Wheels Up Experience Inc. (NYSE:UP) Q1 2024 Earnings Call Transcript May 10, 2024
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Operator: Welcome to the Wheels Up First Quarter 2024 Webcast. It is my pleasure to introduce Keith Ferguson with Wheels Up. Keith, you may proceed.
Keith Ferguson: Thank you. This morning we announced our first quarter results. The earnings 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/investors. Please refer to the slide with our disclaimer. Today’s presentation contains forward-looking statements based on our current forecasts and expectations of future events. These statements should be considered estimates only and actual results may differ materially. During today’s webcast, 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.
With that, I would like to turn it over to Wheels Up’s Chief Executive Officer, George Mattson.
George Mattson: Thank you, Keith, and thanks to all of you for joining us today. Over the course of the last year, Wheels Up has taken significant steps towards delivering on our commitment to lead the industry in operational excellence while driving efficiency, profitability and durability across our business model. Last year, we made the decision to publicly disclose details on our operational performance in an effort to provide transparency on our journey to being the best-run private aviation company globally. I’m pleased to report that we’ve seen continued operational momentum as we enter into what are seasonally strong periods of demand. In the first quarter, both completion rate and on-time performance exceeded our internal goals, coming in at 98% and 87%, respectively.
These results were driven by strong underlying performance improvements within key elements of the operations, including maintenance and dispatch availability of our aircraft under our new operational leadership team. As we deliver on these goals and in keeping with our mindset of continuous improvement, we’ve begun to focus on an additional internal benchmark we call Brand Days, a metric created by Delta to recognize operational excellence. A Brand Day is a day in which we have zero cancellations of any type across our entire controlled fleet. I’m proud to report that in Q1, we had 27 Brand Days, by far the highest in over two years since we started tracking that metric. Operational excellence is a continuous journey and our team is excited to be delivering for customers every day.
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Q&A Session
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These metrics, as well as our previous adjustments and improvements that place the customer at the center of everything we do, have been a guiding focus for all of Wheels Up as we continue our commitment to delivering exceptional service and in turn, an experience worth repeating no matter the journey. But they also create crucial efficiencies that are lighting the runway for our strategic goal of driving more focused, profitable growth. Key in our journey to positive adjusted EBITDA is balancing our portfolio across our Programmatic and Charter Service offerings, and between leisure and corporate customers. Our Charter business, led by our Air Partner platform, is profitable today, making the growth of this business an important contributor to overall profitability.
First quarter total Charter FTV grew 25% year-over-year, reflecting increased customer spend on Charter Services. That profitable flying, which is non-guaranteed and based on market-based pricing, represents just over 50% of the value of flights provided to our customers. We’re also seeing an improving mix in our corporate business, thanks in part to the continued momentum in our Delta partnership, supported by our strong operational performance. Our private aviation solutions complement Delta’s premium commercial offering, providing high value business customers a choice between commercial and private travel, while creating more opportunities for weekday travel to complement the weekend concentration we typically see from our leisure flyers.
This balance is a key component for our financial plan to drive asset utilization and profitability going forward. We’ve seen progress over the course of the last quarter with our fastest growth in corporate block sales, which exceeded 30% year-over-year. We also saw a 40% year-over-year increase in block purchases over a $1 million. Finally, let me turn to our Programmatic offering. When we announced the primary service area changes last June, we knew the transition would take some time before it showed up in our results, particularly as we’ve continued to honor the flying commitments we made to customers who purchased blocks on the previous program rule sets. Today, less than 20% of our current blocks are on those legacy rule sets, allowing us to take the next steps to more fully transition and consolidate our controlled fleet flying within that regional footprint.
Just a few weeks ago, we announced plans to open a new flagship maintenance facility at Palm Beach International Airport later this year. Todd will provide more details, but that move, along with the closing of underutilized maintenance facilities in Cincinnati, Ohio, and Broomfield, Colorado, represents the next phase in the reallocation of our resources to be appropriately concentrated where our fleet will be flying. Consolidating and increasing the density of our operations improves our asset utilization and efficiency, while simultaneously improving response times and service for our customers. While we have made great strides in improving our operational performance and business mix, we have more work to do to increase our Programmatic demand.
With strong block sales and a heightened focus on profitable demand generation, we expect to see increased flight revenue through the remainder of the year. The hiring of our new Chief Commercial Officer, Dave Harvey, and his remit of integrating the key elements of our Programmatic Commercial Engine further advances our mission to build a durable business model our customers and investors expect. With that, let me turn it over to Todd to discuss our financial results.
Todd Smith: Thanks, George. It is great to be with you all today. For my remarks, I will focus on three topics, a review of our first quarter, details on the structural changes that have improved our underlying businesses and our plan to achieve positive adjusted EBITDA later this year. Starting with a review of the first quarter, revenue was $197 million for the quarter, which represents a reduction of 44% year-over-year due to exiting of our aircraft management and aircraft sale businesses, the transition of our reduced Programmatic flying areas where we are exiting unprofitable flight revenue and lower industry demand. As previously described, since Charter revenue is reported on a net rather than a gross basis, we expect our GAAP reported revenue growth will continue to be weighed down by an increasing mix of Charter flying.
That is why last quarter, we introduced a new metric which we call flight transaction and on flights with us. Specifically, first quarter total private jet flight transaction value, which captures the value of all of our private jet flying was down 26% year-over-year. That is a much less significant reduction than the reported 35% decline in our reported GAAP flight revenue. We believe that total private jet flight transaction value is a more indicative measure of our underlying flying trends and the strength of our Charter offerings. Consistent with our strategy to grow our Charter business, total Charter FTV was up 25% year-over-year and accounted for 54% of our total flight transaction value in the quarter. These trends highlight the clear progress we are making in our goals to grow our Charter business.
Total private jet flight transaction value per live flight leg was $16,315 and down 3% year-over-year. That represents an apples-to-apples comparison of the spend per flight that we deliver for our customers. As George highlighted, after slower demand in January and February, we saw improvement in our flight volumes in March, which provides momentum for the second quarter. Our adjusted contribution margin was 1% in the quarter, reflecting lower utilization of our fixed assets due to a decline in Programmatic volumes as a result of the transitioning of our Programmatic offering and industry weakness. Consistent with demand levels, our March exit rate for adjusted contribution margin was significantly higher than the total quarter. Although our adjusted contribution margin was challenging, we have made substantial progress in reducing our cost of revenue.
We have reduced structural costs within our business and we expect to continue to adjust the size of our controlled fleet to better align with our Programmatic offering. We believe we are well positioned to drive strong incremental margin as we grow our revenue profile over the remainder of the year. Adjusted EBITDA loss was $49 million for the quarter and flat year-over-year, despite a decrease in revenues of 44%. Similar to adjusted contribution margin, the performance maps key structural improvements we have made to the business. We have diligently pruned unnecessary costs and we are proud of the fact that the business is increasing its performance capability as a leaner and smaller company. GAAP net loss was $97 million for the quarter, slightly improved year-over-year.
