Yahoo Finance Blade Air Mobility, Inc. (NASDAQ:BLDE) Q4 2023 Earnings Call Transcript
Blade Air Mobility, Inc. (NASDAQ:BLDE) Q4 2023 Earnings Call Transcript March 12, 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: Ladies and gentlemen, thank you for standing by. Welcome to Blade Air Mobility Fiscal Fourth 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, and instructions will follow at that time. As a reminder, this call is being recorded. I would like now to turn the conference over to Mr. Lee Gold, Investor Relations. Please go ahead.
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 December 31, 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 in 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 historical comparable consolidated GAAP financial measures to those historical non-GAAP financial measures is provided in our earnings press release and our 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 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. I am very pleased with our progress we made during 2023, another record year for Blade. Our financial trajectory is strong, sound and now tangible. In 2023, our full year revenue increased 54.1% versus the prior year to $225.2 million, while flight profit increased by 84% as our intense focus on margin enhancement initiatives generated results yet again this quarter. This led to a $10.8 million improvement in adjusted EBITDA versus the prior-year period to negative $16.6 million for the full year 2023. I'm especially pleased to share that Blade Airport, our helicopter service between Manhattan and New York area airports starting at $195 per seat, delivered positive flight profit not just for Q3 and Q4, but also for the full year 2023.
When we launched Blade Airport in 2021, we set up the unit economics to be profitable at just above two out of six seats sold per flight. But we knew along the way that our growth and customer acquisition metrics were pointing in the right direction. The two-year ramp-up process has required hard work from our operations team and patience from our investors. I'd like to take a minute to thank our flier experience, flier relations, operations and on-the-ground logistic teams and our ground transport partners at Mercedes-Benz USA for working so diligently to make this product a success. We look forward to continued growth this year and beyond as we begin to transition to EVA, Electric Vertical Aircraft, or eVTOL in the coming years. On the operational front, we are excited to announce the acquisition of eight fixed-wing jet aircraft to support our continued rapid growth in Medical, enabling lower cost service and improved availability for the hospitals we serve and improved unit economics for us.
Our Medical business has more than tripled since our acquisition of Trinity in 2021, presenting us with an opportunity to further leverage our scale through the purchase of a limited number of jet aircraft. By purchasing aircraft that we already use exclusively and by maintaining the existing operator and crews, we are well-positioned to capture incremental fixed cost leverage without the risk of building a new medical aircraft operation from the ground up. We believe this change will further improve our competitive positioning without compromising the benefits of our asset-light model as a vast majority of our Medical flights and nearly 100% of our Passenger flights will continue to be serviced by our very select group of third-party owned and operated aircraft in the U.S., Europe and Canada.
After this rewarding year of strong growth, flight profit margin expansion and cost structure improvements, we are now confident to begin providing guidance to our investors for revenue and adjusted EBITDA for the year ending December 31, 2024 and 2025. For the current year 2024, we expect to have positive adjusted EBITDA, and for 2025, we expect adjusted EBITDA in the double-digit millions. I'll let Will provide additional details shortly, but first I'd just like to emphasize that we do not take providing these public goals lightly, which is exactly why we waited to reach adequate scale in our Medical and Passenger businesses, which provided better forward visibility, enabling us to put a stake in the ground on achieving profitability. Now, I'll provide a few quick highlights from our fourth quarter ending December 31, 2023.
Flight profit increased 65.7% to $9 million in the current quarter versus $5.4 million in the prior-year period, well ahead of our expectations, driven by strong growth in our Medical business and improved profitability across our U.S. Short Distance business. We're pleased to see flight profit growing significantly ahead of revenue, which increased 24.5% to $47.5 million in Q4 2023. I'll let Will provide some additional details around our focus on flight profit maximization, but I'm happy to report that in Medical, our increased use of dedicated aircraft and owned ground vehicles have helped us lower costs for our hospital customers while increasing average flight profit per trip, a win-win for this important business segment. Starting at Passenger, Short Distance delivered another quarter of significant growth with revenue in Q4 2023 up 14% versus the prior-year period, driven by improvements in Blade Airport, Europe and Canada.
As mentioned previously, we are especially pleased that Blade Airport alone delivered 40%-plus year-over-year revenue growth in addition to positive flight contribution for the second quarter in a row. Our growth across Passenger, coupled with continued improved profitability in Blade Airport, contributed to a $1.1 million increase in Passenger segment adjusted EBITDA to negative $2.6 million in Q4 2023. In Medical, revenue in Q4 2023 increased 48% versus the prior-year period, driven by new hospital wins, business expansion with existing hospitals and strong end market growth. As a reminder, this is 100% organic growth as we completed the Trinity acquisition in 2021. Medical segment adjusted EBITDA increased 57.8% to $2.5 million in Q4 2023, demonstrating the strong operating leverage of this business.
As expected, our new TOPS organ placement service launched in December as planned. And I am very pleased with the initial progress our team has made with a key Blade customer, NYU Langone. We're staying focused on providing great service. It's early days of this exciting new business line, but we'll have a lot more to share on our growth plans in the coming months. These profitability improvements in both segments coupled with a $0.7 million year-over-year decrease in our adjusted unallocated corporate expenses led to a $2.7 million improvement in adjusted EBITDA versus the prior-year period to negative $5.2 million in Q4 2023. Adjusted EBITDA improved as a percentage of revenues to negative 11.1% in Q4 2023 from negative 20.9% in Q4 2022. This proves the operating leverage we have enabling us to dramatically grow Blade without adding significant overhead.
I'll let Will provide more details around Q4, but I will say that despite this being a seasonally light quarter for Blade, I'm very pleased with our success on continued cost structure improvements and significant expansion to our dedicated aircraft fleet highlighted by our acquisition of eight jet aircraft for our organ transportation business. And with $166.1 million in cash and short-term investments available to us, we believe Blade is in the best possible position to drive growth both organically and by acquisition. With that, I'll turn the call over to Will.
Will Heyburn: Thank you, Rob. Before we dive in, I'd like to remind everyone that we manage our business primarily based on flight profit rather than revenue, which could be influenced by a number of factors like fuel costs and landing fees, which we largely pass through, jet charter market pricing, aircraft repositioning and mix shifts between air and ground in our Medical business. Recently, we've made significant progress transitioning more and more of our Medical flights to dedicated aircraft that provide us with fixed cost leverage as we grow and are strategically based near our hospital customers. This has enabled us to improve our flight profit dollars per trip while reducing costs for our hospital customers and more importantly increasing availability with shorter call out times, which can lead to better patient outcomes.
When paired with our growing fleet of Medical vehicles and new organ placement offering, we believe we've built the most cost effective and reliable end-to-end organ logistics platform in the United States. That's why even though we saw a slight sequential decrease in Medical revenues from Q3 to Q4, Medical flight profit increased sequentially over the same period. This shows us that our strategy is working. At the same time, we improved our Passenger flight profit margins by 5 percentage points in Q4 2024 versus the prior year, demonstrating our path to full year profitability in the Passenger segment, which we expect in 2025. I'll now walk through a few highlights from our business segments in the fourth quarter. We'll start with Medical, where revenue increased 48% to $32 million in the fourth quarter of 2023 versus $21.6 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. Industry wide, we continue to see longer distance trips versus the prior-year period as transplant centers fly farther to enable more transplants resulting in more flight hours and increasing the revenue opportunity for Blade. Medical revenue was at the lower end of our expectations this quarter. Compared to Q3 2023, we saw a slightly higher percentage of organ transports traveling ground-only, which we view as the typical ebb and flow, while our increased use of dedicated aircraft helped reduce repositioning for our hospital customers. Use of dedicated aircraft generally will slightly decrease flight hours and revenue per air trip, while flight profit per air trip will increase.
As discussed earlier, we're keenly focused on flight profit performance, which exceeded our expectations. On last quarter's call, we guided towards Medical flight margins in the 18% to 19% range for Q4 2023 with continued steady improvement toward 20%-plus in the future. I'm happy to report that Q4 2023 Medical flight margin exceeded expectations at 20.1%, a 4 percentage point improvement year-over-year and a 2 percentage point sequential improvement versus Q3 2023. Our faster-than-planned adoption of dedicated aircraft and owned ground vehicles allowed us to achieve this important milestone more swiftly than originally anticipated. Medical segment flight profit was $6.4 million in the current quarter, an increase of $2.9 million or 81% versus $3.6 million in the comparable 2022 period.
Medical segment adjusted EBITDA was up 58% to $2.5 million in the fourth quarter of 2023 versus $1.6 million in the comparable 2022 period. Looking forward in Medical, we continue to expect single-digit percentage sequential revenue growth in the coming quarters with flight margins above 20% for the entirety of 2024 and gradual improvements towards 25%-plus by the end of the year, driven by our new aircraft supply arrangements. Q4 2023 Medical SG&A was a little heavier than we expected, given startup costs associated with comps and some end of year commission catch up, driven by great performance. We're expecting slightly lower medical SG&A in Q1 sequentially followed by low-single-digit sequential growth as we ramp up TOPS and add logistics staff.
As Rob previously mentioned, we're excited to announce the acquisition of eight Hawker 800 aircraft to bolster our Medical operations. In our experience, the Hawker platform is longer range and lower cost with more cargo capacity than other aircraft utilized by our competitors. This new arrangement results in both lower costs for our customers and higher margins for Blade. Based on our average utilization of these aircraft in 2023, we should see a 5 percentage points to 10 percentage point flight profit margin uplift for flights utilizing these owned aircraft, which will help us to achieve our goal of 25%-plus flight profit margins in Medical over the coming quarters. We recently signed a purchase agreement and expect to start seeing improved margins during the month of March.
I'd like to emphasize that these specific aircraft are among our most highly utilized, are under capacity purchase agreements today and are strategically positioned in areas with significant demand from overlapping customers. Going forward, we will continue to assess aircraft acquisitions only in areas where we are already servicing significant customer demand. We remain committed to our asset-light model and expect the significant majority of our flying to remain with third-party owned and operated aircraft. For example, the specific owned aircraft discussed today are expected to represent only about 10% of Blade's overall flying activity in 2024. The opportunity for further margin expansion is apparent. The $21 million acquisition costs will be funded through $11.7 million in cash and $9.3 million in existing deposits with the operator.
Turning to our Passenger business. In Short Distance, Q4 is always a seasonally light quarter, but we're pleased that revenue was up 14% to $10.7 million in the fourth quarter of 2023 versus $9.4 million in the comparable 2022 period, driven by an increase in seat volume and stronger pricing in our by-the-seat airport product and increased revenue in Europe and Canada. Blade Europe continued to be a positive contributor of flight profit this quarter and was flight profit positive for the full year 2023, meaning it covered all costs related to air and infra terminal ground transportation for our fliers. In jet and other, revenues decreased 32.4% to $4.8 million in the current quarter versus $7.1 million in the prior-year period, driven primarily by our decision to discontinue Blade 1, our seasonal by-the-seat jet service between New York and South Florida, which was a $1.7 million impact and softness in jet charter.
Passenger segment flight profit increased by $0.7 million or 37% to $2.6 million in the fourth quarter of 2023 from $1.9 million in the same period of 2022. This increase was attributable primarily to improved pricing and utilization and our by-the-seat Blade Airport product. All of this led to a $1.1 million improvement in Passenger segment adjusted EBITDA to negative $2.6 million in the fourth quarter of 2023 versus negative $3.8 million in the prior-year period. Despite the solid growth this quarter, Europe is performing below our original acquisition expectations. As such, we took a non-cash impairment charge on the intangible assets associated with our asset-light aircraft operator agreement. Despite this write-down of $20.8 million next to the U.S., Europe is the largest urban air mobility market globally and is poised to be an early adopter of Electric Vertical Aircraft.
This was a strategic acquisition that enjoys exclusive infrastructure, exclusivity for flying between Nice and Monaco on a by-the-seat basis and a devoted customer base that secures our leading position as we transition to EVA. We're making great progress with our newly installed management team and expect improvement in both revenue and profitability in 2024. On the corporate cost side, yet again, we were able to reduce our adjusted unallocated corporate expenses, shrinking 11.3% in Q4 2023 versus the prior-year period, which, when coupled with our flight profit growth across Medical and Passenger, led to a $2.7 million improvement in adjusted EBITDA versus the prior-year period to negative $5.2 million in Q4 2023. Turning to our guidance.
We expect to be profitable on an adjusted EBITDA basis for the full year 2024 and to achieve double-digit adjusted EBITDA in 2025. To get there, we'll continue to employ the tools that led to our significant adjusted EBITDA improvement over the past year. Adjusted unallocated corporate expenses should stay near the average of recent quarters, leading to low- to mid-single-digit million dollars of savings in the current year 2024 versus 2023. In Passenger, we expect a 2 point to 3 point improvement in flight profit margin as Blade Airport builds on its first flight profit positive year to become a more material contributor to overall flight profit. At the same time, we've built enough scale and brand awareness to reduce our U.S. marketing spend.
We've also realized cost savings from the finalization of our European integration. Together, we expect these items to have a low- to mid-single-digit positive impact on adjusted EBITDA in 2024 with Passenger segment EBITDA turning positive to low-single-digit millions in 2025. In Medical, flight profit margins should continue to expand towards 25%-plus by the end of 2024, driven by increased use of dedicated aircraft and the increased fixed cost leverage we're expecting from our recently acquired aircraft. This alone would result in mid- to high-single digit adjusted EBITDA improvement in 2024 based on just 2023 revenues. New customer growth could push that into the higher end of the range and would come with some additional SG&A. Though improvements will come gradually throughout 2024, we expect 25%-plus flight profit margins in Medical for the full year 2025.
We expect that this margin expansion, when coupled with just moderate growth in Medical and Passenger, will get us to our adjusted EBITDA goal for 2025 and set us up for continued double-digit adjusted EBITDA growth into the future. With respect to our balance sheet, given our improving financial performance, we expect that the majority of our $166 million in cash and short-term securities as of the end of fourth quarter of 2023 will be utilized for tactical acquisitions in our Medical segment or further accretive investments in our aircraft supply base. The best is yet to come and we're excited about the years ahead. With that, I'll turn it back over to Rob.
Rob Wiesenthal: Thank you, Will. In short, we are proud of the accomplishments of our team to deliver outstanding fourth quarter results and we look forward to building on this momentum, achieving adjusted EBITDA profitability this year and significant growth in this important metric in 2025 and beyond. 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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