Surf Air Mobility Inc.

Good afternoon and welcome to the SURF AIR fourth quarter and full year 2023 earnings call. Please note that this call is being recorded. All participants are now in listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. I will now turn the call over to Bill Margaritas. You may begin your conference.

Thank you, operator. Welcome to Surfer Mobility's fourth quarter 2023 and full year 2023 earnings call. I'm joined today by Stan Little, Surfer's CEO, and Oliver Reeves, Surfer's CFO. Please note we released our Q4 2023 results this afternoon, which are available in filings with the SEC and on Surfer's investor page at investors.surfer.com. Before we begin, I will remind everyone that during this call, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or similar such statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of the risks have been set forth in our earnings release and our periodic reports filed with the SEC. During today's call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures, are included in the earnings release we issued earlier today, which has been posted on the Investor Relations page of Surfer Mobility's website and in our filings with the SEC. With that, I'll turn the call over to Stan.

Thanks, Bill, and thank you, everyone, for joining our call today. We are pleased with our overall performance in both the fourth quarter and the full year 2023. I'm grateful to our team for delivering financial results that met or beat our guidance. The company recorded $112.9 million in revenue, up 12% year over year, beating our 2023 guidance, and negative $50.9 million in pro forma adjusted EBITDA, including investment in electrification and software, achieving our 2023 guidance 2023 was a transformative year for surf air mobility as evidenced by our completion of two big milestones our direct listing on the new york stock exchange and the completion of our merger with southern airways we're also pleased with the integration of southern airways and surf air in just seven months we've made strides in defining the strategic path ahead bringing on new talent and building key partnerships We've also made steady progress in expanding our leading regional airline network, developing proprietary powertrain technology to electrify the Cessna Grand Caravan, and advancing our AI-driven software platform with the support of Palantir. Our aircraft as a service platform model will enable independent owner-operators to join our platform where they will benefit from electrification technology, state-of-the-art software, and aircraft financing. or a bundle of all three. Over time, our aircraft-as-a-service model will enable us to expand our operational ecosystem and grow our off-fleet products. Our partnership with Palantir Technologies and continued investment in our software platform are core to these efforts, and we intend to offer access to our software to operators prior to launching electric powertrains. The expansion of our network over time and our steadfast commitment to and investment in electrification should enable us to capture a meaningful portion of the emerging regional air mobility market. According to McKenzie and Company, by 2035, the total global market for regional air mobility will be between $75 billion and $115 billion for trips between 100 and 500 miles. We believe that electrification will have a transformative effect on the unit economics of regional flying as it will drive down direct operating costs considerably. According to McKinsey, the emergence of regional air mobility will also create the need for financing and distribution and other software services that are not currently being offered at scale to this segment of the market. We plan to address these needs for ourselves and for third parties through our software products and aircraft as a service offerings. We are pursuing these initiatives in partnership with some of the most sophisticated technology companies in the aviation space. Textron Aviation, one of the world's largest airplane manufacturers, is providing us with new caravan aircraft under a preferential agreement. Palantir Technologies, a multibillion-dollar software company that builds enterprise data platforms for organizations with highly complex and sensitive data needs, is deeply involved in co-developing state-of-the-art software for our regional air mobility platform. The tools we've been developing with Palantir leverage AI to improve our operational efficiency, our customer experience and service levels, and our back office intelligence across Surfer's three air travel brands. More specifically, as we continue to integrate our companies, Palantir has supported the aggregation of financial and sales data across multiple systems into a unified dashboard and reporting platform. We've been building a data warehouse of near real-time flight information and aircraft positioning to facilitate more efficient operator outreach for our on-demand charter fulfillment. We also designed a framework to help drive recommendations for potential new markets and route expansions. And finally, we are continuing development of an AI-enhanced crew scheduling application that factors things like crew availability, maintenance schedules, and compliance guidelines to enhance our decision making and improve the safety and efficiency of our flights. This work with Palantir has laid the foundation for our platform to be able to host and provide access to these tools for unlimited air operators beyond our own brands. We're also working with Aerotech, one of the most accomplished aerospace engineering firms in the world, to develop the engineering specifications for our proprietary powertrain technology and to jointly work through the FAA certification process. These and other partnerships provide us with an even deeper bench, faster time to market, and efficient R&D spend. Since our earnings call in November, we've announced several new key agreements to advance our growth plans and scope of services, including providing commuter air service between Williamsport, Pennsylvania and Washington, D.C., and bringing air service to Purdue University for the first time in over 20 years, connecting their university with Chicago. These two new routes will be subsidized by local and private entities, including launch costs, without the need of the essential air service program. They will provide crucial regional transportation and are the first of what we believe will be many new subsidized partnerships with other airports, cities, and institutions. The Surf Air Purdue partnership is groundbreaking on several levels. In addition to connecting one of the world's premier aviation universities to U.S. and international air service connections with frequent daily flights, it will provide a major boost to businesses along the emerging I-65 tech and distribution corridor. One leading industry analyst has already dubbed this non-federal subsidy program the Southern Airways Effect. Purdue launches on May 15th and Williamsport on May 23rd. Agreements like those with Purdue and Williamsport are so important because while enplanements worldwide have already surpassed pre-COVID levels and yields remain strong, major airlines and their regional jet partners are still phasing out 50-seat aircraft. They are shrinking operations in smaller regional markets, thereby limiting customer options, which leaves a void we can fill. Southern's business development leadership is actively engaged in identifying the best growth opportunities with minimal financial and resource risk. As a reminder, SURF Air provides two types of air services, scheduled and on-demand charters. These businesses grew 11% and 18% respectively in 2023 on a year-over-year pro forma basis. We recently integrated both Southern and Mokalele ticketing functionality onto surfair.com, which is an important step in integrating the brands. We encourage all of you to go to our websites and see the brand synergy. I'm pleased to report that we have made considerable progress in overcoming the recent supply chain challenges and aircraft groundings that impacted our service levels throughout the latter part of 2023 and early 2024. Our maintenance teams have undertaken extensive efforts to work through supply chain challenges that have impacted the availability of parts over a prolonged period. And because of our unique pilot training program, we have cultivated a full roster of pilots to staff our bases. In 2024, we will continue to pursue synergistic opportunities between our scheduled and on-demand charter networks, further modernizing and streamlining our operations as we grow the business. As part of our continuing efforts to upgrade the talent of our team, we've recently hired two aviation industry veterans. As new deputy head of airline operations, Louis Sancerre has had a successful career with both Hawaiian Airlines and WestJet. Louis will oversee things like fuel purchasing arrangements, ground handling, and crew travel and accommodation costs, always with an eye on cost efficiencies. Additionally, he is introducing a new crew rostering platform designed by Palantir to drive efficiencies in how we optimally pair crews with a goal of reducing total crew numbers required. Louie also has an extensive history in customer experience and will be highly focused on optimizing our customer satisfaction scores. We've also hired a new director of maintenance for Southern Airways, Thomas Andino, who brings over 30 years of experience in aircraft maintenance including overseeing maintenance programs at both Virgin America and Spirit Airlines. Tommy has many years of knowledge of both the Cessna Caravan and the Pilatus PC-12 as well. We were thrilled to have found this combination of big airline and small airplane experience when we found Tommy. We are highly confident that the combined leadership and deep experience that Louie and Tommy bring to the company will help elevate the overall performance and reliability of our airline operations going forward. Additionally, we have expanded our technology team to include new experts with deep experience across consumer, transportation and logistics, marketplace, and distribution. Working closely with our partner Palantir, this team will lead the software development for Surfer's consumer technology and air operations while building the tools for third-party operators as part of our aircraft as a service offering. We are making solid progress with our electrification initiative, along with our lead partner Aerotech, and are currently in the latter half of our conceptual design phase. That means we're in the final stages of vendor selection for key components, including battery and electric motor suppliers. Additionally, we're working with the caravan's avionics manufacturer, Garmin, to integrate the powertrain with the aircraft displays. Our exclusive relationship with Textron is a real competitive advantage as it enables us to work more closely with Garmin and other key vendors on these critical components. Alongside the supplier selection work, our design of the powertrain's integration to the aircraft is progressing well. We intend to electrify our existing fleet using fully electric and hybrid electric powertrain technology once it's fully designed, developed, and certified. Due to the timing of availability for the optimal components for our powertrain, we believe we will obtain STC certification of the fully electric powertrain by early 2027 and for the hybrid electric powertrain sometime thereafter. Given this timeline, we remain confident that we can still be the first to market with an electric commercial regional passenger aircraft. To further this goal, we've made great progress signing up new customers for our proprietary powertrains and have signed MOUs with several new partners in Africa, including SafariLink, Yellow Wings, Oreck Air Services, and Z Boscovic, all Cessna caravan operators, to upgrade their aircraft with our electric powertrains. These providers are looking to Surfeir to substantially lower the carbon emissions of their caravan fleet, reduce operating costs, and deliver on their mission of protecting Africa's natural ecosystem and wildlife. These MOUs represent 13% of the total caravan fleet flying on the entire African continent. So, if you recall from our Q2 earnings release last year, we offered long-term guidance that 10% to 15% of the caravan market would be electrified or in contract to be electrified. We believe these early successes demonstrate progress toward those goals. To enhance our platform offerings, Surphair also entered into an LOI with Electra Aircraft to commercialize their electric planes once certified. We will jointly develop a leasing partnership to enable new operators to expand access to regional transportation, and we will collaborate on fleet-wide data analytics services to provide real-time aircraft information on Surfer's network. We have also secured preferred delivery positions for 90 Electra e-stall, that is electric short takeoff and landing aircraft, that will be available to us or our operator partners. Before I turn the call over to our new CFO, Oliver, I want to thank all our team members across the company who make our customers' journeys exceptional today while working to transform regional flying through electrification tomorrow. Their hard work is paying off, and I'm grateful to them. Now I'll turn things over to Oliver.