Blade Air Mobility, Inc. (NASDAQ:BLDE) Q1 2023 Earnings Call Transcript May 11, 2023

Blade Air Mobility, Inc. beats earnings expectations. Reported EPS is $-0.14, expectations were $-0.21.

Operator: Good day and thank you for standing by. Welcome to the Blade Air Mobility, Inc.’s Fiscal First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I will now hand the conference over to your speakers.

Ravi Jani: 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 31st, 2023. We appreciate everyone joining us today. Before we get started, I’d like to remind you of the company’s forward-looking statement and Safe Harbor language. Statements made in this conference call that are not historical facts, including statements about the 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 a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this 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 comparable consolidated GAAP financial measures to these non-GAAP financial measures is provided in our earnings press release and investor presentation.

Our press release, investor presentation and our Form 10-Q are available on the Investor Relations section of our website at ir.blade.com. These non-GAAP measures should not be considered in isolation, or a substitute for financial results prepared in accordance with GAAP. Hosting today’s call are; Rob Wiesenthal, Founder and Chief Executive Officer of Blade; and William Heyburn, Chief Financial Officer. I will now turn the call over to Rob Wiesenthal. Rob?

Rob Wiesenthal: Thank you, Ravi. Good morning, everyone. We released strong first quarter results this morning resulting in our seventh consecutive quarter with financial results ahead of our expectations. Revenue in the March 2023 quarter increased 70% to $45.3 million versus $26.6 million in the comparable 2022 period, while flight profit increased by 145% to $7.2 million versus $2.9 million in the comparable 2022 period. Adjusted EBITDA of negative $7.7 million was roughly flat versus the prior year. And as a percentage of revenue, adjusted EBITDA margin improved by nearly 1200 basis points to negative 17% in the March 2023 quarter. This is particularly notable given that Q1 is seasonably one of our lightest quarters. This was driven by a significant increase in flight profit that outpaced growth in our adjusted corporate expense.

Importantly, our first quarter results set a strong foundation for the balance of the year. And we remain on track with our commitments to deliver a significant improvement in full year adjusted EBITDA in 2023 versus 2022. Turning to some highlights in the quarter. Short Distance delivered or another quarter of solid growth, up 148% on a reported basis, driven by our acquisitions in Europe, robust growth in Canada and a continued ramp up of our Blade Airport product which flies travelers between Manhattan and New York area airports. In Blade Airport, we were pleased to see revenue increased nearly 100% versus the comparable prior year period, driven by nearly 70% increase in seats flown combined with double-digit increases in average revenue per seat.

In the US, airport is Blade’s most accessible entry level products with seat prices starting at $195 consistent with Uber Black pricing, and therefore, our big bet for customer acquisition for Blade. We continue to optimize our marketing spend on Blade Airport to focus on getting even more granular and targeted with our audience and by spending more efficiently on interconnected digital channels. This strategy has increased new user visits to the airport booking page on our app and website by 310% since the start of the year, relative to the same period in 2022, showing a strong increase in awareness and engagement. Furthermore, since the start of the year, we’ve seen a 46% increase in first-time Blade Airport fliers versus the same period last year, contributing to a 72% year-over-year growth in revenue from new customers.

Remarkably, this has been accomplished with roughly 20% less media spend. Meanwhile, Airport Pass+, which offers fliers unlimited flights between Manhattan and New York airports for $95 with an upfront cost of $795 for the year, is another major driver for airport. Year-to-date, the number of Airport Passes sold is up 118% versus the same period last year, demonstrating that more and more fliers value the time savings and customer experience that Blade offers. This is extremely important given that Passholders typically fly Blade Airport an average of 10 times a year, giving us strong confidence in the lifetime value of our airport customer base. With respect to current trends in Blade Airport, we are encouraged by the strong revenue and booking trends we have witnessed thus far in the second quarter, including April 2023, which finished as our second-best month ever for the product, giving us confidence that the investments we are making in marketing, schedule and service offerings continue to pay off.

Moving on to Europe. Our performance in Europe this quarter was impacted by several factors, including an unusually warm winter ski season, fewer flyable days due to weather, and longer than expected delays in scheduled aircraft maintenance. These factors reduced our available capacity during the quarter. However, this will ensure that we have adequate aircraft availability for Europe’s peak season, which starts next week with the upcoming Cannes Film Festival, in addition to Cannes Lions, the Monaco Grand Prix, the Monaco Yacht Show, and numerous conferences throughout the summer with attendees from all over the world. Given that this is Blade’s first high season in Europe since our acquisition, we have launched our European marketing campaign for the Line, our by-the-seat service between Nice and Monaco, historically the highest volume helicopter service in all of Europe.

We have launched impactful marketing campaigns resulting in noticeable improvements in efficiency and conversion. We will continue to capitalize on our momentum to drive brand awareness for Blade and incentivize referrals with ambassadors, promoters, concierges and travel agencies throughout Europe. I’m also pleased to announce that we’ll be running a by-the-seat helicopter service between Nice and Cannes this summer. And we look forward to welcoming fliers to our new terminals in Monaco, Nice and Cannes, all which will be opening soon. This will bring us to 14 passenger terminals across the US, Europe, Canada and India. This is game-changing for us as we build the brand experience that we are renowned for in the US across Europe, while helping to unlock our lucrative local and global brand partnerships.

It is also very encouraging that over 60% of Blade Europe bookings are now happening on the Blade app or website, demonstrating healthy awareness and acceptance of our brand and consumer-friendly technology at this early stage. In MediMobility Organ transport, we delivered another record quarter with 111% organic growth driven by new hospital wins, continued expansion with existing hospitals, and strong end market growth. We’ve discussed in the past how advances in organ preservation and perfusion technology are increasing the size of our addressable market, both in terms of the number of organs being transplanted, in addition to the distance organs can travel in order to get from the organ donor to the transplant recipient. For Blade this dynamic results in both higher traffic and higher revenue permission, as longer distances typically require larger, more capable aircraft.

For transplant recipients, it means the potential to receive a matching organ that might otherwise have been discarded. It’s a perfect fit for our broad, flexible, asset-light air mobility platform, and we are incredibly well positioned to continue supporting our hospitals as they adopt this new technology. We also launched a highly targeted television and video campaign to build awareness with hospitals, legislators and investors, about this very important part of our business that is both profitable and saving lives every day. On the M&A front, we continue to actively evaluate strategic bolt-on opportunities that will accelerate our path to profitability in a low-risk manner, and where we can leverage our brand, terminal infrastructure, technology platform, operator network and core competencies in customer experience and operational excellence.

We are fortified by our strong balance sheet which in the current market environment remains a strategic weapon. Therefore, we will remain disciplined with respect to capital allocation with a focus on creating long-term shareholder value. Separately, in March we announced the appointment of Andrew Lauck and John Borthwick to our Board of Directors. Andrew has been a board observer since January and is a partner at RedBird Capital Partners, where he leads the firm’s consumer vertical, including its over 5% stake in Blade, as well as RedBird’s firm as investment in Jet Linx, the BETA Technologies or EVA Company, Aero Centers, and RedBird QSR. John Borthwick is the CEO and Founder of Betaworks, a technology investment and incubation company based in New York.

John was actually a member of Blade’s Board when the company was private and first started and brings over 30 years of expertise in consumer-facing and business-to-business technologies. And I’m confident that he will be vital as our fliers and customers demand more real-time information about their flights, and to collect relevant data insights optimizing our flight economics. On the topic of electric vertical aircraft or EVA certification, we remain encouraged by the strong support shown by the FAA and Acting FAA Administrator, Billy Nolen for the industry. As Mr. Nolen prepares to step down from his role this summer, we remain optimistic that his successor will continue to support the acceleration of the certification process for these innovative aircrafts.

We believe that EVA has the potential to provide numerous benefits such as reduced noise, zero emissions, and lower operating and maintenance costs. This transformative technology has the potential to exponentially grow our business globally as we add more landing zones that will enable greater convenience and lower prices for our fliers across all of our operating regions. Regardless of the ultimate timing of EVA, we remain focused on providing best-in-class air mobility services for our fliers around the world using conventional aircraft, always improving the experience, expanding our terminal infrastructure footprint and consumer-friendly technologies that will serve to fortify our transition to EVA, while continuing to scale and optimize our Passenger business towards profitability and free cash flow.

With that, I’ll turn the call over to Will.

Will Heyburn: Thank you, Rob. I’ll walk through a few highlights from our business lines in the first quarter. In Short Distance, revenues were up 148% to $10.4 million in the first quarter of 2023 versus $4.2 million in the comparable 2022 period. Growth was driven by our acquisition of Blade Europe, which closed on September 1st, 2022, a continued rebound in Canada, and growth in our Blade Airport service. On a pro forma basis, Short Distance revenue increased 12% versus the prior year first quarter, including results from acquisitions in both periods and adjusting for currency translation. A few quick highlights from specific Short Distance products. In our New York Airport business, we saw another quarter of significant passenger and revenue per seat growth.

While Q1 is always seasonally slower than Q4, we were pleased that Q1 2023 Airport revenues nearly doubled versus comparable Q1 2022 levels, and we are encouraged by continued strong year-over-year growth in the second quarter 2023 to-date. Canada saw a significant improvement versus the prior year with revenue increasing 65% versus the comparable prior year period, and it remains a profitable contributor to our Short Distance business. We’re encouraged to see this progress given demand is still approximately 80% of pre-COVID levels in the country. As Rob mentioned, Europe performance in the quarter was impacted by unseasonably warm winter weather on the continent, which coupled with poor flying conditions in the Alps, resulted in lower revenues versus the record 2022 levels.

However, I’d like to emphasize again that Q1 and Q4 are Europe’s slowest quarters by far in terms of seasonality. Turning now to MediMobility Organ Transport. Revenue increased 111% to $26.8 million in the first quarter of 2023 versus $12.7 million in the comparable 2022 period. Notably, revenue increased 24% sequentially in the first quarter of 2023 versus the fourth quarter of 2022. Given our acquisition of Trinity Air Medical was completed in September of 2021, all of the growth this quarter was organic, with approximately half of this quarter’s growth driven by the addition of new customers, and the remainder driven by growth with existing clients in addition to strong overall market growth. As Rob touched on earlier, we’re seeing new growth being driven by the deployment of perfusion technologies, which allow organs to be maintained in transport for longer than is possible with traditional cold transport.

For example, in April, we serviced multiple trips to and from Alaska, delivering lungs from organ donors to waiting recipients on the East Coast and West Coast. This type of journey would not have been possible just a few years ago, and yet, last month alone, we were proud to support multiple different developers of advancing profusion technology as Blade successfully completed such transports. I’d like to emphasize that if it weren’t for these incredible new technologies, these trips would not have happened, and these organs may not have reached their intended recipients in time. That is to say that perfusion technology is increasing organ transport volumes and saving lives. Additionally, given the longer flight times associated with these trips, which often require more capable aircraft, transport costs per organ can be a multiple of those for traditional coal transport, and are often more logistically challenging.

This dynamic works in Blade’s favor given our broad aircraft availability and unique flexibility. So we expect the vast majority of trips will continue to utilize traditional preservation methods, given lower costs. Perfusion technology is already proving it can increase the supply of organs to become available for transplant, and improving patient outcomes and further expanding the market. We are honored to play our part in making these lifesaving missions a success. We expect to see continued sequential growth in MediMobility in the balance of 2023, normalizing at single-digit levels once we realize the full quarter impact of recent customer wins. In Jet and Other, revenue declined by 17% to $8.1 million in the first quarter of 2023 versus $9.8 million in the prior year period.

The decline was driven by both lower volume and lower average price per jet charter in the first quarter of 2023 versus the prior year. As expected, particularly given the prior year first quarter benefited somewhat from strong demand driven by the COVID-19 Omicron variant. We expect continued year-over-year declines in jet charter volume and pricing in the balance of the year as the market normalizes. As a reminder, though jet charter is not core to our strategy, the business helps us to secure favorable aircraft capacity for a MediMobility business, while benefiting Blade and our fliers by generating incremental flight margin dollars with very limited fixed costs. Turning to flight profit. Flight profit increased 145% to $7.2 million in the current quarter versus $2.9 million in the prior year period.

The increase in flight profit was driven by the significant growth in MediMobility Organ Transport, the contribution from our acquisitions in Europe, which we did not own in the comparable prior year period, and a significant improvement in Blade Canada, which was profitable in the first quarter of 2023, after generating a loss in the first quarter of 2022. Flight margin of 15.8% also improved in the first quarter of 2023 versus 11% in the prior year period. In Blade Airport, though we’re encouraged by consistent revenue and flyer growth, we continued to operate below breakeven in the quarter, as we are rapidly growing this business. Absent the Blade Airport ramp up, we estimate that flight margin would have been approximately 150 basis points higher in the first quarter of 2023, which is an improvement from a nearly 200 basis point drag in the comparable prior year period.

Looking ahead to the second quarter of 2023, we expect slight margin to improve to the high-teens. Let’s turn now to corporate expenses, which includes software development, general and administrative, and selling and marketing expenses. When adjusting for non-cash and non-recurring items, our adjusted corporate expense totaled $14.9 million in the first quarter of 2023, an increase of approximately 40% versus the first quarter of 2022. This compares to a total revenue increase of 70%, and a flight profit increase of 145%, resulting in adjusted corporate expense as a percentage of revenues declining to 33% of revenue in the first quarter of 2023, versus 40% in the prior year period. We are pleased to see that Blade’s underlying operational platform is creating economic leverage.

We continue to look for opportunities to optimize our cost structure to drive further operating expense leverage including making tough decisions where necessary. As we look to the second quarter of 2023, we expect total adjusted corporate expense to increase by a high single-digit percentage relative to the first quarter of 2023, driven primarily by typical seasonal headcount and marketing spend, while significantly improving as a percentage of revenues. Adjusted EBITDA in the first quarter of 2023 was a loss of $7.7 million or roughly flat versus the comparable prior year period, but improved as a percentage of revenues to negative 17% in the first quarter of 2023, from negative 29% in the comparable prior year period. This outcome was a result of strong revenue and flight profit growth, which outpaced growth in adjusted corporate expense.

I would also note that this quarter includes approximately $0.7 million of expense to reflect the establishment of a short-term incentive plan, which was implemented during the third quarter of 2022, and therefore was not accrued for in the prior year period. This created a particularly tough comp on the corporate expense line, which will continue in the second quarter. Additionally, Blade Europe, which did not exist in the prior year period, operated below breakeven this quarter as expected, as we felt the full burden of SG&A related to our acquisitions, despite limited revenue and flight profit, during the seasonally weak first quarter. Moving to our segment results. Total Medical segment adjusted EBITDA improved to $1.9 million in the first quarter of 2023 versus $1 million in the comparable prior year period.

The significant year-over-year improvement is a result of the tremendous work the Trinity team did to bring our MediMobility Organ Transport solutions to more customers and patients, coupled with significant market growth as discussed previously. In our Passenger segment, which includes both our Short Distance and Jet and Other business lines, segment adjusted EBITDA was negative $3.1 million in the first quarter of 2023 versus negative $2.6 million in the prior year period. The increased loss versus the prior year primarily reflects our results in Blade Europe, where flight profit generated in the quarter did not cover our fixed costs, and lower results in our Jet and Other business line. This was partially offset by an improvement in profitability at Blade Canada.

Moving to cash. Operating cash flow was a use of $16.9 million in the first quarter. The primary driver of the difference between operating cash flow and adjusted EBITDA of negative $7.7 million was a $9.5 million investment in working capital. This was primarily driven by three items: First, we saw a $5.6 million increase in accounts receivable, primarily attributable to the rapid revenue growth in MediMobility Organ Transport, where hospital customers require 30 to 60-day terms. We view this as a high-class problem given the significant growth in the business. Second, we saw a $3.4 million decline in accounts payable and accrued expenses, driven by the payment of prior year incentives, including an earn out to the Trinity team for their outstanding performance in 2022, agreed as part of our acquisition agreement, as well as our 2022 short-term incentive plan.

Lastly, we saw a $1.6 million increase in prepaid expenses, which was driven by deposits to aircraft operators in connection with capacity purchase agreements to support our growth in medical. This was partially offset by an increase in deferred revenue of $1.1 million. With respect to our balance sheet, we continue to have zero debt and approximately $179 million in cash and short-term securities as of the end of the first quarter of 2023. We remain confident in our tangible and forthcoming path to profitability, and as a result, we continue to expect that a significant amount of this liquidity will be available for strategic acquisitions. With that, I’ll turn it back over to Rob for a few closing remarks.

Rob Wiesenthal: Thanks, Will. Simply put, this was a strong start to the year, and we are pleased by the improved operating metrics we are seeing in the quarter. At Blade, we have built a platform that is scalable and can be profitable using conventional aircraft today, prior to the growth in volume that will be generated by our transition to EVA tomorrow. As the largest operating urban air mobility company in the world, we are currently flying people and precious cargo on the highest friction routes that exist today across the globe, generating value for our customers and shareholders alike. While Electric Vertical Aircraft or as we call it, EVA, will enable exponential growth and enhance our return profile, we are not waiting idly for their arrival.

Instead, we remain laser-focused on deploying our capital in a manner that generates attractive returns right now, while increasing the long-term intrinsic value of our business for the future. With that, I’ll turn it over to Ravi for questions.

Ravi Jani: Thanks, Rob. As a reminder, we will take questions from analysts and investors on this call today. Reporters should send the inquiries to me directly. Operator, we’re now ready for questions.

Q&A Session

Operator: Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from Hillary Cacanando with Deutsche Bank. Go ahead with your question.

Operator: Thank you. I’ll bring up the next question. Our next question comes from Jason Helfstein with Oppenheimer. Your line’s open.

Operator: Thank you for that question. I’ll queue up the next one. Next we have Bill Peterson with J.P. Morgan. Go ahead, your line is open.

Operator: Thank you for those questions. We now have one last question from this listener. Apologies for the pronunciation. But I’ll bring out, Itay Michaeli from Citi. Go ahead, your line is open.

Operator: Thank you. And with that being our last question, we’d like to thank you for your participation in today’s conference. This does conclude the program. You may now disconnect your phone.