the short-distance business, John.

Okay. Thank you so much. That's helpful. I got it down this time. Appreciate it. And congratulations on the quarter. Thanks, John.

Thank you. I'm showing no further questions. I'd like to turn it back to Max Schneider.

Great. So we're going to take a few questions from our Say Q&A platform. We're going to start with a few questions for Rob on eVTOL or EVA. First question is, do we believe the manufacturers are going to work with Blade as they kind of expand their fleet of aircraft over time?

And which manufacturers are we most excited about? I think we have great relationships with all the manufacturers now. We speak to them, you know, extremely often, almost every week I would say at this point. They're very excited about working with Blade. given the fact that we are flying more people by vertical transportation than any other company in the world and have more proprietary infrastructure than any other company. I think that I'm very excited about what Joby and Archer are doing, especially in terms of how far along the process they are in terms of certification and what their plans are. I think that they're definitely in a position, especially given the current administration, to try to expedite you know, their time to market. I think that, you know, really will help them remain on time here in the U.S., you know, for the years that they've put out there. But also I think that there are others out there as well that we've had, you know, we have relationships with in terms of, you know, you know, Beta, Hyundai, Eve, Wisk, and everybody else. And I think that, look, they're all doing a great job and that we're looking forward to them getting a certification that's only going to help supercharge Blade's business.

Great. Our next question is for Will on flight margin. And the question is generally, what's the path for flight margin expansion from here?

Thanks for the question. I think we talked about some of the great leverage that we've already started to pull in the passenger business, including the restructuring in Europe and our exit of the Western Canada market, and then some continued pricing efforts. and growth in products like airport that's going to drive that passenger flight margin up. On the medical side, we're fortunate that now we're going to get a lot more fixed cost leverage as we grow. And as we add flight hours, that's one of the big benefits of having the own fleet. We're in the middle of onboarding more aircraft, which does create some near-term lumpiness for us. And there could be a little bit more of that as we just announced that we'll be buying two more aircraft that are not yet producing revenue flights for us. But in the long term, the more we fly now, the less it costs. Every hour costs a little bit less to fly. So that's how you're going to start to get that adjusted EBITDA margin on segment-adjusted medical EBITDA to the high teens over the next few years. And we think there's a really clear path to that.

Great, why don't you take one more, Will, just on medical competition in NRP. So the question is, I've heard the question is, how are you thinking about the competitive landscape evolving as different devices and methods like NRP become more popular?

Yeah, look, we've been getting a lot of questions about this. It's a really exciting new therapy, normothermic regional perfusion. As we said in the script, We've seen year-to-date about three times as many volumes of cases where transplant centers are performing NRP year-to-date 2024 versus year-to-date 2023. So that's really interesting and exciting to see. It's still about a low single-digit percentage of our overall cases. The other thing we're seeing that's kind of exciting is more and more we see OPO, Organ Procurement Organization-led cases, So rather than the transplant center being the driver of selecting the use of NRP for a donor circulatory death donor, we're seeing the OPO choose to do it. And then what happens is maybe they thought they were only going to match a kidney for that particular donor. And then after being on NRP for a bit of time, they re-offer the liver to a few other centers and it gets accepted. And so when we talk to some of the OPOs we work with, we've heard from a few folks that it's their goal to try to use NRP for the largest percentage of their donors that they possibly can, simply because they see it as increasing the yields that they're gonna get from those donors. So it's early days for this, certainly. You know, there's a number of third-party service providers that are trying to make this easier and put a bow around it to help both the OPOs and the transplant centers. And like we've always said, we're agnostic and we'll work with our customers with whatever device procedure therapy they want to use, we're there to support them no matter what. So really excited about the future and definitely will be a growing driver of more supply of donor organs becoming available. So just to add to that, in terms of the hospitals that our medical team talks to, NRP has often been described as a game changer, and I think that we only believe that this is going to help our business going forward on the medical side.

Great. It should be exciting to watch this play out over the next few years. Rob, the last question we're going to take is on capital allocation. The question is just an update on how we're thinking about capital allocation and use of cash.

Sure. We're continuing to be prudent, smart, but yet aggressive in terms of uncovering the opportunities that we see here. You saw that we did a very quick tuck-in single-digit multiple creative day one acquisition, as I like to say, in the medical side with respect to gram transportation. We're looking at things every day, both large and small, and we're happy to have the size panel sheet that we have and being debt-free in order to achieve those goals. And so there will be a lot more to come. So we're excited about the future with respect to the opportunities that we see. And, again, the folks will be on the medical side on M&A.

Great. So that's the end of our state Q&A questions. Operator, we'll turn it back over to you.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.