Surf Air Mobility Inc.

Good evening. My name is Christine Nguyen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Surf Air Mobility first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now pass the call over to Sam Levinson. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome to Surfer Mobility's first quarter 2026 earnings call. I'm joined today by Deanna White, our Chief Executive Officer, Louis Sancerre, President of Airline Operations, Joshua Loughton, President of Surf On Demand, Liam Fayyad, Co-Founder of Surf Air Mobility, and Oliver Reeves, our Chief Financial Officer. Our earnings release can be found on the SEC Edgar website and on our investor relations page at investors.surfare.com. Before we begin, I want to remind everyone that during today's call, we will discuss our outlook and expectations for future performance. These forward-looking statements may be preceded by words such as, we expect, we believe, or we anticipate. These statements are subject to risks and uncertainties, and actual results could differ materially from the views expressed today. Some of these risks are set forth in our earnings release and in our periodic reports filed with the SEC. We will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding non-GAAP measures, including the reconciliation of GAAP to non-GAAP, are included in our earnings release posted on our Investor Relations website and in our SEC filings. With that, I'll now turn the call over to Deanna. Deanna?

Thank you, Sam, and thank you all for joining us this afternoon. Our Q1 2026 results came in better than we expected. Revenue landed at $25.6 million at the high end of our guidance range, and adjusted EBITDA loss of $12.3 million outperformed our guidance. These results reflect a business that is executing with more discipline and efficiency than a year ago, despite the macro environment and higher fuel prices. We have improved our 2026 adjusted EBITDA guidance by approximately 40% to a loss of 30 to 25 million, while maintaining our annual revenue guidance at 128 million to 138 million, 20 to 30% growth year over year. This revised adjusted EBITDA guidance represents a significant improvement from our previous guidance and is a result of four factors. First, we anticipate SurfOS to continue to reduce costs across the airline and charter businesses. 6% for the airline, 15% for on-demand private charter. Second, corporate automation and procurement discipline will reduce our staffing requirements by 32% and our professional services spend by 17%. Third, our chartered businesses growing revenue through the Powered by Surf on Demand program without a proportionate increase in fixed costs. Fourth, AI-assisted development has compressed SurfOS build cycles and reduced development spend. Together, these four factors are expected to generate an incremental $15 to $20 million in adjusted EBITDA improvement from our previous guidance. The bigger picture is that SurfOS is now visibly moving our financial results. Last week, we released go-to-market details of the SurfOS platform with a presentation available on our investor relations site. In just a few minutes, our co-founder, Liam Fayad, will share more on our go-to-market strategy. Lastly, our strategic partnership with Beta Technologies remains central to our ambitions to adopt electric aircraft within our operations. In March, we announced a firm order for 25 Beta all-electric aircraft with options for 75 more and a designation as Beta's launch operator for commercial passenger electric service. Under the agreement, Surfer Mobility will become Beta Technologies' exclusive maintenance, repair, and overhaul facility in our launch market of Hawaii, with the ability to expand into future geographic areas. Importantly, this partnership allowed us to eliminate up to $100 million in planned capital expenditure on our Cessna Caravan power train electrification program. We still believe in a long-term case for an electric caravan and are exploring partner paths forward that would complete the initiative without further deployment of our capital. I'll now turn it over to the business leaders of our company to discuss their specific areas, beginning with Louis Sancier, president of our airline operations.

Thank you, Deanna. Q1 2026 was a solid quarter for our airline operations, both in terms of operational performance and how we're using technology to improve efficiency across the network. For the quarter, we maintain a controllable completion factor of 96%, with on-time departures of 72% and on-time arrivals of 78%. All three metrics improved relative to the same period last year. Within our peer group of regional airlines, we're consistently operating as a leader on these metrics. And that consistency is a direct result of better tools, better processes, and a focus on safety and reliability. Our two airline brands, Southern Airways Express and Mokululi Airlines flew approximately 65,000 passengers on nearly 13,000 departures in the quarter. Scheduled service revenue of $15.5 million reflects a 13% year-over-year decrease, which was planned. We have continued to exit routes that do not contribute positively to the business. That trade-off is the right one. We're building a more profitable scheduled service network, not one optimized for revenue at the expense of margins. We also had a solid quarter managing our cost base. The airline came in better than plan for Q1, driven by tighter cost discipline and operational efficiencies. That kind of cost performance is what makes the network rationalization sustainable. The efficiency gains reflected in our financial results are largely driven by what Surf OS is doing inside the airline. In Q1, 2026, Surf OS powered crew scheduling, aircraft dispatch, and maintenance digitization drove measurable improvements in both productivity and reliability. Our proprietary mobile crew app and maintenance management system reduced both the cost and frequency of regular operation. These cost efficiencies are the result of better data, better planning, and faster decision-making, all integrated through Surf OS. As we automate more workflows and feed more operational data into the system, the returns compound. We expect these results to be indicative of the efficiencies we can drive for our Surf OS customers. In Hawaii, we continue to execute on our investment commitments. We renovated our terminal, which has significantly improved our passenger experience at our Honolulu Airport hub, and we took delivery of two new Cessna caravans in April. These are tangible improvements that enhance the experience for Hawaii's inner island travelers and reinforce our position as the largest inner island airline network by departure and airport served. Hawaii is also the market where electrification roadmap will come to life. the ultra short haul route network, the airport access, and the community relationships that Moklili has built over many years provide the operating foundation for beta cargo demonstration flights, which will begin this summer, and ultimately for passenger service on electric aircraft. That transition will happen because we've already established the operational footprint and credibility in that market. Safety, reliability, and profitability in that order are the priorities of our airline. In April, we completed the implementation of our safety management system known as SMS. We are one of nine Part 135 commuter operators in the country that have completed an operational SMS. And we did this a full year ahead of the FAA's May 2027 mandate. SMS is a key differentiator in how we manage risk and how we demonstrate safety leadership to regulators, partners, and passengers. It also governs the vetting of all third-party operator partners used by surf-on-demand private charters. With that, I'll hand it over to Josh Luton, President of Surf-on-Demand, to cover our private charter business.

Thanks, Louis. Q1 2026 was a breakout quarter for Surf on Demand. We set records across revenue and margin and have a stronger momentum than at any point in the history of this business. Surf on Demand private charter of 10.1 million represented a 77% year-over-year increase and our highest revenue quarter since inception. March was our highest revenue month ever and gross margins improved 340 basis points from the same quarter year-over-year. Margin improvement reflects our deliberate shift in how we're building the business. Some stats that support this. Revenue per flight increased 38% in the first quarter, driven by a number of factors, including long-haul flights over 1,000 miles grew 149% year over year, and international departures increased 87%. Flights on larger cabin aircraft, defined as greater than nine seats, were up 49%, were flying farther with larger aircraft and to more destinations, domestically and internationally. Supporting this performance were efficiency gains from BrokerOS. Comparing Q1 2026 to Q1 2025, BrokerOS contributed two, top brokers closing 32% more bookings, quote-to-close time improving 57%, and payments processed on platform increasing 40%. What these improvements mean is that our on-demand private charter business is more productive than at any point in our history. We're booking more, we're closing faster, and we're keeping more of the transactions on platform. One of the contributors to growth in our private charter business is Powered by Surf on Demand. Powered by Surf on Demand equips independent brokers with BrokerOS to sell under the Surf on Demand brand, and it enables us to continue to scale globally. At the end of Q1 2026, we had six active independent brokers involved on the program. That number has grown to 29, and we have hundreds of additional applications in the queue. Independent brokers are looking for a branded platform that offers a full suite of tools, including 24-7 customer service, safety accreditation, real-time aircraft access, and complementary aircraft recovery. And the economics are attractive. we generate incremental revenue without a proportional increase in fixed costs, and we anticipate that margin will continue to expand as we scale. In April, we signed another exclusive wholesale agreement to expand our aircraft supply by 67% and added a new aircraft category. Those supply agreements directly support our ability to serve the growing demand coming through Powered by Surf On Demand. Looking at the full year, we expect Surf on Demand to be the largest single contributor to revenue growth in 2026, with expanding gross margins as the mix continues to shift towards higher value flights as the Powered by Surf on Demand program gains traction. One final milestone worth noting. In March, Surf on Demand achieved the Argus Certified Charter Broker Accreditation, making us one of only 16 Argus Certified Brokerages globally. This accreditation is not easy to obtain, and it matters to our clients and reinforces that we operate at the safety and compliance standards that they require. We also joined the Air Charter Safety Foundation, a non-profit organization dedicated to advocating for safety, professionalism, and operational best practices throughout the charter aviation industry. With that, I'll hand over to Liam Fyod, co-founder of Surf Air Mobility, to discuss our SurfOS initiative.

Thank you, Josh. To briefly introduce myself, I'm Liam, the co-founder of Surf Air Mobility, and I run the Surf Technologies team developing Surf OS. Most software companies enter a market from the outside, then try to learn as they build and iterate from there. We took a different approach. Every Surf OS product is built and validated on the operational and commercial data from our airline and charter business before we offer it to external customers. which means we've worked through our own pain points and found solutions within our own business first. Looking to the broader opportunity, SurfOS is targeting a large and growing market spanning charter aviation, private aircraft sales, and MRO aftermarket. Taken together, these three interdependent market segments share the same operators, brokers, and aircrafts, and represent an estimated 156 billion global opportunity. yet each still largely runs on legacy software and manual processes. SurfOS is designed to bring the data and workflows across all three onto one connected operating system. Our software development is moving at record speed. To highlight just a few of the new tools we built in the first quarter of 2026, we developed an aircraft intelligence tool to monitor fleet utilization and movement patterns of third-party aircraft to better inform charter and sourcing decisions. We integrated Palantir's AIP-enabled price rating directly into BrokerOS, allowing brokers to determine the market rates and identify margin opportunities and every quote. And we continued expanding BrokerOS CRM capabilities, moving closer to a true end-to-end solution for an independent brokerage operating under the Surf on Demand brand. After the end of the first quarter, we launched a fuel optimization module and a crew reserve optimization module for our airline operations. These are both AI-supported workflows built on Palantir's Foundry and AIP infrastructure. Last week, we released the details of our SurfOS commercial go-to-market strategy. I want to walk through that here and to reiterate our approach to the software business in 2026 and beyond. In 2025, we focused on building our data infrastructure on Palantir's Foundry platform, digitizing our processes, capturing data, and deploying tools within our own business. And now, with the infrastructure in place, we're focused on bringing three SurfOS products to market this year. BrokerOS launched commercially in December of 2025. Independent brokers joined our Powered by Surf on Demand program and used BrokerOS to manage sourcing, quoting, pricing, and bookings end-to-end. Before external launch, BrokerOS was developed inside Surf's on Demand's own sales team. The results speak for themselves. A 32% increase in bookings for top-performing brokers. 57% faster quote-to-close cycles, and 40% more payments processed on-platform, comparing Q1 2026 with Q1 of 2025. BrokerOS generates revenue via a take rate across on-demand private charter bookings. The early results are encouraging, and as Josh mentioned, we are accelerating the Powered by Surf on Demand program as the primary commercialization channel for BrokerOS. Our 2026 target is 100 independent brokers onboarded by year-end. Operator OS is targeted for commercial launch in the second half of 2026. It is designed for small and mid-sized Part 135 operators, both scheduled and charter, and provides core modules for crew and aircraft scheduling while integrating supply directly into broker OS distributions. The better Operator OS works for operators, the more real-time aircraft supply is available to our brokers. The products are designed to reinforce one another. We have worked with over 440 operators over the past several years who supply our charter operations. These operators form our prospective software sales pipeline for Operator OS, and we currently have 17 LOIs and software agreements signed. OperatorOS will be monetized through a modular subscription fee and based on operator size, with additional revenue generated through ancillary services upsells. Our highest strategic priority for OperatorOS is aggregating as much supply onto the platform as possible. Our 2026 targets are 10 additional LOIs signed and 5 operators live on the platform by year-end. SurfOS Enterprise Solutions targets large operators, charter brokerages, and aircraft manufacturers that need fully customized SurfOS deployment. Under our exclusive teaming agreement, Palantir's forward-deployed engineering team participates directly in enterprise sales conversations alongside us and provides us business development resources for go-to-market and commercialization. The combination of Palantir's infrastructure, credibility, and forward-deployed engineers, paired with our real-world software operational use case, opens up doors and shortens sales cycles in ways that pure SaaS competitors have trouble replicating. Our 2026 target for enterprise software is to close multi-year, multi-million dollar contracts, and we are currently in several active conversations. I also want to briefly address Surfo's approach to agentic AI, because it's where the next phase of our software gets particularly interesting. The data from our own airlines and charter business is already unified on Palantir's foundry, which means the foundation is in place to maximize the impact from deploying AI agents to autonomously optimized workflows, like crew scheduling, aircraft sourcing, maintenance, prediction, and aircraft recovery. With Palantir's AIP, we're embedding agents quickly into the highest impact opportunities. Our SurfOS products, as they launch and grow within the market, will enable something that does not exist today. A distributed charter network where brokers and operators, aircraft owners and passengers all benefit from the coordinated supply and demand on a single AI-enabled operating system. Operators reduce costs and improve fleet utilization. Owners maximize asset returns. Brokers close more deals with better aircraft sourcing. Passengers access more inventory at a transparent competitive prices. None of that is possible today because the ecosystem is so fragmented. Causing stakeholders to operate with incomplete information, SurfOS will change that. The more participants on the platform, the more valuable it becomes for everyone. That's the big opportunity we see ahead of us. For additional details on our go-to-market strategy and our product roadmap, the full presentation is available on our Investor Relations website. I'll now turn it over to Oliver Reeves, our Chief Financial Officer.

Thank you, Liam. I'd like to begin by covering our Q1 2026 financial results, and I will then walk through guidance for the second quarter and full year 2026. Total revenue of 25.6 million came in at the high end of our guidance range of 24 million to 26 million, representing a 9% increase year over year. Scheduled service revenue was 15.5 million, a 13% decrease compared to the prior year period. As Louis mentioned, scheduled service revenue reflects the intentional exit of unprofitable routes. We are trading short-term revenue for long-term margin, which is the correct outcome to drive long-term value. Surf on Demand private charter revenue of 10.1 million grew 77% year over year. That is the strongest quarter the charter business has had since inception, and it reflects both the demand growth Josh has described and the productivity gains flowing through BrokerOS. Net loss for Q1 2026 was 20.3 million, compared to a net loss of 18.5 million in the prior year period. Both periods include investments in R&D for technology initiatives, stock-based compensation, transaction costs, and other non-recurring items. The year-over-year increase in net loss reflects our continued strategic investment in surplus development and the commercial rollouts we are building towards. Adjusted EBITDA loss for the quarter was 12.3 million, outperforming our adjusted EBITDA loss guidance range of 15.5 million to 13.5 million. Adjusted EBITDA results were driven by improving on-demand charter margins, effective cost controls across our airline operations, and the more rapid and cost-efficient development and deployment of SurfOS. Additionally, adjusted EBITDA loss improved by 1.1 million compared to the prior year, driven primarily by the broader internal adoption of SurfOS within our airline operations. This is the ninth consecutive quarter in which we have met or exceeded our revenue and or adjusted EBITDA guidance. We do not take that record for granted. It reflects a management team that sets guidance it can stand behind and then executes against it. In April, we revised our four-year 2026 adjusted EBITDA loss guidance to a range of 25 million to 30 million, an improvement of approximately 40% from our prior adjusted EBITDA loss guidance of 40 million to 50 million. Revenue guidance is unchanged at 128 million to 138 million, representing 20% to 30% growth over four-year 2025 revenue. The guidance improvement is not driven by a single factor. As covered by Deanna and the team, there are several drivers behind the upward revision, including SurfOS-driven cost reductions in the airline and charter businesses, corporate automation and procurement discipline, profitable revenue growth through the Powered by Surf on Demand program, and lower SurfOS development costs through AI-assisted build cycles. For the second quarter of 2026, we expect revenue in the range of 27 million to 30 million. These expectations reflect both continued growth in undermined private charter and the impact for scheduled service of the prior year's exit of unprofitable routes. We expect adjusted EBITDA loss in the range of 10.5 to 8.5 million. Adjusted EBITDA excludes the impact of stock-based compensation, changes in the fair value of financial instruments, and other non-cash and non-recurring items. Adjusted EBITDA loss guidance for the second quarter reflects two external headwinds. First, global fuel markets moved against the industry, and April weather in Hawaii drove an elevated cancellation rate on our inter-island network with both revenue and unit cost consequences. We responded to the fuel pressure with targeted fair actions in markets where demand supports them. The operational improvement we've talked about in recent quarters, including SurfOS productivity gains and maintenance and scheduling efficiencies, provided a meaningful offset. And absent these two events, our Q2 guidance expectations would have demonstrated the underlying margins trajectories more clearly. In summary, in line with our recently announced 40% improvement to four-year 2026 adjusted EBITDA guidance, our company is focused on accelerating its path to profitability and anticipates adjusted EBITDA loss to further narrow through the second half of 2026, absent unexpected macro or geopolitical headwinds. One additional item worth noting. In April, we raised $30 million in new capital, $15 million through a non-dilutive aircraft-backed credit facility, and $15 million in common equity led by a co-founder, with participations from officers, directors, and existing institutional investors. The proceeds are primarily intended to accelerate CERFOS implementation and fund our electrification initiatives. The fact that co-founders, our chairman, CEOs, CFO, and other directors collectively purchased approximately $5.3 million of Surfer Mobility common stock in the offering translates as follows. The people running this company are buying the stock. We believe in our plan. I'll hand it back to Diana for some closing remarks before we open for questions.

The operational and financial results of the first quarter clearly demonstrate that the work we did in 2025 Building SurfOS, tightening operations, and recalibrating the private charter business is starting to bear fruit. We exceeded adjusted EBITDA guidance, improved full-year guidance by nearly 40%, and closed the first quarter with a series of milestones that matter. SMS completion had a schedule, Argus certification, and a capital raise backed by the leadership team's own capital. The plan we have laid out for 2026 is clear. We are executing against it. We appreciate your time today and interest in Surfer Mobility. I will now turn it back over to the operator.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Mike Latimer with Northland. Mike, your line is now open.

All right, great. Afternoon, yeah. Nice to see the accelerating growth on on-demand and the overall efficiency benefits from Circle S. Great results here. Yes, as we think about moving from, I think, about 29 brokers to 100 by year-end, can you talk a little bit about your visibility into that? What's the process for onboarding? Is it going to be a linear process throughout the year?

Hi, Mike. It's Deanna. Thanks for your interest in the company. I'm going to turn that question over to Josh Lowton, who's the president of the on-demand business.

Yeah. Hi, Mike. Since we launched the program, as I mentioned, we've brought on board, you know, just shy of 30 brokers in the first couple of months. We've had over 200 brokers apply to join the program. So hitting the 100 brokers is something that we know we can do, but we really want to focus on quality. The reason we believe in this program is because it can be scaled globally, and we want to make sure we focus on brokers that have the industry relationships and the customer relationships to bring to the table. But we are confident we can hit our goal of 100 brokers. In terms of onboarding the brokers, it is a fully automated process through the software that we built together with Palantir. So the process of getting onboard and getting selling for some brokers can happen in just a couple of days.

Okay, excellent. And then just with regard to the airline operations, it looks like you're already getting some of the efficiencies from using TurfOS, I guess, you know, You mentioned some of the modules you currently use internally, and they're having, you know, a good impact here, obviously. As you think about the next sort of tranche of modules you could use, how impactful could they be kind of relative to what you've implemented so far?

I'm going to turn that over to Louis Sancier, the President of Airline Operations.

Hi, Mike. Thanks for the question. I think our vision, what we want to do is really have it completely, you know, from end to end, a digital experience for our operation, for our employees, and for our customers. And when you do that, you get rid of a lot of the redundancy, a lot of the, you end up having and managing an airline that's a lot less complicated. You end up having savings from processes, from being more efficient. We're seeing that now. And we're really excited about where we're going. Just to give you an example of what that looks like, our pilots, as an example, when they're going to be interacting with us through their iPads, they already have a robust set of modules right now. But the next step is really from the time they bid their schedules to the time that they get paid the following month, it's all going to be virtual. And we're really excited about that. It's all going to be seamless. OK.

Excellent. Yeah. Great. Well, thanks a lot. Best of luck this year.

Our next question comes from the line of Brian Kinslinger with Alliance Global Partners. Brian, your line is now open.

Hi, this is Kevin for Brian. Thanks for taking our questions. On the broker OS side, as you start to scale in external adoption, how should we think about those progressions from internal efficiencies to meaningful take rate revenue with customers of the platform, and what are some of the early indicators that give you confidence in that monetization path?

Yeah, thanks, Kevin. I'm going to turn that over to Josh Lowden, president of On Demand, who's actively been using BrokerOS and is managing the Powered by Surf On Demand program.

Yeah. Hi, Kevin. Thanks for your question. um so we'll continue to scale that take rate on broker os naturally by increasing the number of brokers that we have on the platform and also through some of the additional modules that we'll be developing um you know without without getting too much into the weeds we we have a tool that can help brokers source aircraft from our aircraft partnerships so one of the things that i mentioned was our supply deals and that's a great way for us to be really competitive in what we're offering brokers And therefore, increasing revenue per broker, we can also increase our take rate per broker. We can also give brokers access to markets that they wouldn't usually be able to access to our global brands. So enabling brokers in North America to sell in Europe and so on and so forth. So it's really about increasing that take rate through increasing the market share that each of our brokers can get and acquiring and working with brokers around the world.

Got it. Thank you. And then for the operator OS side, what are some key milestones you think that'll determine successful conversion from those LOIs to live operators once you launch? And what do you view as the primary driver of adoption as you start to kind of roll this out?

Thanks, Kevin. I'm going to turn that over to Sudha Shahani, our co-founder, to talk about that.

Hi, Kevin. Nice to meet you. As you mentioned, we're pursuing a number of enterprise-centered relationships and have LOIs in place at the moment, also on the OperatorOS side. We see OperatorOS as being a way to bring both supply into the market to enable BrokerOS and be complementary to that, as well as to bring these operators real efficiencies within their own business. We've seen significant efficiencies ourselves in our business, which is the reason we kind of developed this product and bringing it out to market. And as our beta customers, I think, start to realize these efficiencies in their early tests, we expect to see strong conversion from LOIs into contracts.

Great. Thank you so much.

Our next question comes from the line of Austin Muller with Canaccord. Austin, your line is now open.

Hi, good afternoon. So just my first question here. If we think about what you discussed in Hawaii and the higher fuel prices, are you able to pass on the higher fuel costs within the essential air service program through inflation cost escalators, or what are the dynamics there?

um thanks austin um i'll turn that question over to louis sincere the president of the airline operation yeah thanks austin yeah obviously fuels a problem in the industry for everybody um i mean from the get-go you basically feel that with the caravan you know we're really well positioned because it's a it's such a it's such an efficient aircraft um it's really a leader in its class um so from uh from a cost you know to revenue perspective I think we've got an advantage over the industry. Having said that, we've already put some modules through SurfOS to help us better manage our fuel program, which is great. When we look at the EAS program, the EAS program is really not built to kind of reset the rates, but we're comfortable with what we've done in the past six months, 12 months, with the bids that we've put in place. We've got a few this year as well that we'll be adjusting for fuel. So all those things combined, the technology, the rebidding of routes, what we did in the past year, I think puts us in a good position.

Hi. So just my second question, how should we be thinking about the revenue mix for Surf OS, Broker OS, Operator OS relative to the core airline business as that's rolled out to customers over time.

Thanks, Austin. I'm going to turn that over to Oliver.

Hi, Austin. Good to talk to you again. So I think, as we said, Austin, if you look at least at the short to medium term, we expect broker OS's impact on the SERP on-demand business to be the largest part of the growth that we are looking to experience through the expansion phase of our transformation plan. I think that as you start getting further out and you see us convert on some of these opportunities that Siddin mentioned on the enterprise side, you'll start seeing the customized versions of SurfOS become a more meaningful percentage of our revenue going forward. But as you know, there's sometimes longer conversion cycles for the larger enterprise customers. And so you'd expect to see them a little bit further off, notwithstanding the fact that we still anticipate seeing our first multi-million dollar contracts on SurfOS this year.

Great. I'll pass it back there. Thank you.

Our last question comes from the line of Dave Storms with Stonegate. Dave, your line is now open.

Thank you for taking my questions. I wanted to start with some of the upcoming stuff you have with Beta and Hawaii beginning in June. With those cargo aircraft flights, I guess, what would you consider early success there? Can you help us understand maybe how The margin profile is different between cargo flights versus passenger flights with that. Maybe any additional color there as we start to look forward to that.

Thanks, Dave. Turn that over to Louie to answer.

Thanks, Dave. We're really excited about the trials. They're going to start at the end of June. The plane's going to be there for probably two months. And essentially what we're doing during those trials, and we're doing cargo cargo flights, as you mentioned. We're teaming up, you know, our flight ops team, our maintenance team, ground team is teaming up with the beta team. And it's really gonna be an exchange of, you know, operational knowledge with the beta folks. It's gonna be an exchange of data, a lot of data coming back to us from the aircraft. And as we are basically, you know, operationalizing between, you know, Honolulu and Molokai and Lanai, It's to do with several things. The first one is to validate the assumptions and to see the aircraft and the performance of the aircraft in an environment that we think is the best suited in the United States for this airplane. When you look at the stage lengths, when you look at the population there, when you look at some of the remote areas in Hawaii, this plane is perfect to service the communities. with our staff working side by side with the beta staff who have already flown this aircraft over 130,000 miles, that's where the transfer of knowledge is really going to start. And that's where we're going to start building our programs, our training programs, our manuals, et cetera, and really get us ahead of the curve because from certification in terms of when these planes are going to be coming into our fleet,

uh in you know 20 to 24 months so very excited about what's going to happen this summer understood that's great color thank you um and then just maybe circling back to the brokers that are in the surf on demand platform I guess what do you see in uh are there any differences in the sophistication between the brokers are there some that are using it more or less than others is it a pretty homogenous group and is that informing uh any of the additional rollouts you know to other brokers they have planned

Yeah, thanks for your question. You know, the program is obviously new for this year, and we certainly want to focus on sophisticated brokers. But what are the real benefits of building BrokerOS for ourselves within our own on-demand business first? was that we got to build a lot of modules to try and get everybody to a certain standard. As I mentioned, we recently accomplished our Argus certification, and that's really enabled us to have and obtain a standard that we can train our brokers to, which many sophisticated brokers thought might not have worked for an Argus accredited brokerage. We've really leveraged that to build out modules and training within the platform that bring everybody to a standard. But you're completely right that there is brokers that have different levels of sophistication and understanding of different markets. Something that we definitely see is a broker might be really experienced in regional charter, for example, and have less experience when you get into midsize jets and up. And our platform is all being built to guide brokers through how to manage that relationship and how to get those customers flying on larger planes with you versus going somewhere else. So I'm confident that with the platform that we've built, we can get all of our brokers to a very high standard. And I don't think that the goal of getting 100 brokers means that we have to compromise on quality.

There are no further questions at this time. I will now turn the call back to the SURF AIR executive team.

So now we'd like to take some questions to the team from our SAVEmedia platform and some other inbound sources. We appreciate all the investors and shareholders who submitted questions. The first question is, Net income keeps going down. What is being done to fix that? I'll turn that question over to our CFO, Oliver.

Thanks, Jenna. So, as you know, Dan, net income includes a lot of things. It includes some non-operating expenses, some one-time items, non-cash items, and each of those affect net income comparabilities. So the reason that we use adjusted EBITDA as a measure of profitability is because it excludes those, and it really gives you the ability to compare without having some of this volatility within the numbers. As we've mentioned, the company is accelerating its path to profitability. We anticipate net loss to narrow in the second half of 2026, absent unexpected macro or geopolitical headwinds. On top of that, we expect Surface to improve the scale and margin of both our scheduled and on-demand businesses. So when you put all of these things together, we anticipate that net loss is going to transition into net income, and that's for the benefit of our shareholders.

Thanks, Oliver. Lots of interest from shareholders in our technology. The next question is, how is the partnership with Palantir allowing you to gain an advantage in this space? I'll turn that over to Sasud and Shahani to answer.

Thank you, Deanna. So our Palantir advantage gives us, Palantir partnership gives us a number of advantages. Let me just break them out. One, we use the enterprise-grade Foundry and AIP data infrastructure platform to develop our proprietary applications on. This infrastructure is used by some of the world's largest government and commercial organizations. We use their development and deployment resources to accelerate the pace of our development, as well as their business development resources to build out our enterprise sales platform. Their platform also allows us to develop and launch AI agents much faster on top of the data foundation we've already built. Additionally, we have an exclusive with them in the charter broker and operator category, and our data advantage compounds significantly as more brokers operate and then flights transact through Circle S.

Thanks, Susan. Our next question has two parts. What kind of specific, qualifiable milestones and timelines can you share for SRF-OS commercialization and the Beta Electric Aircraft Program in 26 to 27 that would drive revenue acceleration and contribute to positive adjusted EBITDA and support free positive cash flow? So I'll turn it back to Susan to first comment on how SRF-OS will do that.

Great. Thank you, Deanna. And I'll recap some of this, and I know we've covered some of it, but we expect SurfOS to begin contributing meaningfully in the second half of 2026. SurfOS is both products and services. For the products, BrokerOS has been live since December of 25. We have a target of 100 active brokers enrolled by the end of 26, up from the 29 currently enrolled, and with hundreds of applicants already in the queue. For OperatorOS, we're targeting second half of 26 commercial launch. Our target KPIs are 10 signed LOIs and five operators live on the platform by year end. For our enterprise solutions, we have an active pipeline in discussions with large operators, brokers, and aircraft manufacturers. Our target there are signed multi-year, multi-million dollar contracts in 2026. This is where our teaming agreement with Palantir and Dayco to market team are supporting this pipeline directly. I'm now going to pass it over to Louis to talk about beta.

Thanks, Susan.

I think Austin's question asked part of the issue with the beta aircraft. You know, we're doing the demonstration flights this summer. We're very excited about that and all the data that we're going to get. You know, when we find the agreement with beta, it's an aircraft that, you know, we've got the ability to have different variants in terms of certification for the plane. So cargo, passenger service. We also have, with beta, factory authorized service, maintenance, You know agreement with them, where we are going to have exclusivity rights in Hawaii and we really want to build on that. But when we look at the program itself in terms of its. Real advantage is that it's really going to cost us about 30% less to operate per aircraft compared to the system caravans and that's the real competitive edge we're very excited about that and that's driven by you know, obviously fuel. It's driven by maintenance. You know, when we look at the reliability of this aircraft in terms of base, that it's down for heavy maintenance, it's considerably less than the traditional aircraft that we have seen and also the caravans. So those are the real opportunities.

Thanks, Louie. Next question is, how close are you to certification and what are some hurdles and important dates ahead of that? So I'll turn this over to Louie.

Yeah. So just picking up on that with the beta aircraft, we initially had a focus on the electric power train with the Cessna Caravan, and we've moved away from that. And the advantage of doing that is instead we're going to focus on the OEMs that are bringing new technology to the marketplace. And what that's doing is it's really allowing us to really not spend up to $100 million of capital on this electrification with the caravans and reallocate our spend where we plan to have a higher ROI, like things like Serfo S and what we have talked about. So that's going to be a real advantage for us. When we look at the beta aircraft itself in terms of the progress that beta has been doing with the ALIA, they're part of the EIPP program that's going to be starting this summer. They basically were awarded, you know, seven of the eight programs in the United States, which is significant. And that is really going to allow them to expedite the certification process. And so even if we're talking about, you know, 24 months, you know, at the end of Q4 2028, for the arrival of our first aircraft. We're optimistic with everything that Beta's doing and what they've got laid out. And they clearly have a direct path to certification. And again, as I mentioned earlier, they've already flown this aircraft 130,000 miles. And so they have a lot of experience here. And again, Hawaii really is going to be a showcase for this aircraft. And, you know, we're excited about what we're doing this summer and what will happen in the next couple of months.

Thanks, Louie. Last question is, in the Q1 call, you said that SURF and Beta would co-market SURF OS with Beta aircraft. With the cargo flights approaching, can you confirm if SURF OS is being designed with native electronic capabilities like battery state monitoring or cycle charging optimization? Turn this one over, student, again.

Thank you, Deanna. So, as we discussed, we're building SURF OS to support operational requirements of fleets at scale. The benefit of next-gen aircraft is you can actually design them from the ground up with enhanced data capabilities. The capabilities we intend to have include battery health monitoring, charge cycle tracking, and predictive maintenance, amongst other things, all of which will, of course, be weighted by the commercial and operational realities of flying electric aircraft. These are all areas where the Palantir Foundry IP platform has proven to be very effective in its deployments across the larger commercial aircraft manufacturers and airlines, and we're bringing this to the Part 135 space.

Thanks, Susan. So that ends our Q&A session. I appreciate everybody's interest and time today, and hopefully you all call in and meet us next time in the next quarter. Thank you very much.

This concludes today's conference call you may now disconnect.