Yahoo Finance Blade Air Mobility, Inc. (NASDAQ:BLDE) Q1 2024 Earnings Call Transcript
Blade Air Mobility, Inc. (NASDAQ:BLDE) Q1 2024 Earnings Call Transcript May 7, 2024
Blade Air Mobility, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: 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. I would now like to turn the conference over to Matt Schneider, Vice President, Investor Relations and Strategic Finance. Matthew, you may begin.
Matt Schneider: 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. Before we get started, I would 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 future time periods, maybe 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 the conference 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 historical, comparable, consolidated GAAP financial measures to those historical non-GAAP financial measures is provided in our earnings press release and investor presentation.
Our press release, investor presentation, and our Form 10-Q and 10-K filings 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 Will Heyburn, Chief Financial Officer. I will now turn the call over to Rob. Rob?
Rob Wiesenthal: Thank you, Matt, and good morning, everyone. I am 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. Most notably, this was the best quarter in company history for our medical business. We achieved record revenue and segment adjusted EBITDA, building upon our dramatic growth driven by increased trip volumes and trip distances both from existing and newly added hospital clients. This should address issues that have been raised on the impact of competition. We are America’s largest dedicated air transporter of human organs for transplant and we are confident we are the most cost-effective as well.
Total revenue in the first quarter ending March 31, 2024 increased 13.8% to $51.5 million versus the comparable period in 2023. Excluding the impact of last year’s discontinuation of Blade 1, our scheduled jet service between New York and South Florida, total revenue increased 21.5% year-over-year. Profitability continues to improve across the business driven by several initiatives, including a shift to dedicated aircraft and vehicles in our medical business, meaningful profitability improvements in our New York by-the-seat airport service, and a continuation of cost rationalization programs across the company, including the elimination of unprofitable services such as Blade 1. While total revenue increased 13.8% year-over-year, total flight profit increased by 41.5% year-over-year, as flight margins rose to 19.7% in Q1 2024 as compared to 15.8% for the comparable period last year.
We achieved significant year-over-year improvement in both medical and passenger segment adjusted EBITDA, which when coupled with a 19% year-over-year decline in our adjusted unallocated corporate expenses, drove a strong $4.2 million improvement in adjusted EBITDA in Q1 2024 versus the comparable period last year. Medical revenue increased 34.6% in Q1 2024 year-over-year. And importantly, we saw the resumption of sequential revenue growth in the quarter with revenues increasing 12.6% versus the fourth quarter of 2023. Medical segment adjusted EBITDA increased 134.5% year-over-year as adjusted EBITDA margins rose over 500 basis points versus the comparable period last year. Additionally, our clients use of perfusion and other organ preservation devices continues to grow the overall market beyond industry expectations, given the ability to move organs over much longer distances and accept organs that just a few years ago would not have been suitable for transplant.
When our contracted clients utilize these devices, they continue to use Blade’s logistics services. We have now closed on seven of the eight jet aircraft acquisitions that we announced last quarter. This is a win-win as it enables lower costs and improved service delivery for our clients and improved flight margins per trip for Blade. The vast majority of our flying will remain with third-party owned and operated aircraft as part of our layered asset light approach, enabling maximum flexibility and availability for the hospitals we serve. In our passenger business, despite inconsistent year-over-year revenue comparisons due to the discontinuation of our Blade 1 scheduled jet service, poor flying weather for ski season in Europe, and lower passenger volume in Canada, the passenger segment still reported a $0.4 million year-over-year improvement in adjusted EBITDA.
Importantly, we continue to see improvement in our New York by-the-seat airport service with revenues increasing 26% year-over-year in our third consecutive quarter of positive flight margin. The airport business remains our most strategic route given the combination of the large addressable market of 27 million annual flyers and our proprietary passenger infrastructure in New York City. We have also – seeing continued growth in revenue per seat, while the total number of airport passes outstanding, which allow flyers to travel between Manhattan and JFK or Newark Airport for as low as $95 per seat, rose more than 30% year-over-year. Given the annual cost of our passes of $795 per pass, purchasers are signaling that they expect to fly Blade Airport more than 8x during the course of the year.
As a reminder, Q1 is the seasonally lightest quarter for short-distance business. Regardless, I’m pleased to see that we’re delivering on the cost savings and profitability improvements we promised both in the passenger segment and on the corporate level. Before I turn the call over to Will, I would like to address our long-planned management transition in the medical division. Seth Bacon, founder of Trinity Air Medical, which we acquired in September 2021, will assume the role of Executive Chairman of Blade Medical. He will continue to be involved in all strategic manners, key client relationships, and high-value sales processes. Our current medical COO, Scott Wunsch, will assume the role of Chief Executive Officer of Blade Medical. Scott has been with Trinity since 2018 and previously spent 13 years at one of the largest organ procurement organizations in the country.
Scott has served as Trinity’s COO for the past four years, where he’s been responsible for day-to-day oversight of Trinity, and following our acquisition, Blade Medical Operations. Seth has built an incredible team in Phoenix. He is a large shareholder, and from his new position, he will continue to foster the culture of excellence that has led to our incredible success. With that, I’ll turn it over to Will.
Will Heyburn: Thank you, Rob. I’ll now walk through a few financial highlights from the quarter, starting with medical. We’re benefiting both from solid industry fundamentals and our strategy to establish and refine the most cost-effective and reliable end-to-end organ logistics platform in the United States. Nationwide, heart, liver, and lung organ transplants rose approximately 9% year-over-year in the first quarter of 2024. Blade’s growth, both in terms of trip volumes and in terms of revenues, continues to exceed that market growth, given new client additions and strong trip growth within our existing client base. We continue to see growth related to our client’s use of multiple new perfusion and organ preservation technologies, which have expanded the transport market by enabling organs to travel over longer distances and by increasing the pool of viable organs for transplantation.
Market growth and company initiatives are evident in the commercial momentum we’re seeing in the business. Medical segment revenue rose 34.6% year-over-year in the first quarter to $36 million and rose 12.6% sequentially versus Q4 2023. New clients represented approximately half of the growth in the quarter, and we continue to drive strong revenue growth with our existing clients. We are pleased with the sales pipeline and expect to onboard several new clients, both for logistics and for TOPS, our organ matching service, over the coming quarters. We also wanted to highlight how our ground strategy is allowing us to build a deeper, more integrated, and more cost-effective relationship with our clients. Blade now directly operates more than 30 medical vehicles, with many more available through our growing network of third-party drivers, all deployed in our densest markets.
Ground represented more than 10% of medical revenue this quarter at above average margins, and it grew more than 70% versus the prior year. Several factors are contributing to improved profitability in the medical segment. Our increased use of dedicated aircraft and ground vehicles provides a mutual benefit to our clients and Blade. We also continue to see an increase in average trip distance, which all translates into improved profitability metrics within our medical business. Medical flight profit rose 84.5% year-over-year to $8 million in Q1 2024. Medical flight margin increased six points to 22.3% in the quarter versus the comparable period last year and two points versus Q4 2023. Medical segment adjusted EBITDA rose 134.5% year-over-year to $4.4 million in Q1 2024 as margins rose over 500 basis points to 12.2%.
Going forward in medical, we expect to average single-digit sequential quarter-over-quarter revenue growth for the remainder of the year. As always, the timing of new client onboarding and other factors influences sequential growth rate in any quarter and can result in some quarter-to-quarter lumpiness. Our next quarter, ending June 30, 2024, is a particularly tough year-over-year comp given our support of a large hospital on a temporary basis during the 2023 period, which we have discussed on our prior earnings calls. For medical SG&A, we continue to expect single-digit sequential quarter-over-quarter growth for the remainder of the year as we ramp-up our organ placement and ground offerings. As Rob mentioned, we closed on seven of the eight previously announced aircraft acquisitions.
While these closings happened after quarter end, we’re pleased with the free cash flow benefits we’ve seen in these early days, and we look forward to providing a more thorough update once we’ve closed on all the aircraft and have accumulated more operating data. Turning to the passenger business, in short distance, 26% growth in airport this quarter was more than offset by poor flying weather for European ski routes and lower passenger volume in Canada, leading to a 5.9% revenue decrease year-over-year. In Europe, where travel to and from the Alps is the primary driver in the first quarter, weather-related cancellations approximately doubled compared with last year. In jet and other areas, revenues decreased 29.7% year-over-year, driven by our decision to discontinue Blade 1 at the end of the 2023 winter season, which had generated losses and $2.9 million of revenue in Q1 2023.
Excluding Blade 1, yet another revenue rose 9.4% year-over-year, driven by increased jet charter activity and growing brand partner revenues. Q2 will be our last quarter for this Blade 1 revenue headwind, expected to be in the range of $1 million. We are delivering on the profitability improvements we promised in passenger, cutting loss-making products like Blade 1 and optimizing the cost structure. Importantly, passenger segment adjusted EBITDA improved by $0.4 million year-over-year, even in the face of disappointing weather in Europe. Going forward in passenger, we expect continued year-over-year improvement in passenger segment adjusted EBITDA, driven by SG&A cost efficiencies. On the corporate cost side, we once again reduced our adjusted unallocated corporate expenses with a 19% decline in Q1 2024 versus the prior year period.
This combined with our improvement in both passenger and medical segment adjusted EBITDA led to a $4.2 million improvement in adjusted EBITDA versus the prior year period to negative $3.5 million in Q1 2024. For the remainder of the year, we expect adjusted unallocated corporate expenses to be flat to down. On the cash flow front, cash from operations was a $15.6 million usage in the quarter. The difference between adjusted EBITDA and cash from operations in the quarter was primarily driven by a $2.6 million increase in accounts receivable and a $10.2 million reduction in accounts payable and accrued expenses, which was driven by cash payments for the Trinity contingent consideration resulting from our acquisition and by our 2023 short-term incentive plan.
Please note that this will be the last Trinity contingent consideration payment. Capital expenditures of $1.1 million were driven primarily by leasehold improvements related to the build-out of larger office space in Tempe, Arizona for our growing medical business, along with investments in software development. We ended the quarter with no debt and $151 million of cash in short-term investments, providing flexibility for strategic investments, acquisitions, and opportunistic share repurchases. On the guidance front, we are reiterating the 2024 and 2025 guidance we introduced last quarter, most notably for positive adjusted EBITDA in 2024 and double-digit adjusted EBITDA in 2025. And we believe this quarter’s results represent an important first step in achieving those goals.
Last but not least, I’d like to take this opportunity to welcome Matt Schneider to the team as VP of Investor Relations and Strategic Finance. Matt has had a long career spanning sell-side research and public equity investing with a focus on aerospace. We’re lucky to have him on board, and I look forward to introducing many of you to him in the coming weeks. With that, I’ll turn it back over to Rob.
Rob Wiesenthal: 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. With respect to our corporate SEC disclosure and investor materials, given the intense interest in a rapidly growing medical business, Blade Metamobility, we are refocusing these materials to provide greater clarity and insight into this business, which is now the largest in our company. In closing, we are off to a great start to the year, and we’re increasingly confident in the improving profitability outlook for our businesses. And now, I’ll turn it over to Matt for questions.
Matt Schneider: Thanks, Rob. We’ll start by taking questions from the analyst community, and we’ll follow with a few questions from the Say Q&A platform. I’ll now turn it over to the operator for analyst questions.
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