Blade Air Mobility, Inc.

Good morning, ladies and gentlemen, and welcome to the Blade Air Mobility first quarter 2025 earnings release conference call. At this time, all participants are in 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 like to turn the call over to Matt Snyder, Vice President of Investor Relations and Strategic Finance. Matt, you may begin.

Thank you for standing by and welcome to the Blade Air Mobility conference call and webcast for the quarter ended March 31st, 2025. We appreciate everyone joining us today. Before we get started, I would like to remind you of the company's forward-looking statements 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 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 form 10Q and 10Q filings are available on the investor relations section of our website at ir.blade.com. These non-GAAP financial measures should not be considered in isolation or as substitute for financial results prepared in accordance with GAAP. Hosting today's call are Rob Wiesendahl, Founder and Chief Executive Officer of Blade, and Will Haber, Chief Financial Officer. I'll now turn the call over to Rob.

Thank you, Matt, and good morning, everyone. We are pleased to report an excellent start to the year with revenue growth of 11%, excluding Canada, and a $2.3 million year-over-year improvement in adjusted EBITDA. Our strength in the passenger segment this quarter was particularly notable with segment revenue growing 42% year over year excluding Canada, which we exited in August 2024. And our very first segment adjusted EBITDA profitable first quarter since going public. Our strong passenger segment results reflect several factors including our durable competitive positioning along with the important actions we've taken recently to improve profitability such as our exit from Canada and broad-based cost rationalization initiatives. I'm particularly encouraged by the results in Europe following our restructuring, which led to strong revenue growth and significantly improved profitability this quarter. Passenger segment adjusted EBITDA improved by $2.7 million in the current quarter versus the prior year, and on a trailing 12-month basis, rose to 6.3 million as of Q1 2025, up from 3.6 million in Q4 2024. We're also happy to deliver medical results ahead of our guidance this quarter, while we successfully launched service with two new large hospitals on April 1st, as expected, contributing to an all-time record for trip volumes in April. Our medical business remains well-positioned to prosper in the current environment, given the strength of our logistics platform, strong underlying transplant volume growth, limited economic sensitivity, and insulation from tariffs. We continue to expect improving results throughout the rest of the year in both business lines. In medical, we are onboarding additional new hospitals and expect continued growth with existing hospitals, particularly given the strong industry transplant volume numbers we've been seeing. In passenger, while the economic outlook may be uncertain, we still expect ongoing year-over-year benefits from cost and restructuring actions as we will not anniversary our implementation of most items until the fourth quarter of this year. On the supply side, Having now completed a rapid period of aircraft acquisitions, we are focused on improving the operational and financial performance of the fleet. Following a period of unusually heavy scheduled aircraft maintenance and associated downtime during the first half of 2025, we expect a significant improvement in the second half of the year through 2026, resulting in reduced capital expenditures and improved medical segment adjusted EBITDA margins. Passenger had a very strong start to the year, as we previously covered, exceeding our internal projections. While we are not changing our guidance for the passenger segment, we are very focused on a potential impact of economic uncertainty along with the impact of the recent helicopter tour incident. I would like to take a moment to address this event. Blade does not offer tourist flights in the United States, and this incident highlights the importance of our safety team and related parameters, restrictions, and audits they require of our dedicated operators. Beyond our regular audits, Blade requires our operators to maintain numerous standards that exceed the requirements of the FAA. For example, the minimum number of pilot flight hours for tours can be as little as 150 hours. To fly for Blade, our minimum pilot hours are 800 or 1,000 hours, depending on the type of rotorcraft flown during those hours. We also have a minimum number of hours pilots must fly in the New York airspace before flying for Blade. Our full-time five-member safety team works with our operators in both our passenger and medical businesses every day. Turning to the macro outlook, though we are mindful that several airlines have highlighted softening travel fundamentals, airlines have also reported continued growth in premium seat sales, which is particularly relevant for Blade's higher-end flyer base. Given the seasonal nature of the passenger business, volumes are typically low in April and start to pick up in May, so we'll have much greater visibility into underlying demand over the coming weeks and months. Regarding the helicopter tourism incident, past experience leads us to believe that this will have a transitory impact on demand for our New York area services. We have seen a moderate impact on the incident in April, but as mentioned, this is on a seasonally low short-distance revenue base, and we are already seeing improvements. Lastly, in passenger, it's important to note the actions we've taken to improve profitability across the passenger segment. Our restructuring in Europe, our exit from Canada, and cost efficiency initiatives remain a key driver of passenger segment adjusted EBITDA results in 2025, as we will not anniversary our implementation of most of these items until the fourth quarter of this year. Despite any short-term variability, it is now more clear that our passenger segment is very well positioned for the transition from helicopters to eVTOL over the midterm due to our scale, strong brand, technology stack, and proprietary infrastructure in the key vertical transportation markets we serve. We remain excited about the future for Blade Passenger and believe it serves a growing and economic resilient customer base. We continue to focus on the discipline allocation of our shareholders' capital, evaluating additional investments in aircraft and vehicles in the medical business, along with acquisitions in medical that can strengthen our competitive position or expand our logistics platform. With $120 million in cash and short-term investments, as of the end of Q1, we believe we are well-positioned to capitalize on such opportunities. 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. Excluding Canada, which we exited in August 2024, short-distance revenue increased 28.1% year-over-year, driven primarily by growth in Europe. We view the European improvement as being a direct result of our restructuring, which not only reduced costs significantly, but also streamlined operations, leading to a better and more efficient experience for our customers, particularly for the hotel concierges and travel agents who make up a large portion of our European bookings. And yet another, revenue increased 60% year-over-year, driven by strength in both flight volume and revenue per flight. We saw another quarter of significant passenger segment profitability improvement in Q1 2025, as we achieved the segment's first adjusted EBITDA profitable first quarter since going public. This was driven by an 840 basis point improvement in flight margin, along with a 16% reduction in passenger segment adjusted SD&A. This profitability improvement in passenger was broad-based, driven by improvements in short distance, the restructuring in Europe, growth in jet and other, our exit from Canada, and SG&A cost efficiencies. Turning to our medical business. Medical revenue came in roughly flat year over year at $35.9 million. As we discussed on our Q4 2024 earnings call in March, there are several factors impacting air revenue in the first half of 2025. We saw heightened variability in monthly medical revenue growth trends during Q1, with low single-digit year-over-year growth in January, followed by a year-over-year decline in February. Medical revenue growth resumed in March, and we're happy to report that in April, we set an all-time monthly volume record, partially driven by the launch of two new customers on April 1st, as expected. We expect to build on this momentum with additional customer onboarding in the back half of the year. Our strategy, executed throughout 2024, is to increase the size of our dedicated fleet and position aircraft closer to our customers. We are more confident today that this is the right strategy that results in lower costs and shorter call-out times for our customers and enables a meaningful pricing advantage versus our competition. A natural result of this strategy is a reduction in block hours per trip until the anniversary of the increased dedicated fleet size in the second half of 2025. And we saw this negative impact in Q1 2025. It's important to note that while there is a modest revenue impact from this strategy, there is an improvement in average profitability per trip, along with the competitive benefits referenced earlier. Finally, ground and tops revenue continued their strong growth this quarter compared to the prior year period. Medical segment profitability declined on a year-over-year basis, primarily due to elevated scheduled maintenance downtime on our own fleet during the quarter, as expected and discussed on last quarter's call. Our own fleet generally provides us with the best unit economics on both the P&L and cash basis. When we experience above average downtime, there are two primary negative impacts in the period. One, though we continue to perform all trips for our customers as contracted, We substitute higher cost non-dedicated aircraft from our network. Two, we are unable to amortize the fixed cost of our own fleet, like pilots, on as many flight hours, resulting in a higher fully loaded average cost per flight hour on the own fleet during periods of elevated maintenance downtime. As a result, medical segment adjusted EBITDA margins fell 80 basis points year over year to 11.4%. The year-over-year increase in medical segment adjusted SG&A is related to our own fleet, which did not exist in the prior year period. As previously communicated, we expect reduced schedule of maintenance in the second half of 2025 and 2026 to result in reduced capital expenditures and improved adjusted EBITDA margins. Moving to unallocated corporate expense and software development. We continue to focus on cost efficiencies across the business And during the quarter, our expenses rose just modestly about 1.6% year over year. On the cash flow front, the difference between our Q1 adjusted EBITDA of negative $1.2 million and cash from operations of negative $0.2 million in the quarter was primarily driven by an increase in deferred revenue, partially offset by working capital bills. Capital expenditures, inclusive of capitalized software development costs, were $3.2 million in the quarter, driven primarily by capitalized aircraft maintenance of approximately $1.5 million and $0.7 million of aircraft acquisition payments. We currently have 10 aircraft in operation and continue to focus on optimizing the financial and operational performance of the fleet. Given the significant strategic and financial benefits of our owned aircraft, We expect to add a low single-digit number of aircraft to the fleet over the next year or two, but are not currently in the process of buying any aircraft. As previously discussed, we now use the withhold-to-cover method for taxes due on employee stock-based compensation. With this method, we pay taxes due on employee shares off the balance sheet and then withhold the equivalent number of shares, reducing the number of shares to become outstanding. Given a large number of expiring employee options, we were able to deploy 4.3 million during the quarter, which resulted in withholding approximately 1.5 million shares at an average price of approximately $2.91. We ended the quarter with no debt and $120 million of cash and short-term investments, providing flexibility for strategic investments in aircraft and acquisitions in medical. Turning to the 2025 outlook. we are reiterating our revenue and adjusted EBITDA guidance for the year. Starting with medical, we continue to expect double-digit revenue growth for the year following a tough comp here in Q1. After moderating throughout 2024, heart, liver, and lung industry transplant volume growth has been strong year to date, rising 7% year over year. As we mentioned previously, 2025 new customer starts are weighted towards the second half of the year for us, and we've had a strong start this quarter with two new customers driving great results in April. After a flattish result in Q1 2025, we expect single-digit medical revenue growth in Q2 2025, with strong growth in the second half of the year, driven by the ramp-up of new customers and an easing comparison base. We continue to expect medical segment adjusted EBITDA margins to be approximately 15% for the year, along with the risk that margins could come in slightly below our full year target due to the timing of maintenance completed during the year. As we discussed last year, we expect maintenance downtime to remain elevated in Q2 2025 and moderate in the second half of the year. As such, medical segment adjusted EBITDA margins are expected to improve versus Q1 2025, but remain below our full-year target in Q2 2025, with margins rising above our full-year target in the second half of the year. Rob addressed the heightened level of macro uncertainty in passenger earlier. Though it's too early to tell if this will have any discernible impact on our higher-end consumer, We are confident in the flexibility of our asset-light model to quickly respond to any variations in demand while maintaining flight profit margins. Moving on, we continue to expect adjusted unallocated corporate expenses and software development to decline slightly year-over-year in 2025, and we continue to 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 the operator for Q&A.