SRTA - NASDAQ

Good morning, ladies and gentlemen, and welcome to the Blade Air Mobility Fiscal First Quarter 2024 Earnings Release Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

Thanks, and good morning. Thank you for standing by, and welcome to the Blade Air Mobility Conference Call and Webcast for the quarter ended March 31, 2024. We appreciate everyone joining us today.

Thank you, Mat, and good morning, everyone. I'm very pleased to report a strong start to 2024 that represents an early but important first step in achieving the 2024 and 2025 financial guidance that we provided last quarter and reaffirmed today.

Thank you, Rob. I'll now walk through a few financial highlights from the quarter.

Thank you, Will. I just have a few catch-up items to review. From time to time, we receive questions regarding quarterly stock sales by senior executives. Please note that these sales represent a sell-to-cover mechanism, whereby the company transfers vested RSUs to executives, net of shares sold, to pay taxes owed and due at the time of vesting, this program is clearly noted in our Form 4 filings.

Thanks, Rob. [Operator Instructions]

[Operator Instructions] Our first question is going to come from the line of Jason Helfstein with Oppenheimer.

Two questions. First on Medical Mobility and the second on Passenger. So you've kind of given us pretty much detailed kind of growth guidance for the rest of the year. As we think about next year, do you think about, can you still grow faster than the industry next year or just you just start to look more like the industry next year? And maybe just talk about the factors around the growth of that as we're thinking of maybe a year or 2?

Thanks for the questions, Jason. Will speaking. On the Medical side, yes, I do believe we continue -- can continue to outpace the market growth in medical because remember, when you think about the unit of an organ, our unit is a flight block hour and then we have a lot of ancillary revenues that we can make on a trip, as well, particularly the growth in our ground business and the introduction of the TOPS service. So if you still see that high single-digit growth in the number of organs that are being transplant in America because of some of the new technology and centers getting more aggressive, that incremental organ is often coming from further away. So there's a multiplier on the growth for us.

I mean just any thoughts just about how you think passenger margins kind of the rest of the year?

You're always going to see better margins once you get into our summer season. Those are our highest gross margin products, and it's also our opportunity on growing products like Blade Airport to get the highest load factor in terms of number of seats that are full on the aircraft. So you should see improvement particularly going into Q2 and Q3.

And if you take a look at the market also taking on the U.S. side increases and per seat prices, that's something that's held really well. We expect that to continue. And I think now that we have a new management team in place in Europe, you're not -- you're going to see stronger pricing in terms of per seat basis because we're starting to introduce fare classes like we have in the U.S., which has been a huge driver of incremental pricing for passengers.

And one moment as we move on to our next question. Our next question is going to come from the line of Edison Yu with Deutsche Bank.

Great. I wanted to maybe get your thoughts on the buyback. Obviously, you do have a lot of cash in your launch, which I think is very encouraging. What are the, I guess, thoughts into the quantity and the timing -- potential timing of it going forward?

Okay. Sure, I'll take that. We have not purchased any stock yet. We did authorize the repurchase program, so we have that tool in our toolbox to further enhance shareholder value when we see major disconnects between the trading value of our company and the intrinsic value.

Understood. And a separate follow-up. I'm curious if you looked at some other areas of expansion on the ground side, I saw you recently had this partnership with the Jet. Just curious if there's more kind of niche opportunities there you maybe actually could tap into?

Sure. Look, I think there are 2 things, just to mention on the partnership with the Jet. That really was driven by marketing. As you saw, I think we even announced that we had strong performance in our brand partnership revenues, tons of brands on a global basis wants to get in front of our passengers and are willing to pay for that privilege.

And one moment for our next question. Our next question is going to come from the line of Jon Hickman with Ladenburg Thalmann.

I just have 2 questions. Could you just talk about why Canada was weak for a minute? And also, what are we supposed to expect from depreciation as you now own 7, well, potentially 8, aircraft?

Thanks for the questions, Jon. Canada, we're still seeing some weakness in terms of overall seats flown that we believe is driven by a shift towards still more remote meetings with government officials and the provincial capital of British Columbia versus what we saw in the pre-COVID period. So we think that's the major driver there.

So from a model point of view, the expense that would have been kind of a cost of goods sold, that should go down a little bit. And then on the SG&A -- on your operating, there will be higher depreciation from those, and you'll have to pay for your own gas and stuff like that.

It's sort of just moving into different buckets, but the overall bucket of the cash that we pay to get the lift that we need for our medical customers, we're going to spend less, we believe, on a per hour basis, and you'll see that benefit in the cost of revenue line. Correct.

Just one thing I'd add. I mean, we're looking still at a very small percentage of overall fleet being owned. But I have to admit that I believe that you're going to see a very meaningful increase in margins that more than -- that more than make up for any concern you might have on the free cash flow in terms of depreciation and -- looking at depreciation or CapEx. So it really is a balancing act where we believe we're -- we're still asset light, but what we're trying to do is just make sure that we have all -- have 24/7 access for all our customers and are able to accommodate them when needed.

And just one more question there. On the pilot side, do you -- is that still a cost of goods sold? I mean paying the pilots.

Remember, we're not operating -- remember, we don't operate these aircraft. We just own them. So we're going to be benefiting from pass-through billing, but you'll still see that come through on the COGS line for something like pilots.

And then can I just ask, so I noticed you've started this like luxury bus service from Manhattan to the Hamptons. Is that true?

Yes, I think we just covered that real quick. That's not going to be any type of in the short term, any kind of meaningful driver of revenues, but it's not going to be any kind of drag on profit whatsoever.

And our next question comes from the line of Bill Peterson with JPMorgan.

I wanted to come to first start with Medical and about the competition. So I guess, first of all, are you seeing any shifts in terms of the transplant center customers as a result of competition? For example, are most choosing a dual source for these services if they weren't doing this prior? Are any new customers changing their contract length or size versus historical norms?

Thanks for the question, Bill. We've seen nothing but really positive momentum in the Medical business, both in terms of new customer acquisition. We've got a great pipeline for the rest of the year. You saw about half of our growth was from new customers, but we've also seen incredible growth within all of our existing customers. That's any way you slice it. That's the number of trips that we're doing with them, that's trip distances, that's overall revenue from our existing customer base.

Bill, I just want to add in here, because I'm glad you asked the question. And I think that the quarter speaks for itself. We had a record high revenue of $36 million in Medical, and we grew 135% in EBITDA. And we've gotten this question before.

And Bill, if it's helpful, we're still seeing kind of a teens percentage of trips that use some kind of perfusion or organ preservation equipment. The vast majority of the flying that we're doing for our customers is still using traditional cold storage. And it's really been a positive on all fronts.

And we're moving organs with perfusion devices every day.

Okay. I want to pivot over to the passenger business. So especially, I guess, the context of the revenue growth in Medical and your reiteration of the guidance and focus on profitability. Want to kind of talk about the seasonality of the business, how to think about it from here from a passenger volume.

Yes. So Bill, I think the seasonality is going to remain pretty consistent with what you've seen in short distance historically. Just looking at kind of the general distribution of revenues last year in short distance should still be a really good guide as to what we expect for this year.

Okay. If I can sneak one more in, just kind of housekeep -- so thanks for the guidance on the Medical SG&A, and I guess with Passenger SG&A, it seems to remain flat or to down. The Medical SG&A growing. How should we think about SG&A in aggregate through the course of the year? Maybe trajectory-wise and then in aggregate, sort of kind of flattish to low single digits as a whole?

Yes. I mean I would say, overall, in the unallocated corporate expense, we guided flat to down. You should see the same thing in passenger flat to down. Overall, I think if you were to look -- we call it our adjusted SG&A, which is just kind of all the SG&A items added together. Same thing there. You blend it together, and it's probably flat to down for the year.

Yes. I mean every day, we're learning how to do more with less, and that's just -- as we get into new businesses, the SG&A sometimes going to start a little heavy to make sure that you have a good product. But every single day, as we get more mature in a specific business and know -- and have a better knowledge of what we're doing, it's just -- that's kind of job one, and it's working so far.

And I'm showing no further phone questions at this time.

Great. We will now take a few questions investor questions from the Say Q&A platform. The first question is about the biggest challenges to transition to eVTOLs from traditional aircraft. Rob, why don't you take that one?

Okay. I think that the time lines for eVTOL manufacturers or we call EVA, electric vertical aircraft, have consistently been delayed. I think that both Joby and Archer have announced really strong programs in the Middle East, which I think will be a very good forum to show that these aircraft are actually viable.

Great. The next question is on TOPS. Will, can you provide just an update on TOPS?

Yes. Overall, we're getting great customer feedback and that's really our #1 focus right now. We're not going to be providing a quarter-to-quarter update on new customer acquisition, but we've got a great pipeline. We do expect to onboard several incremental new customers throughout the balance of the year.

Thank you. The next question is about the strategic value in NORE, the medical competitor. Will, can you address that?

Sure. We think it's a fantastic business. We're always evaluating all growth opportunities, both organic and inorganic. NORA has built a great company. We're particularly impressed with their ground business. It's inspired us to offer some of those same services to the customers that we have across the country, and we think we're already seeing the benefits of that.

I think let me just go a little deeper on that. Just to make it clear to the people on the call, NORA was sold, I guess, about how long ago? I think probably I think in the past year. It is something that we did evaluate and we're always thinking about build versus buy. And frankly, I think this is one where we felt more comfortable continuing to build this -- our business, which turned out to be a good outcome for us if you take especially looking at our recent performance.

Great. Well, that was the last question we're going to take from the plot. Rob, do you have any closing remarks?

I just want to thank everybody on the Blade team for really putting together a terrific building towards a terrific quarter. Obviously, the performance on the Medical side speaks for itself. This is historically a slow quarter for Passenger. And I think we're really in strong shape on Passenger as we come into the high season here, and we look forward to answering any questions. You can obviously e-mail us at [email protected] if you've got any further questions, and we look forward to working with you guys in the future and continuing to perform. Thanks for your time.