Yahoo Finance Blade Air Mobility, Inc. (NASDAQ:BLDE) Q3 2023 Earnings Call Transcript
Blade Air Mobility, Inc. (NASDAQ:BLDE) Q3 2023 Earnings Call Transcript November 8, 2023
Operator: Good morning, ladies and gentlemen, and welcome to the Blade Air Mobility Fiscal Third Quarter 2022 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference call over to Mr. Lee Gold, Investor Relations. You may begin.
Lee Gold: Thanks, and good morning. Thank you for standing by, and welcome to the Blade Air Mobility conference call and webcast for the quarter ended September 30, 2023. 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 on this conference call that are not historical facts, including statements about 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 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 comparable consolidated GAAP financial measures to those 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 as 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 Wiesenthal. Rob?
Rob Wiesenthal: Thank you, Lee. Good morning, everyone. We are very pleased to deliver our first quarter of positive free cash flow and positive adjusted EBITDA while maintaining rapid revenue growth in both the Passenger and Medical segments. Revenue in the quarter ending September 30, 2023 increased 56% to $71.4 million versus $45.7 million in the comparable 2022 period. We achieved free cash flow of $1.3 million in Q3 2023 a $7.8 million improvement from Q3 2022, while adjusted EBITDA of $0.8 million in Q3 2023 improved $5.3 million versus Q3 2022. Importantly, as we turn the corner to profitability, we are doing so without sacrificing revenue growth. Starting in Passenger. Short Distance delivered another quarter of significant growth with revenue up 49% year-over-year driven by our acquisitions in Europe and improvement across our entire Short Distance route network.
We are especially pleased that our flagship urban air mobility service, Blade Airport, enjoyed continued improved financial performance with strong revenue growth in addition to positive flight profit contribution for the first time during Q3 2023. Airport is one of our most important growth vectors for the passenger business as it will be the very first use case for electric vertical aircraft, EVA or an industry parlance eVTOL. But the ramp up has required patience from both you, our investors and our management team. It’s taken two years of steadily growing our passenger volumes, route offerings, average checkout price and seat utilization to reach today’s critical profitability milestone. In Q4 2023 quarter-to-date, we’ve seen solid seat growth that we expect will unlock continued incremental profitability for airport in the future.
We have also made great progress in optimizing our aircraft capacity agreements to capitalize on our growing scale, enabling Blade to benefit from the economic leverage of a more active fleet. We are already seeing this translate to flight profit margin expansion in both our Medical and Passenger segments. This is a win-win both for our operators and our customers as we direct more flight hours to our most reliable and efficient aircraft providers. In Jet and Other, we also saw strong growth as revenue increased 49.1% to $7.6 million. Our growth across passenger coupled with our turn to profitability in the airport contributed to a significant 88.7% increase in Passenger segment adjusted EBITDA to $2.8 million for Q3 2023. On the strategic front, we continue expanding our infrastructure footprint.
In Atlantic City, we partnered with Ocean Casino to create an exclusive Blade heliport allowing our flyers to land directly at the resort. Charter service is available today and by the seat service backstopped by Ocean Casino is planned for spring 2024. In France at Nice International Airport the opening of an on-tarmac security checkpoint will enable our flyers to bypass crowded terminals and proceed directly to their commercial airline gate after landing on a Blade helicopter. This will reduce the travel time between the Blade helicopter arrivals and the commercial gate by 45 minutes or more for all of our European urban air mobility products where passengers are connecting to airlines in Nice. This is consistent with our infrastructure strategy around the world.
We are able to leverage our significant passenger volumes and brand recognitions to strike partnerships with infrastructure owners that provide unique access to terminal space, improving the passenger experience with limited cost. These arrangements are a win-win for all parties and will provide an important strategic advantage as we begin to transition from conventional rotorcraft to EVA in the coming years. We made important progress on the EVA front just last week as our operator for Blade Canada, which operates as Helijet, placed an order for the Beta Technologies Alia Electric Vertical Aircraft, which is expected to provide quiet, emission-free air mobility service for Blade flyers in Canada. This order is for the same aircraft that Blade recently utilized during our first EVA test in the New York City area in Q1 Now, we’ll turn to Medical where we delivered 65% organic growth driven by continued new hospital wins, business expansion with existing hospitals and strong end market growth.
We continue to demonstrate the strong operating leverage of this business with Medical segment adjusted EBITDA increasing 123.8% to $3.3 million. We’re also excited to announce the launch of our new organ placement service, an offering that has been requested by a significant portion of our existing customers. This new business line, which goes live on December 1, brings us further upstream in the organ transplantation process by helping transplant centers determine if an organ is a match for a potential recipient. When paired with our existing logistics services, we can now provide even more seamless engagement, simplify the communication process for our customers and increase our revenue per transplant. The wider the breadth of our services we offer our hospital clients, the more we can help them and the deeper we become integrated in their mission to save lives.
I’ll let Will provide some additional details on the unit economics shortly. As evidenced by this quarter’s results, we remain on track with our commitment to deliver a meaningful improvement in full year adjusted EBITDA in 2023 versus 2022, and we also expect further year-over-year adjusted EBITDA improvement in Q4 of this year. Looking to 2024, we expect even better results with significantly improved adjusted EBITDA versus 2023. We plan to provide guidance for both the full year 2024 and 2025 as part of our Q4 2023 earnings release. With that, I’ll turn the call over to Will.
Will Heyburn: Thank you, Rob. Our turn to profitability this quarter highlights the results of our strong execution on growth initiatives coupled with relentless focus on cost efficiencies as we shrunk adjusted unallocated corporate expenses by 29.0% while still growing revenue 56% in Q3 2023 versus the prior year period. We tactically optimized corporate overhead while staying focused on our customers to maintain the seamless experience we’re known for in both our Passenger and Medical businesses. I’ll now walk through a few highlights from our business segments in the third quarter. We’ll start with Medical, where revenue increased 65% to $33.4 million in the third quarter of 2023 versus $20.2 million in the comparable 2022 period.
Approximately 45% of this quarter’s growth was driven by the addition of new customers, with the remainder driven by growth with existing clients as well as strong overall market growth. As discussed during last quarter’s earnings call in Q2 2023, we supported a non-contracted customer on a temporary basis that should not reoccur. Excluding this customer, Q3 2023 would have seen low single digit sequential growth versus Q2 2023. In addition to strong overall volume growth, we continue to see increases in flight hours per trip versus the prior year period as transplant centers have shown a willingness to fly farther to enable a transplant. Medical segment adjusted EBITDA was $3.3 million in the current quarter, an increase of $1.9 million, or 124% versus $1.5 million in the comparable 2022 period.
We’re happy to see EBITDA growing faster than revenue, which reflects growth coupled with our ability to bring in dedicated aircraft capacity behind our new customer contracts. This lowers costs and increases reliability for our customers by eliminating aircraft repositioning while enabling better flight profit margins for Blade. With respect to the forward outlook for our Medical segment, we expect to average low single digit percentage sequential growth in the coming quarters, but keep in mind that Q4 historically has exhibited mild seasonality and thus we expect revenues to be flat or lower sequentially for this Q4. We expect flight margins in the 18% to 19% range for Q4 2024, with continued steady improvement towards 20% plus in the future.
Medical SG&A should grow in the low single digits sequentially over the next couple of quarters as we ramp up our new organ matching service. On that front, we’re pleased to announce the launch of Trinity Organ Placement Services, or TOPS, with two key customers on December 1, 2023. In this new role, we will benefit from fixed annual contracts, typically between $0.5 million and $1.5 million per year, depending on the size of the transplant center. Over time, we hope that many of our 70 plus existing contracted customers will choose to vertically integrate with us for organ placement as well, and we also expect that some centers with other transportation providers will utilize these services. Our two launch customers will cover the fixed cost for this new business, while we expect contribution margin to be in line with our overall medical average in 2024 as we scale up.
Finally, for Medical. There seems to have been some confusion in the marketplace recently after a perfusion device manufacturer began to bundle aviation services with their device. We estimate that 10% to 15% of our trips this quarter utilize this specific device. We’ve not lost a single contract to this device company, though we take all competition seriously. At the end of the day, we found that our pricing can be as much as 50% lower given our lower cost platform and our scale in terms of trips, geographies and number of dedicated aircraft. As such, we believe that the impact to our business will be minimal. Turning to the Passenger business. In Short Distance revenues were up 49% to $30.4 million in the third quarter of 2023 versus $20.4 million in the comparable 2022 period.
Growth was driven by our acquisition of Blade Europe, which closed on September 1, 2022. Growth in our Blade Airport business and strong growth across the rest of our Short Distance portfolio. As Rob mentioned, airport was a positive contributor to flight profit for the first time, meaning that it covered all costs related to air and intraterminal [ph] ground transportation for our flyers. Europe was soft relative to our expectations, slightly dragging down our adjusted EBITDA this quarter. Flexibility is a key benefit of our asset-light model, and we’re taking this opportunity to right size our European business for the opportunity ahead, optimizing our cost structure and accessible aircraft fleet to match demand. We’ll have more to share on this front as part of our Q4 earnings release.
Passenger segment flight profit increased by $3.3 million, or 54%, to $9.4 million in the third quarter of 2023 from $6.1 million in the same period of 2022. This increase was attributable primarily to the acquisition of Blade Europe, which contributed in only one month of the 2022 period. Also contributing were higher jet charter volumes, increased seat utilization and average seat pricing for Blade Airport and profit growth across the rest of our U.S. Short Distance portfolio. All of this led to an 88.7% increase in Passenger segment adjusted EBITDA to $2.8 million in the third quarter of 2023 versus $1.5 million in the prior year period. Looking ahead for Passenger. In an effort to tighten our focus on the highest growth and most profitable business lines, we opted to discontinue our buy the seat jet service between New York and South Florida.
As a result, when coupled with an expected year-over-year decline in jet charter volume, we expect jet/other revenue to be approximately $2 million lower in Q4 2023 versus Q4 2022. In Short Distance we expect revenue to increase in Q4 in the low single digits year-over-year. Overall Passenger segment flight margins should improve by 100 basis points to 200 basis points year-over-year next quarter given airports turn to profitability. We continue to optimize corporate costs as adjusted unallocated corporate expenses and software development, which relate to the overall Blade Shared Services platform, decreased $2.2 million, or 29% in Q3 2023 versus the prior year period despite our significant growth. We’re pleased to see that Blade’s underlying operational platform is creating economic leverage and we continue to look for opportunities to optimize our cost structure to drive further operating expense leverage.
As we look to the fourth quarter of 2023, we expect total adjusted unallocated corporate expense to remain roughly flat sequentially. When you roll up the segment level Q4 2023 guidance we just walked you through, you should arrive on a consolidated basis at approximately high 40s revenue flight profit margin in the mid-to-high teens and adjusted corporate expenses in the $13 million to $15 million range. This would result in solid year-over -year improvement and adjusted EBITDA in Q4. As Rob mentioned, we also expect to see significant year-over-year EBITDA improvement for full year 2024 and we plan to provide a detailed outlook for the full year 2024 and 2025 as part of our Q4 2023 earnings release. With respect to our balance sheet, we continue to have zero debt and approximately $173 million in cash and short term securities as of the end of the third quarter of 2023, an increase versus Q2 2023.
Given our improving financial performance, we expect a significant majority of our cash to be available for acquisitions. In closing, our hard work continues, as we remain committed to expanding flight profit margins, optimizing our cost base and adding profitable new business lines like our new organ matching service to maximize free cash flow generation. With that, I’ll turn it back over to Rob.
Rob Wiesenthal: Thank you, Will. In short, we are proud of the work the team did to deliver outstanding third quarter results and our first positive adjusted EBITDA and free cash flow quarter. We look forward to building on this momentum as we continue to drive towards overall corporate profitability. We look forward to providing full year guidance for 2024 and 2025 during our Q4 earnings announcement. I’ll now turn it over to Lee for questions.
Lee Gold: 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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