Wheels Up Experience Inc.

Welcome to Wales App's fourth quarter 2021 earnings conference 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, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star followed by the number 2. It is now my pleasure to introduce Keith Ferguson. Mr Keith Ferguson, you may now begin the conference call.

So thank you and welcome again to Wheels Up's fourth quarter 2021 earnings conference call. Earlier today, we issued a press release announcing our financial results for the period. The release, with its supporting tables, as well as a copy of today's presentation, can be found on our investor relations website at wheelsup.com slash investors. Please refer to the slide with our disclaimer. Today's presentation contains forward-looking statements based on our current forecast and expectations of future events. These statements should be considered estimates only, and actual results may differ material. During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines. Unless otherwise noted, all income statement-related financial measures will be non-GAAP other than revenue. Reconciliations of GAAP to non-GAAP financial measures and definitions of non-GAAP financial measures are found within the financial tables of our earnings release and appendix of today's presentation. And with that, I'd like to turn the call over to our Chairman and Chief Executive Officer, Kenny Victor. Thank you, Keith, and thanks to all of you for joining us today.

Quick disclaimer, I have a little cold and my voice is a little raspy. That said, I'm pleased to report another quarter of record revenue as we continue to see unprecedented demand across our platform. The private aviation industry is ripe for disruption. Despite flying highly sophisticated aircraft, the industry has historically taken an analog and antiquated approach to optimizing supply and demand. The surge in demand over the past year has exposed the limitations of the industry's fragmented supply and consumers have felt the pain. What it has also done is to highlight the tremendous efficiencies that can be gained with the technology-enabled marketplace that seamlessly connects supply and demand. we are building that marketplace. We are still in the early stages, but our playbook, similar to the one used by Uber and Airbnb, is a proven winner. In short, our vision has never been clearer, our strategy has never been more relevant, and we continue to make meaningful progress in building the future marketplace for private travel. Bringing demand onto your platform is typically the most difficult part of building a two-sided marketplace. That is not the case for Wheels Up. Today, we are a clear leader with a growing base of more than 12,000 members. We have built an iconic brand in private aviation and forged a strong and unique commercial relationship with Delta Airlines, as well as brand partnerships with global powerhouses like American Express and Porsche. And after a two-year hiatus, We have returned to hosting certain signature live events around the Super Bowl, around the Masters, and around Art Basel. And we continue to work with a host of A-list ambassadors to help Wheels Up tell its story on the largest stages while generating important earned media for our brand. All of that creates a competitive advantage that sets us on a strong path for continued growth. Today we have our sights set on the supply side of the industry where we believe our focus on innovation will drive efficiency and unlock more capacity to meet the strong demand. Our strategy is to develop leading-edge technology to bridge this gap. We are building a platform that will leverage machine learning and AI tools to streamline our operations, automate scheduling, improve customer experience, create real-time incentives to fill available aircraft, and generally make it easier to fly private. we also believe this platform will open up a world of possibilities beyond aviation. This type of disruption requires a disruptive leadership team capable of moving quickly to capitalize on our competitive advantages and the clear opportunities we see around us. That's why we added and continue to add key technology-focused executives from outside our industry to bring new perspectives to an old way of doing things. Their expertise and energy has been vital as we forge a new path. And I am energized by the potential for us to improve operations, profitably grow the business, and generate attractive returns for our stockholders. With that as the backdrop, let me share some of the highlights from this morning's earnings release. we reported over 345 million in fourth quarter revenue, setting another record, which was up 64% year over year. Revenue for the year was almost 1.2 billion, which is up over 70% year over year and well above our latest guidance. We now have over 12,000 active members growing by over 30% year over year and more than doubling our membership from 2019. and our live legs were up 65% year-over-year to over 73,000 for 2021. I am extremely proud of these results and the efforts of our entire Wheels Up team who work tirelessly to serve and care for our customers. That said, I want to be very clear. We are fully cognizant of the short-term costs we are absorbing to prioritize customer service in a very challenging environment. We made the conscious decision to invest in our membership, including securing third-party capacity and often providing complimentary cabin upgrades to compensate for broader supply chain issues, including parts, maintenance, and workforce availability due to the Omicron wave of COVID-19. To protect service levels for our existing customers, we implemented a 90-day fly moratorium from date of joining on most new memberships and marketplace flyers. That substantially curtailed the ability of new customers to fly during a seasonally busy fourth quarter and the beginning of 2022. However, thanks to our concerted efforts to address supply, we were able to ease those restrictions earlier than expected, even as most of our competitors have continued with limitations on their programs. I am very confident that our focus on customer satisfaction, despite some short-term margin pressures and self-imposed limitations on our growth, was the right decision for our members, customers, and for our company for the long term. The reasoning is simple. Our cohort trends continue to highlight an extremely high lifetime customer value. Our core and business memberships on average spend over $80,000 per year with us. Their spend is durable year in and year out with very strong retention. Even better, our newest customers are spending more on our platform than earlier cohorts. This runs counter to the old marketing axiom that your oldest customers are your best customers, and it's another exceptional proof point of the strength of our demand dynamics and the power of our products and services. As further proof, our customers continue to make increasingly long-term commitments to wheels up, Our prepaid block sales were well north of $500 million for the fourth quarter, up 80% year-over-year, handily beating our previous block sales record. And this leading indicator continues to be strong in the first quarter. With robust block sales, our deferred revenue balance is well north of $900 million as of year-end. This, along with our strong retention rate, provides us with great revenue visibility and allows us to plan and secure future supply with more favorable economics across our 1P, 2P, and 3P fleets. I don't know of many companies that have the luxury of this type of visibility into the vast majority of their expected 2022 revenue. All of this demonstrates the true quality of our brand and customer base. That is why we made the decision to absorb margin pressures in favor of investing in the long-term value of our customers. In addition, we are making progress with certain recent supply initiatives. For example, we are growing our capacity with the acquisition of a latte air charter, which adds 12 incremental tails to our fleet. It's a great addition to our safety vetted and verified life jet program, arguably the most in demand category in the industry. I am very excited to report that we have hired more than 150 new wheels up pilots since our November call and added another 40 with Elante as we bolster our supply and continue to deliver exceptional service to our customers. It's a great thrill to welcome so many talented aviators who make what we do possible. next i'd like to take a minute to highlight our planned global expansion over the last year i've often spoken about natural adjacencies including new geographies our pending acquisition of air partner which is listed on the london stock exchange is a great fit with our growth strategy it will provide us an agile asset light way to extend our platform globally air partners should be accretive to our contribution margin and adjusted ebada in year one It is a strong management team, led by CEO Mark Pripa, that will guide our international expansion. Moreover, it gives us a global footprint to leverage for our members and prospective customers, whom we expect will increasingly look to travel around the world. We expect to close the acquisition within the next several weeks. Their partner has received shareholder approval, and we are awaiting final regulatory and court approvals. This will be an exciting new chapter for Wheels Up. I also want to provide a quick update on our announcement last year regarding our long-term strategic view of urban mobility. We recently began utilizing partner VTOLs for certain short-range trips during peak periods, a true last-mile solution. We have received positive member feedback and this is an important future feature to support our customers. We see tremendous opportunities where we can invest in our customers, expand our supply, develop our technology-enabled marketplace, and serve as a much larger overall TAM. Our strong balance sheet with significant cash on hand, essentially no debt and strong borrowing capacity, is a powerful advantage. Expect us to be opportunistic as we look to deepen our competitive modes. In my 20-plus years in private aviation, I've never been more bullish about the opportunity to revolutionize how the industry operates. We have growing predictable demand in concert with tangible technology initiatives to boost supply, streamline our operations, and deliver long-term attractive returns. As always, I'm thankful to our loyal members and customers for continuing to put their trust in us. I would also like to recognize and thank the hardworking people across Wheels Up, whom I'm proud to call my partners. Vinayat?