Q3 2021 Blade Air Mobility Inc Earnings Call
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Good morning, and welcome to the Blade Air Mobility, Inc. Fiscal third quarter 2021 financial results conference call. All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing Star then zero on your telephone keypad. After today's presentation there will be.
An opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.
I'd now like to turn the conference over to Mr. Tom Cook Investor Relations. Please go ahead.
Thanks, Andrew and good morning, ladies and gentlemen, thank you for standing by and welcome to the Blade Air mobility fiscal third quarter 2021 conference call and webcast. We appreciate everyone. Joining us today before we get started I would like to remind you of the company's forward looking statements Safe Harbor language statements made in this conference call that are not historical facts.
Including statements about our future period 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.
Our SEC filings, including our form S. One filed with the SEC on May 28, 2021, and the Form 10-Q for the quarter ended June 30th 2021 filed with the SEC on August 16th 2021 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 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 non-GAAP financial measures, which we believe can be useful in evaluating our financial performance. A reconciliation of the most directly comparable GAAP financial measures to those non-GAAP.
Financial measures is provided in our press release, which will be available on our website. These non-GAAP measures should not be considered in isolation or as substitute for our financial results prepared in accordance with GAAP.
Hosting todays call are Rob Wiesenthal, founder and Chief Executive Officer, Wade and willing Haber Chief Financial Officer.
I will now turn the call over to Rob Wiesenthal Rob.
Thank you Tom Good morning, everyone I'd like to thank you for your interest in blade and welcome you to our earnings call for the third quarter ending June 32021, our first report as a public company, we had a great quarter and I'm very pleased to inform you of our 277% revenue growth versus 2020.
And our 73% revenue growth compared to the pre Covid 2019 period before we dive into our results I'd like to thank our employees and particularly our on the ground wire experienced team, replacing our Flyers and their safety first as we continue to operate our business due to the pandemic the commitment of our team as part of <unk>.
Critical for a minute mobility service, which moves human organs for transplant by helicopter and fixed wing aircraft.
This business grew dramatically compared to last year and it would never have been possible without our team showing up in person every single day. So that we could continue providing essential services to hospitals across the northeast.
While our other business lines have now rebounded rebounded or even shown growth versus the historical pre COVID-19 period.
Certainly still uncertainty still remains to the Boeing our passenger stress test, you're getting quickly and seamlessly to wherever they need to be but the health and safety of our Flyers and employees remains Paramount blade has led the way in implementing health and safety protocols and we continue to adjust our approach as needed in.
In light of the dynamic nature of the virus.
We were the first aviation company a mandate in flight masking the first to have pre boarding blood oxygen saturation and the first to provide onsite COVID-19 testing for our longer haul flights and this leadership position continues this past Thursday, we were the first aviation company to announce a requirement for all flyers to be vaccinated.
Starting on September seven with exemptions as recommended by the CDC is an important differentiator versus our competitors on the ground and in the air and we believe it will lead to increased wireline with blade health protocols and scale.
I'd like to take a few minutes to recap our strategic priorities and core strengths before we review our results in the most recent quarter our asset light model remains a key differentiator that term asset light is used liberally by aviation companies. So let me explain what it means that Blake blade as a platform, we neither one nor opera.
Aircrafts, our services are enabled through our strong and growing network of highly integrated embedded aircrafts. Operator partnerships. This approach allows us to quickly and cost effectively scale our business in response to fluctuations in customer demand customer demand as well as the macro environment. There is no better example of the flex.
The ability of this model than our performance during the pandemic during lockdown in early 2020, we immediately reduced our supply of nonmetal mobility aircrafts and when the spring 2021 travel snapback occurred we quickly brought them back online all while maintaining consistent unit economics and great service for acquirers.
We are committed to this approach today and as we prepare for the transition to electric vertical aircrafts EMEA as we call them or E. VTOL in industry parlance labeled partner with third parties that will own and operate on our behalf.
When it blades key priorities is to identify and launch short distance routes that can be successful using the conventional aircraft of today, but that will also be appropriate for EMEA once available.
Chi this will continue to pursue our again, our organic growth plans as well as undertake highly targeted acquisitions and partnerships.
During the infrastructure for these routes and enabling us to maintain our unique competitive advantages at the same time, we will be helping our EBITDA manufacturer Alliance partners to achieve our mutual goal of bringing quiet emission free light to the public on the route growth front, we resumed our New York airports service. This June beginning.
With flights between Manhattan, and JFK Airport after pausing the service at the start of the pandemic.
By ball, we plan to once again service all three New York area airports. So far we are pleased with the performance for the JFK restart, especially as compared to the early results of the service when we first launched it in 2019 pre COVID-19.
We are also preparing to launch new northeast corridor routes in 2022.
We will share additional details about this before the year end.
With respect to our pipeline of strategic acquisitions and partnerships, we expect to announce two transactions before the end of this calendar year that will both fortify our strategic moat and accelerate our growth further we have continued to support our transition to quiet an emission free futures.
<unk> emission free future by entering into new alliances with leading EMEA manufacturers, just this quarter, we announced new partnerships with Magnetics and Eve.
Bringing the total number of blade electric aircraft are for all well respected and well capitalized companies, including Embraer, where ive as one of their uhm divisions.
Two of these partners are in fact flying the aircraft today with test pilots our agreement with Magni X will enable blade to secure a supply of electric aircraft propulsion units for Lima, what ablaze largest aircrafts operating partners. These gpus will enable lemus, who converts blade branded fleet of NPS seaplane.
To all electric aircraft, starting as early as 2023 when development for commercial use is complete.
Electric see planes will be deployed across late north eastern and south eastern routes and are expected to operate emission free at the same speed as the current generation of turbine aircrafts with a significantly reduced noise footprint and lower operating costs.
This alliance is uniquely important as it provides a near term bridge to EBITDA given the engines compatibility with already certified aircraft that are currently being utilized by Blake.
Our agreement with East will enable blade to deploy their EBITDA in South, Florida, and West Coast markets. Beginning in 2026 when development commercial use is expected to be completed blade will pay by the hour for used to be the aircraft, which will be operated by <unk> and its local partners again, consistent with our asset light approach diesel.
Clients is in addition to our earlier partnerships with beta technologies and whiskey row, a joint venture between Boeing and Larry Page's Kitty Hawk Derisk, our alliance on the deployment schedule of any one manufacturer.
Giving blade a portfolio of aircrafts with different capabilities that are necessary for our wide variety of mission profiles. These alliances are subject to entering into additional agreements and certain FAA approvals, we will share additional developments with respect to our EBITDA alliances on future calls with that I'd like to turn it over to our CFO.
Hey, Brian to discuss our financial results in more detail. Thank.
Thank you Rob Bleed continues to make great progress in our long term strategic plan, we relaunched our New York City Airport service in June 2021, and are very encouraged by the results. So far two months into the relaunch. We are well ahead of the same point in our 2019 launch and we have already achieved an annualized run rate of approximately 10000 passengers.
For single route between Manhattan, and JFK for context at our historical pre Covid peak in late 2019, when we were running service to Laguardia Newark, and three JFK routes, we had an annualized run rate of approximately 20000 passengers. This fall we plan to expand our service back to include both Laguardia and Newark.
Moving on to the financials for the quarter ended June 32021 revenue increased by 277% from $3.4 million in 2022.13 million in 2021, marking an impressive recovery from the Covid lows, we're especially pleased with our results compared to the pre COVID-19 period with revenues up.
73% from $7.5 million in the June 2019 quarter.
Short distance revenues increased by 810% from 600000 in 2020 to $5.7 million in 2021 recovering to near pre pandemic levels with revenues at 87% of the same period in 2019.
This was driven primarily by strong intra week commuter demand exceeded pre pandemic pre pandemic levels, but was offset by lower demand for typical peak weekend travel, which remain below pre pandemic levels as in office work schedules are shifting dramatically.
Men and mobility, Oregon transport and jet revenues grew by 147% from $2.6 million in 2020 to $6.5 million in 2021, a comparison of this business line to the same period in 2019 is not meaningful as our minimum ability did not exist at this point in 2019.
<unk> mobility remains an important focus area for us given the use of helicopters for short hospital to hospital transfers as well as last mile transfers from airports to congested city centers most of the trips are very short.
Many of these trips are very short our cargo only and will likely be bleeds first commercial use case for electric vertical aircrafts, even last mile transfers that are currently coordinated by blade using ground transport, we expect will often be replaced with E. D. A.
Finally, other revenue increased from 200000 in 2020 to 700000 in 2020, one driven primarily by brand partners pay for exposure to Voip fliers.
Our cost of revenue decreased as a percentage of revenues from 82% in 2020% to 77% in 2021. If you look at this is a margin of revenue less cost of revenue, which includes the cost of flying paid to our operators and landing fees you see significant improvement from 18% in 2020 to 23.
In 2021, this was driven by an increase in short distance revenues and higher passenger utilization on our buy the seed flights. Additionally, bleed some minimal negative impact from new routes this quarter, which typically see cost of revenue was higher than revenues for the first 18 months as they ramp to average utilization above breakeven.
Airport was our only new route operating this quarter and did not begin until June with a limited schedule at launch.
Importantly, we are seeing leverage from our operating costs as demonstrated by our comparable adjusted EBITDA, which improved to negative 900000. This period compared to negative $1.3 million in 2020 and negative $3.4 million in 2019, we expect to continue to benefit from the scalable platform is our growth.
<unk> for the purposes of comparison to prior quarters when blade was a private company. This comparable adjusted EBITDA metric excludes new recurring costs paid to third parties, which are associated with operating as a public company. These costs include incremental directors and officers liability insurance and professional services fees that were not incurred.
In the prior years, our adjusted EBITDA, which includes the recurring third party costs of being a public company totaled negative $2.6 million this quarter compared to negative $1.3 million in the same period in 2020 and negative $3.5 million in 2019.
A few words about the future.
Though we have not seen a negative impact from the Delta variant to date. It is very difficult to forecast the effect of a potential slower return to normal office work and business travel on the one hand hybrid remote office policies benefited us in late 2020, and early 2021, as our weekend driven leisure routes morph.
Into seven day, a week commuter routes if employers continue to delay full returns to the office. We can similarly benefit this year and would expect our 70 mile plus commuter business to outperform the pre COVID-19 period during the fall and winter off season on the other hand, a slower return to office may delay the recovery in business travel which would reduce.
<unk> demand for Blade Airport. Additionally.
Additionally, short distance revenues were weighted heavily towards the September quarter pre pandemic. Thus, we expect the fact that our short this business has not yet fully recovered from COVID-19 impacts will have a more significant effect on that business lines results next quarter.
Looking to our cost of revenues, we expect the predictable unit economics and strong utilization on our mature routes to continue to provide a positive contribution moving forward we plan to leverage the contributions from these mature businesses along with our strong balance sheet to aggressively ramp up new routes starting with airport this year.
Year, and moving to the northeast corridor in calendar year 2022.
As Blade Airport did not re launch until June this quarter saw limited net negative cost impacts from its ramp we expect airport to be running at a loss for at least the next 18 months as we continue to aggressively invest in additional passenger capacity and new airports. As a result, we expect cost of revenue should increase as a percentage of revenue.
In the coming quarters.
We've also been building our team and to support our public company transition and to execute against our growth plans. Many of these additions took place recently and may not be fully reflected in the June or September quarter. Our current SG&A run rate on an unadjusted basis is a good proxy for future quarters, as one time transaction costs fall away, but.
New cost of employees and marketing will be added as we accelerate our growth.
Given that our asset light business model requires limited capital expenditures as well as consistent negative net working capital position, our free cash flow profile should actually be better than EBITDA as we grow. So this quarter, we did prepay over $5 million of public company, D&O insurance, which hit prepaid expenses look.
King ahead blades expansion strategy is keenly focused on new routes with significantly less seasonality such as inner city connections airport transfers and year round commuter routes given this shift in our recent transition to reporting as a public company, we've begun evaluating a change to a more typical December 30.
First fiscal year, and we've had preliminary discussions with our board on this topic and expect them to consider a formal change in early 2022.
In closing, we have a strong debt free balance sheet with more than $330 million support our growth strategy. We will continue to focus on the largest markets where blade can maintain its leadership status and achieves achieve sustainable unit economics today moving forward, we believe the transition to electric vertical are.
We will only serve to improve our cost structure and make urban air mobility accessible to more people around the world with that I'll turn it back over to Rob. Thank.
Thank you, we'll let me take a moment as to our strategy within the broader emerging urban air mobility industry first a few data points over $5 billion have already been invested in the design and manufacturing of electric vertical aircrafts.
<unk> EBITDA manufacturers have either gone public or in the process of going public with expectations to raise incremental capital of more than $4 billion. During this year alone.
Outside space transportation, there may be no more ambitious task than first Standalone company to build certify and manufacturer ebay and to do it at scale and to do it on budget and to do it on schedule simply put that is not our business. We will continue the singular.
Focus we have.
We have had for the past six years building, creating and acquiring all the necessary elements to provide the best.
First urban air mobility service layer possible, ensuring the deployment of EMEA to the public in a seamless convenient cost effective and safe manner.
These elements include our network of exclusive terminal in key locations in the most important markets in the country. Our partnerships with leading aircraft manufacturers are consumer to cockpit technology stack or 24, seven on the ground fly our experienced team as well as our trusted brands and over 200.
And users.
These are our competitive strengths and they are extremely difficult to replicate as we continue to build new services using conventional in rotorcraft, we will be in a bit powerful position to enable manufacturers to deploy their EBITDA to the flying public safely.
Safely and as quickly as possible.
Unlike many companies in the urban air mobility ecosystem, we have a strong and growing business today using conventional aircrafts as such we have set a number of important milestones for this pre DVA period.
For our investors.
Two accretive acquisitions by calendar year end.
The addition of two remaining commercial airport routes in the New York City area by this fall as well as the launch of an important northeast quarter business route in early 2022.
This was a great quarter, both financially and operationally and while going public and raising more than twice the amount of cash we require to execute upon our business plan.
Before we close I'd like to briefly discuss the current capital markets environment.
This quarter has continued to be a volatile volatile time in the markets for emerging growth companies like Blake.
With our strong financial performance and approximately $4.80 sensitive cash per share on our debt our debt free balance sheet. It is both management and our board's view that the current share price does not adequately reflect the long term prospects for our company, we hope that our performance starting with a great quarter, we announced today.
Coupled with achieving our upcoming milestones for new services and acquisitions will serve to eliminate this GAAP.
However.
If we need to given that we have more than twice the cash necessary to fund our business plan, we have the balance sheet strength to enhance shareholder value and we are prepared to do so if and when the time is right with that I'll turn it over to Tom for questions.
Thanks, Rob as a reminder, we will take questions from analysts and investors on this call today reporters should send enquiries to me directly operator, we're now ready for questions. Thank you. We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you were you.
A speakerphone please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
First question comes from ebay Mckinley with Citi. Please go ahead.
Great. Thanks, Good morning, guys.
Good morning, Good morning, just to just to move it.
First question on the.
A recovery that you saw this past quarter.
Of the passengers that workflow and can you maybe share with kind of how many were new to the blade platform versus those who were prior flyers kind of coming back.
No I would say the majority of the passengers this quarter.
Passengers that we had seen before given that we didn't introduce airport until June and Thats. The biggest driver of new passengers for us that will change as we go into the next quarter, but for this quarter given our reliance on those mature core commuter routes in the northeast we did see a lot of the same passengers at the same time I think if.
You were able to disaggregate, it and say who was flying during the week, we saw in a lot of our leisure routes people that had not been flying blade prior because of the ability to fly seven days a week and this kind of shift from this weekend only cadence to when we back in April we saw.
Call ourselves flying seven days a week, so that really opened up the business to a brand new flyer, which we did see during those kind of business days, but we're not breaking out the numbers for both those segments.
That's very helpful. And then just maybe two questions on <unk>.
Kind of your upcoming couple of quarters.
Really tough to predict as you mentioned given the delta variance, but any comments around.
Perhaps how July trends trended for you and then maybe as I think about you.
You mentioned some of the.
The new route gross margin dilution you would have as you bring back airport over the next 18 months or any way to roughly quantify how we should think about that.
Our models going forward over the next few quarters, how does that impact.
We're seeing an impact of delta.
The impact of just maybe if we just look for Delta. If you could just comment on July trying to kind of have you seen anything thus far early in the quarter and then secondly, just on the Blair displayed airport ramp up again in June.
You mentioned it should run at a loss, but typically in the beginning it anyway to quantify what that could mean in terms of the gross margin impact from the airport.
Sure I'll, let will take the second part in terms of airport ramp, but in terms of what we've been seeing.
Again, it's always kind of this mixed bag.
What I would say is because of our health and safety protocol.
We did not see falloff with passengers who chose.
Chose not to fly blade and take other forms of transportation because of safety concerns. So that's strong. Additionally, because of delta variance at the same time and I'm talking about this basically a whole summer to date.
There were definitely a lot of blade Flyers that may have had plans to travel longer distances, perhaps overseas that canceled their plans.
And so we definitely saw for some of our closer term.
Leisure routes, which is consistent with what you've seen across the travel business.
A much more much greater focus by our travelers on staying nearby this summer.
Then in terms of the margin impact from from Blade Airport. If you look at revenue less cost of revenues, where we're ramping very aggressively and as we mentioned we'll be adding those additional routes. This year. So I wouldn't expect a low single digit million dollar negative impact to that revenue less cost of revenues.
For the rest of the year for airport for airport, Yeah, and again, we breakeven on airport flights typically anything above 2.2 passengers.
Out of six possible passengers on that aircraft. So luckily the hurdle is not very high but had we still need a very robust schedule, so really engaged or flyers and let them know that they can fly at a time, that's most convenient to them.
Terrific. That's all very helpful. Thanks, so much.
Thank you.
The next question comes from Jason <unk> with Oppenheimer. Please go ahead, hey, guys. Thank you. So I'll ask you three first maybe talk about like the cost to you to secure the EAA deals.
What what's kind of the gist.
What's the cost to you what are you kind of committing to et cetera, second well the airport service many different when it resumes remaining airports are basically you know same as it was before and then can you talk about the seasonality of of met Immobility should you know should investors just assume like that does that business just generate.
You know the same revenue each quarter give or take your ability to grow it or is there seasonality in that tax.
Okay.
Yes.
Well, it's probably a first question cost of security of the eight deals.
Consistent with our asset light model, what we do is work with third party manufacturers who want to.
Move to EBITDA, which is pretty much about everybody.
And in certain instances or manufacturers, who would like to operate the service for us and they can take a look at the kind of flatline that we've had in the past or in certain instances, we can make commitments in terms of how many hours with fly and with that that will enable them to.
Finance and purchase the aircrafts on their own and in fact, if you take a look at our conventional business is we often get phone calls from conventional aircraft manufacturers, who say we know you work with operator acts on your platform. How many hours do you think you could do this year and people finance against the kind of volume that we do so we expect that.
That model to continue.
Going forward.
The second question.
Okay.
Okay in terms of the airport service.
Youre, saying that being any different are you talking about the actual service itself is there any as you.
Improvements that you guys have kind of.
Cause for some of your prior than imagine it's been a while since I've used it will there be any improvements or changes given yeah kind of pre COVID-19 or just kind of the same service just bring it back to the other airports.
We'll look at it.
I think it's it's you know, we obviously learned a lot when we first did it and I think we're getting a turn times mature Mac much quicker, we're dealing with a cover recovery much more effectively.
Terms of when there is inclement weather, but most importantly, we continue to work with airports and airlines to enjoy behind the tarmac service like we have had with American Airlines, where you can actually get off the plane when you land at JFK.
<unk> driven.
By American behind the tarmac directly to your blade helicopter that not only saves this two hour drive, which we turned into a five minute flight saved 20 minutes, probably walking through an airport finding a car. So I think more of those alliances we hope for you to see that future.
And we'll talk about minimum ability Jason you're on your on your seasonality question that so there's a few things in that revenue disaggregation line, the minimum ability business does not show seasonality.
However, and it's it's been showing good growth. However, there is some jet charter and by the SEC jet. That's also in that line and on the by the seat jet business that is seasonal so that's our belief one service.
It is focused on the winter months to Miami and to ask then so you'll see a couple million positive impact from that over the season and then on the jet charter side of things it can be a little bit unpredictable.
So that piece.
I Wouldnt say its specific pattern to it but it can be lumpy quarter to quarter. So hopefully that helps you break down the pieces. There is a strong base of revenue is in there that doesn't have seasonality, but there are some moving pieces.
And was there anything else.
I mean I'll go back in the queue I'll ask another Wanna, depending if theres other people I'll go back into your guidance, yet, but I think the segment. The segment obviously the vast majority of men in mobility, which is fast growing and.
And not seasonal.
So I mean, that's really what I would be focusing on.
Okay.
Again, if you have a question. Please press Star then one on a touchtone phone.
And we have a follow up from Jason <unk> from Oppenheimer. Please go ahead.
Why not.
Rob how are you thinking about any of the.
Potential risk of policy changing at any landing location.
To the extent you.
I'm, particularly thinking about kind of in the Hamptons, where I think there is some stuff coming up in September just how do you think about it you know.
So kind of any commentary with other parties et cetera, and just kind of concentration issues on the business there. Thanks.
Sure.
The good news is with.
The leisure routes, especially as the long island.
Our passengers are not going to stop flying.
The Hamptons is a legacy market of ours, it's not core to our future growth strategy, which is identifying short business risks that are well suited for EBITDA.
Nonetheless, we fly to all areas there are many of them, which would actually even in the town of East Hampton Matzo Airport, South Hampton West handset and even maybe a C planes.
Into a local bodies of water that are only 10 minutes away from.
The ECM for an airport, so I think that the.
Closer to the airport would be very shortsighted.
Buyers are going to keep flying with multiple opportunities for that supply for that area. So it's not something that.
We see as you know.
Frankly impacting our business as much as some people may think.
There are just tremendous economic benefits to that I think it was about 900 jobs $77 million in terms of the economic impact.
So we're hopeful they'll continue to keep it open it's been open for over 100 years.
And if not are fliers will keep flying and theyre not going to be the landing too far away from where they were originally intended.
And tenants apply.
Yes.
I don't think I have mentioned is that I think there is a growing understanding that it could be very shortsighted for airports or Hello horse all over this country that may be considering.
What to do a mitigation strategy in terms of noise, because we really are on the precipice of emission free and quiet electric aircraft you saw a deal with magnetics. That's 2023, that's not a.
And that is that is not a large hurdle in terms of the FAA certification, because you're essentially taking an existing aircrafts and changing the motor to an electric motor that is quiet and emission free. So I think we're in pretty we're in pretty good shape on that front.
Thank you.
Okay.
This concludes our question and answer session I would like to turn the conference back over to Rob Wiesenthal CEO Blake for any closing remarks.
Oh.
No I think were fine. We appreciate you joining us for this call today.
And we look forward to take any questions you have if anybody on this call and had not had their questions answered because of time constraints feel free to reach over to Tom Cook at ICR.
And he'll take those and refer them back to us and we look forward to talking to all of you soon.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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