Q1 2022 Wheels Up Experience Inc Earnings Call
Again, a record for the first quarter and up almost 25% year over year.
Active members or 26% higher than a year ago, and our live leg were up 15% year over year as we mark the anniversary of the rebound in travel during the pandemic.
Prepaid block sales a great indicator of future demand were exceptionally strong.
Over $170 million for the quarter and up over 150% year over year.
Overall demand remains strong at the start of the second quarter and our average pricing is increasing.
Our core member retention continues to be robust.
And our core members continue to spend more than $80000 per year with us on average.
Our newest cohorts spend more than our prior cohorts will also continue to spend with us at a healthy clip.
We believe all of these factors provide a strong foundation for future revenue growth.
Our key strategic priority.
It's the aggregate the supply side, a private aviation that drive the scale utility and efficiency that enabled the network effects of our marketplace.
This is the key to unlocking additional profitable consumer demand.
Ultimately the difference maker for us will be the industry disrupting technology and innovation we deploy.
We see an enormous opportunity to improve the customer experience and effectively create a broader and more accessible marketplace for private air travel as much as Uber has done for tax season, Black car and Airbnb for vacation home rentals.
Vinayak will talk in more detail about our operating and technology initiatives I am encouraged by the steady progress in both areas and we are in a much stronger position today than we were at the beginning of this year.
As a direct result of those initiatives our operations improved each month throughout the quarter and we continue to improve in April .
In fact absent the impact of higher fuel prices during the quarter. Our adjusted contribution margin would have improved sequentially in the first quarter.
With the benefit of our fuel surcharge, our recent pricing actions and program adjustments and the contribution from air partner.
With our improving operating performance. We believe we are poised to show margin improvement throughout the remainder of the year.
Let me now highlight our most recent acquisition and a strategic minority investments.
We closed on the air partner acquisition on April one <unk>.
Our partner is a great fit with our growth strategy, giving us an asset light platform to extend our offering globally and includes attractive adjacent businesses that we can grow over time the.
The company is a seasoned and well respected management team that will lead our international expansion and enable us to provide a true end to end solution for our members who are increasingly looking to travel around the world.
Beyond the strategic rationale the air partner acquisition makes great financial sense as well next we made a strategic minority investments and Tropic Ocean Airways.
Leading provider of Cessna caravans see players, which is ideal for last mile service in Florida, The Bahamas, and the Caribbean and a great addition to our marketplace.
We see opportunities to expand their service to other geographies and introduced their offerings to a much wider customer base.
We look forward to keeping you updated on our progress.
We will also continue to broaden our supply capability through the strategic acquisition of charter management companies and opportunistic aircraft purchases.
As we have said many times, we are not demand constrained. That's why we are focused today on building our supply network, while deploying our technology to be best positioned in a supply constrained environment.
I'd like to provide an update on our environmental initiatives sustainability is something that is incredibly important to me and where we hold up can be a leader over the long term sustainability.
Sustainability is a journey that we have embarked on and I'm pleased to announce beginning in June that we will fully offset the carbon emissions of our member and customer flex carbon offsets are important.
But we are also focused on how to reduce the overall impact of our operations on the environment.
Even seemingly small things like using sustainable responsibly sourced materials and reducing single use plastics can.
Can make a difference in the aggregate.
We will be sharing more details on these important initiatives as they develop.
One quarter into the year, we are moving quickly to invest in our members and our customers expand our supply network further develop our technology enabled marketplace and capture a much larger overall Tam before I turn it over to Vinayak I wanted to share that our CFO , Eric Jacobs will be stepping down.
Later this month.
Pursuing new endeavor.
Like to thank Eric for his many contributions to wheels up where he has been a key member of our executive leadership team and played an integral role in.
<unk> taken wheels up public <unk>.
He has helped build a tremendous finance team that he leaves in the very capable hands of Erica basis, who has served as our SVP finance for over three years and will serve as our interim CFO .
We have retained Russell Reynolds to conduct an external search for a permanent replacement Eric Jacobs has graciously agreed to stay on as an adviser and we are very happy we will be able to tap his insight and perspective going forward.
As always.
Im thankful to our loyal members and customers for continuing to put their trust in us.
I would also like to recognize and thank the entire hard working team at wheels up for the tremendous effort they put forth everyday.
Now, let me turn it over to Vinayak.
Who will provide an update on our technology and operating progress.
Thank you Tony it's great to be with all of you today can you highlight some of our recent topline successes and I'm pleased to report that our pace of execution is also improving the business operating system. We are in.
Improvements are helping drive the rigor and transparency.
As we continue to scale and deliver improved core margins over the course of the year.
Our operations improved steadily over the course of the first quarter and that trend has continued so far in the second quarter. These improvements directly translate to a better customer experience an area that we are relentlessly focused.
So with that let me provide an update on the operating initiatives.
Last quarter, we will continue to direct energy and resources throughout the year.
First to focus on improving utility in the near term to pilot and maintenance hiring.
We've already hired more than 250 products since November .
Ahead of the plan, we laid out in the third quarter and will continue to focus in this area.
This pilot study here and put into service as they complete their or company specific training, giving us a strong ongoing pipeline to help to drive our fleet utility going forward.
Our pilots are some of the most highly trained and dynamic in the industry and they are telling you to present, our frontline with members and customers.
Turning to maintenance.
Our aircraft return to service time is a challenge.
The effects aircraft with respect to availability.
One of the main challenges in this area is our reliance on third party providers are experiencing their own issues relating to labor parts and work backlogs to address this we are continuing to invest in internal maintenance capabilities, which allows us to be in control of the schedules and work order priority.
Labor costs, our in house maintenance teams for nearly 20% faster and recurring issues are 20% lower than external providers.
Similar to pilots, we made a concerted effort to hire more maintenance technicians, which accelerated in the first quarter and which we expect will continue to improve throughout the year.
This increase in technicians will boost our mobile service unit capacity by over 50% this year.
Adding faster response time to address unscheduled maintenance and promote the airports because we flagged the posing some destinations. This is a critical capability.
Although parts availability still remains a challenge for aircraft manufacturers and the broader industry, we're getting smarter able to increasing our inventory of the right Cogs in key areas with limited supply impacts that were returned to service times.
I am pleased to report that with our pilot force, increasing and maintenance turnaround times, improving or dispatch availability and utility the number of hours of aircraft flights for revenue each month improved over the course of the quarter and are now operating at the highest levels, where six months I expect these key operations initiatives.
Continue to drive improvements in our service levels and contribution margins.
Now allow me to walk you through a few of our recent initiatives that demonstrate how we are strengthening our technology marketplace on both the supply and demand side.
As you May recall, we migrated over multiple fleets to SMS last year, all migration to challenging and we've learned a lot from that experience.
In six short months, our team migrated nearly our entire first party fleet onto up SMS and we are currently processing the final approvals for our entire fleet based on what you learn from running our own fleets and those of over 100 customers provided more than 80, new features to offer from us to make fleet management more efficient.
Especially for floating fleets and for rapid continuous tenuous common today.
This greatly reduces complexity by providing a common high fidelity view of all of our operations, we have a robust product roadmap and we'll continuously deploy enhancements that will enable all clients of SMS, including our own fleet to more effectively manage daily operations.
They are now focused on integrating.
With our scheduling system further optimize utility and maximize efficiencies across all of our fleets.
And there are other opportunities to add automation to our marketplace by connecting lower internal system to a customer facing platforms like <unk>, we can provide real time customer incentives and price dynamically to drive demand for off peak flying.
This will help us proactively stimulate demand.
Empty repositioning legs.
And current customers with flexibility to change their travel plans driving higher utility.
This means significant savings for our customers and revenue for wheels up than we would have not in the past.
We also will be better positioned to capitalize on the demand supply mismatches that often occur.
Or natively built customer data platform is a critical component of improving our customer experience because it gives our account managers and customer service teams, great visibility into our customers' experiences preferences and intentions in real time.
In April we launched a complete rebuild of our mobile app.
Neither app updates in two years like upper mass the new App redesign on a modern service oriented architecture.
That enables us to regularly add new features and functionality to improve the user experience.
Since our initial launch we have already released multiple updates with significant improvements to performance in search.
These foundational elements of just the beginning of our mobile roadmap.
Updates will allow passengers to manage flight changes and passenger lists.
Greatly reducing customer service interactions, while simultaneously, providing a better customer experience that puts our members and control copper.
Coupled with insights from our customer data platform, our App will ultimately help us shape demand by recommending alternative times dates are even inputs that better matched with available supply.
With this continued improvement in user experience, we expect a higher percentage of for customers to book directly through the app, thereby improving conversion.
It also allows our members of his team to focus on providing a great customer experience instead of manually handling logistics details.
I will now touch on our initiatives to increase the supply from our asset light second and then third party fleets.
For our second party aircraft management fleet, our charter guarantee program that provides predictable revenue to an owner in exchange for specific increments of aircraft availability has been well received.
Our pipeline of new managed teams that are undergoing conformity and FAA required process to bring the aircraft into our operating certificates is already exceeding our internal targets. We expect that's going to drive continued growth in charter hours for our managed fleets in 2022.
We continue to extend our third party capacity or long term geographies as we migrated our own fleet onto up Fms theyre not in a strong position to our third party partner operators to also take advantage of the capabilities from US. It is important to note that many of our partner operators already use.
Our performance for the owned fleet management within their networks.
Fleet optimization can drive profits for all parties and is another compelling reason to choose our marketplace. Additionally, we're constantly improving our forecasting system to anticipate demand at a more granular level to minimize our use of expensive last minute AD hoc third party supply.
You previously mentioned consolidated the fixed FAA certificates that currently make up our first party fleet.
An initiative, which will provide meaningful additional improvement.
In the efficiency of our operations currently in the process of consolidation with a targeted completion in 2023 and will share more details in subsequent quarters.
All of this helps us improve the scalability of our supply and can complement the incredible foundation, we have as a leading demand generators and private aviation today. Finally, I wanted to highlight recent changes to our product and pricing strategy.
Given that we continue to be in an unprecedented demand environment, we are being thoughtful to ensure our dynamically priced marketplace is the right product offerings for our customers, while still being competitive pricing.
<unk> is an important lever to influence customer behavior incentivizing customers to move to higher membership payers in order to capture greater member benefits.
Our most recent program changes will encourage customers to fly at times on aircraft that maximize our operational flexibility and realize the full benefits of our supply strategy.
That is why they are increasing peak surcharges again.
Now up to 15% we believe these changes better reflect the true cost of the services, we provide and will translate to higher service levels and improved customer satisfaction.
The benefit of cap rate increases will phase in over time as prepaid blocks are used with the fuel surcharges effective on April lines are already having an impact.
Or new fuel index strategy for those prices, let's start on June 1st.
<unk>, we will continue to be protected from additional swings in global energy markets.
Let me conclude by saying I'm proud of his team for delivering on the initiatives, we outlined last quarter.
SMS.
New App pilot and maintenance hiring will continue to deliver on what we say and the timelines we set for ourselves.
All the initiatives I highlighted today are the building blocks to strengthen the foundation of our technology enabled marketplace, which we believe will give us a competitive advantage and demonstrate the strength of our business model connecting all of our systems to hardened Apis or a service oriented architecture and modern cloud infrastructure.
Will enable us to rapidly build features and continue to improve the customer experience and convert more demand on our marketplace.
We will continue to drive technology and operational discipline as we build our platform and most importantly, keep the customer at the center of our focus.
I'm extremely confident in our future given the progress our team has made in the past six months and I look forward to sharing our continued progress with that let me turn it over to Eric.
Thank you Vinayak Hello, everyone.
Kenny highlighted we are very pleased with our strong revenue growth with revenue up 24% year over year.
It's typically membership revenue grew 38% year over year for the quarter.
And we added 384 net new members ending the first quarter with 12424 active members.
Up 26% year over year.
We saw a pickup in new membership sales following the lifting of the fight moratorium in February .
Also the mix continued to shift toward our higher priced core membership tier that offers more guaranteed access to the member which is valuable in today's supply constrained market.
We believe our membership revenue is highly visible and largely recurring is our retention rates remained strong at approximately 80% for corn business members overall.
Roughly 90% of corn business members purchase prepaid block.
Turning to slight revenue slight revenue was up 24% year over year for the quarter with Lifeflight legs up 15% year over year.
We continue to see strong leisure demand and a pickup in business and international travel.
We are also pleased with this level of growth considering the supply chain constraints continue to limit our ability to address significant potential demand from kinect and non members through our marketplace.
Flight revenue per lot slight lag was $13410 for the quarter up 8% year over year.
This metric is a function of multiple factors, including pricing stage length cabin mix and peak versus off peak flying.
During the first quarter, we began seeing an impact from the cap rate price increase that was effective last December as well as the continued shift in mix to larger cabin classes as our customers favored our jet offering.
Looking forward for the remainder of the year.
We expect to show an increasing benefit to flight revenue per lifeflight lag from the December and June price increases as the prepay blocks that locked in prior rates are utilized.
As well as from the fuel surcharges.
On April nine.
And which will be updated on June one.
We also expect strong future flight revenue as prepaid block sales totaled $175 million in the quarter up 153% year over year.
Currently over 60% of our core members have an outstanding prepaid blocks.
Switching to aircraft management, our aircraft management revenue grew 19% year over year for the quarter driven by higher owner usage.
Manage approximately 150 aircrafts as at the end of the first quarter, which is flat from year end.
We now have less than 10 legacy management contracts that we're working to restructure down from 15 at the end of the year at about 20 at the end of the third quarter.
Our final revenue category as other revenue.
Other revenue is a small percentage of our total revenue.
It represents revenue earned from software fixed based operations or SCL maintenance aircraft sales, where we act as a broker and special missions, including defense.
Now, let me address cost of revenue and margin.
Our goal is to optimize utility and efficiency across our entire <unk>.
Using technology and scale automated scheduling and incentivize fine to reduce repositioned legg and improve profitability.
Then I'll provide an update on our operational and technology initiatives.
So I wanted to provide some context for how those initiatives are expected to impact our financial results.
First off while we are making meaningful progress internally on numerous areas the financial impact will increasingly flow through the income statement over the course of the year for example, because when I mentioned it takes about 60 days for recent pilot higher it could be revenue productive.
There was a modest benefit late in the first quarter and we expect a larger impact in future quarters, given our recent hiring trends.
Converting our entire lumpy fleet Fms significantly simplify our flight operations with one dashboard and schedule our aircraft crew maintenance et cetera. The.
The impact to margins will be apparent in the second half of the year as we enhance the actual workflows that automate and optimize our global schedule.
So typically consolidation process is now in its early stages. This initiative will allow us to better leverage crew and other personnel availability across our entire fleet once completed in 2023.
While these initiatives are all very concrete and will improve our operations. The margin one thing that is not in our control as fuel costs driven by the price of jet fuel.
While we have the ability to pass along fuel costs within a reasonable period of time, the sharp and quick increase in jet fuel prices related to geopolitical events led to an approximately $9 million adverse impact to our adjusted contribution margin in the first quarter as the recent fuel surcharge didn't kind of effective until April nine.
Our adjusted contribution margin was negative <unk>, 8% for the first quarter would have been roughly 250 basis points higher fuel prices were the same as the fourth quarter that improvement reflects the success of our operating initiatives F&I highlighted.
<unk> also highlighted a new fuel surcharge mechanism that was announced earlier this month.
But that program change commencing June 1st Big step.
Fuel costs were largely via direct pass through with minimal impact to our margins thereafter.
However, so far in the second quarter fuel is still a headwind even with initial fuel surcharge that took effect in April .
That is because fuel prices have continued to rise and have exceeded the amount covered by the initial fuel surcharge.
Switching to Opex sales and marketing expenses were up slightly year over year on a percentage of revenue basis as we return to an in person number event. During this year's Super Bowl in Los Angeles.
We have also been increasing our investment in technology and development as a percentage of revenue.
Capitalized software is an important component of our Capex spending and we believe part of our differentiation in the market.
General and administrative expenses were down slightly as a percentage of revenue year over year. We will continue to explore opportunities that can further streamline our corporate overhead and other costs.
As a result, adjusted EBITDA was negative $49 4 million for the quarter, which was better than our recent guidance range.
Capital expenditures were $71 $9 million in the quarter, which includes approximately $58 million net to acquire 32 aircraft from Textron other capital expenditures, including capitalized software for approximately $14 million in the quarter capitalized software is almost half of our core capital spending.
We continue to expect capital spending for 2020 to be approximately $125 million.
That includes what we consider a more typical capital spending of approximately $67 million for purchase aircrafts capitalized software et cetera, plus the $58 million spent for the textron pre owned aircraft purchased in the first quarter.
As we highlighted on our last call we view the textron purchase as a financing transaction that those aircraft are already on our balance sheet as operating leases.
We will remain opportunistic and upgrading and expanding our lumpy fleet similar to our acquisition of <unk>.
We've also wrapped up the strategic use of our aircraft brokerage purchase and sale capabilities. Some.
Some aircraft maybe purchase outright for a lumpy fleet.
Aircraft, maybe purchased aircraft held for sale to sell to future owners with Tom committing to allow us to manage and use their aircrafts for our charter customers.
Brokerage capabilities have been the driver of approximately $56 million of the aircraft held for sale line on our balance sheet. This is consistent with what we communicated in our last quarterly call we.
We do not anticipate aircraft held for sale to increase significantly from this level, but the balance will fluctuate with the timing level sales and any replacement aircraft purchases.
With regards to cash we ended the quarter with $538 million of cash and cash equivalents and no long term debt.
The strong industry demand, we believe the current fair market value of aircrafts on our balance sheet is well above their fixed asset carrying value. This should allow us an opportunity to finance those assets to drive further growth.
Now let me provide some information regarding the financial impact of the air partner acquisition, which will be reflected fully in the second quarter since the transaction closed on April one.
Our partner has several service lines private Jets group charter rate and safety and security.
The jet business will be included in our flight revenue initially that revenue will represent net revenue, which is the agent fees earned by our partner as our customers supplied.
Over time, we expect to transition the U S private jet business to be more similar to the wheels up private jet business revenue.
Revenue will then reflect the total transaction value from gross revenue customer pays for flying which is consistent with how wheels off report despite revenue today.
International private jet business is expected to still be reported on a net revenue basis.
The group charter rate and safety and security businesses will be included in our other revenue category. These businesses are primarily on the net basis. So we will recognize only the fees we receive for performing the services.
Overall, we expect air partner will contribute approximately $30 million of revenue in the second quarter.
Roughly 30% to 70% between flight and other revenue.
Because of the high mix of net revenue adjusted contribution margin percentage contributed from our partner are significantly higher than our corporate average.
So with that let me now turn to our guidance includes are partner.
For full year 2022, we now expect revenue to be in the range of 147% to $152 billion for the year, reflecting an approximately $90 million revenue contribution from air partner.
We continue to expect our revenue to grow each quarter over the course of the year with the second quarter up at least 28% year over year inclusive of approximately $30 million related to air partner. Please.
Please keep in mind that partner revenue does fluctuate from quarter to quarter, it's a relatively small percentage of our total revenue.
Moving to adjusted contribution margin we.
We expect an improvement from our operational initiatives plus the benefit of the inclusion of air partner will be partially offset by the higher fuel expense I discussed earlier as a result, we expect adjusted contribution margin for the second quarter will be approximately three 5%.
Operational improvements in our fuel surcharge should contribute roughly 200 basis points of the sequential gain with.
With the remaining increase coming from our partner.
With the recent changes to our program. Our view is that the negative fuel impact will be behind us in June . Therefore, we expect adjusted contribution margin will benefit by an additional roughly 200 basis points sequentially in the third quarter.
We expect second quarter adjusted EBITDA to be in the range of negative <unk> 43 to negative $48 million with.
But air partner contributing a positive $2 million to $3 million to that total.
We also expect to reported GAAP net loss of between $90 million to $100 million in the second quarter reflected in this GAAP range are several noncash estimates of $10 million charge related to earn out shares.
A $15 million expense related to stock based compensation.
<unk> million dollars of depreciation and amortization expense.
In addition, we expect approximately $10 million of cash expenses related to transactions and other onetime items.
Range did not reflect any noncash gain or loss related to the fair value of our warrant and any other unusual items.
Overall, our operational technology initiatives, along with better pricing, including our fuel surcharges will allow us to exit the year with higher margin that will set us up well for 2023 and beyond.
In closing I want to thank Kenny and the team at wells at the.
The company has grown revenue almost buybacks since I joined and today. It has a very strong foundation serving members in all cabin classes with a global offering.
It's been an absolute pleasure working with the team I was a member before I joined the <unk> team and I'm looking forward to benefiting from all the enhancements to the marketplace as a member in the future.
With that thank you all for joining let me turn the call back to the operator, so we can take your questions.
Thanks, very much and as a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad now.
And our first question is from the line of Sheila <unk>.
From Jefferies Your.
Your line will be opened now if you'd like to proceed with your question.
Thank you good afternoon, guys and thank you.
Best of luck on your next venture.
Can I just ask starting from the top line I guess on air partner contributing $30 million, so that implies organic debt go up.
About 5% how much of that organic is an increase then.
Membership revenues versus the price increases that are contributing.
Thanks, Sheila I'm going to have Eric and I want to introduce Eric basis, who has been on our side to three years theres going to be helping answer some other questions here. He is our interim CFO .
Okay.
So I just want make sure I understand your question accomplished so youre asking about our 28% guidance for.
Next quarter, how much of that is organic versus their partner is that correct.
And the full year, you've raised guidance by 8%. So we have air partner at $50 million of contribution.
$90 million of contribution and.
And then third impact organic can't go up by a few percentage points I was just wondering how much of that is an increase in membership and other versus like pricing kicking in.
Yes, so the pricing was reflected in our initial guidance for the year. So we didn't change guidance tumor ended the year other than to really add partner plus the benefit that we saw in Q1. So.
Possibly that as conservative, but that's how we approach the guidance for next year.
And then Eric can you step way too fast for me to keep up with those numbers on the fuel surcharge can you just go over it once more.
It alleviates about 200 basis point in Q2, how much for the full year 2002, and then how do we think about that in 'twenty three.
Yes, Erika basis, you want to grab that.
Thanks Kenny.
If you had a roughly $9 million impact on our contribution margin for Q1.
This equates to roughly 250 basis points.
Quarter.
As we highlighted the newfield mechanism that took place took effect June one and will largely insulate margins from future fuel price volatility.
With that said the price of fuel has continued to increase in April and May.
So people will continue to be a headwind in Q2 with a negative impact would be behind us in June .
Guidance, three 5% margins for Q2, and we expect a full offset to contribute 200 basis points of improvement in Q3. So it's roughly a 200 basis points sequential improvement from Q2 to Q3.
I understand okay, great. Thank you I'll just jump back into queue. Thank you guys.
Thank you <unk> next question is from the line of Gary <unk> Barrington. Your line is now really can you. Please proceed with your question.
I'm, sorry, I jumped on the call little bit late so I don't know if I missed some things but.
Could you tell me on <unk>.
You prepaid blocks.
Are those.
People use those without incurring a fuel surcharge or do they get surcharge if they use the block.
Yeah, Hey, Gary Tammy.
Great.
Onto the full membership with the 30 days notice which is.
What we did effective March 9th which kicked in we got some coverage.
Bridge starting April nine.
June 1st we gave notice change the program.
Fuel as it relates to the up and down so I think with that I'm going to give vinayak a bullet point just to further.
Further give you a little clarity.
Yes.
Yes, yes.
Maybe a longer look.
Yes.
Foster the flight.
<unk>.
Okay.
Fine.
Im trying to follow.
As you are talking about an increase in Europe .
Sure.
Adjusted contribution margin.
200 <unk>.
Yes.
From a guidance perspective, we're guiding to three 5% for Q2.
Okay.
The fuel benefit offset in Q3, which will equate to about 200 basis points.
So we're looking at a five 5%.
So an adjusted contribution margin in Q3.
Okay Alright.
Okay. Okay. So I guess, what I'm getting at is I mean, I guess one of the ways to look at what Youre doing is youre efficiency should be repeated.
If you are still looking at.
$35 million of adjusted EBITDA.
Really going to jump up your spending over the next at least quarter and that will continue throughout the rest of the.
For the year.
Some of it I realize that youre going back to a lot of in person things in promotions and stuff like that but is that how we should look at this.
So Gary it's Eric So I think that is.
The hiring of the pilots and such and highly a higher maintenance.
Tax actually helps us from a margin improvement perspective because.
Essentially we have aircraft on the <unk>.
Syed.
Quick payback in terms of how they.
Start impacting the margin.
So as Eric talked about the 200 basis point improvement in Q3 relates to fuel.
You didn't want to sort of looking at a number related to operational improvements yet because we're.
We're still working through a lot of the supply chain things.
Things like chocolate chip tickets holiday.
Longer period of time, that's really going to start hitting in 2020 right. So.
And I think wants to add a point here.
No.
So there would a period of time, we should study.
The improvements.
Okay, Okay, and Gary I, just want to clarify that.
Oh I'm sorry go ahead.
Yes.
You're going to find one of that and feel very comfortable with our margin guidance.
To meet and beat our guidance, we look forward sharing our second quarter results.
Yes.
Okay. Thank you.
Thank you Gary and our next question is from the line of Marvin Fong with <unk>. Your line is now open. Please go ahead.
Great. Good afternoon. Thanks for taking my questions. Just a question to start I mean I. Appreciate the color you gave about current trends and I think you said April was strong.
Just maybe you could dive.
So a little deeper into the demand trends youre seeing and just maybe a comparatively how does it.
How did April look or even early may compared to.
Which actually fell in the first quarter.
Yes.
Marvin I think that the.
The trends on the demand side.
In our industry continue to be robust wheels up youre seeing.
Tremendous interest and obviously you have the back to the office and businesses.
Looking at what Theyre going to do travel wise this year.
I'm working closely with the with Vinayak Hu <unk>.
And there will be demand.
Now moving forward is really where the end market for us.
Yes. So in addition to Dave and launching any impact on the demand side.
This type of environment, we have what we are doing is trying to have any automotive shipments as fast as we can.
And the way we look at it won't demand as you look at the customer cohorts that we have seen it.
Midstream customer approach continuing to spend and because we have this long term view of what we are seeing from them for the past two three years now.
Continuing to spend the newer customer cohort spending at higher levels.
Starting to play out.
If they become they become our number.
So in terms of the demand to.
Two indicators, which is new memberships that we are giving in terms of the actual actual demand.
Both seem to be strong and im not seeing any differential based on the geopolitical conditions.
Terrific. Thanks for that and then.
<unk>.
I appreciate what youre, saying that the demand environment looks good but just considering the fact that the macro does that actually maybe perhaps help you find owners on either the <unk> side, who you might be looking to generating some income.
Maybe more willing to participate in your programs there just some additional color there would be great.
Yes.
<unk> totally helpless to.
Great and.
The other thing that happened to us.
We had it.
Guaranteed programs to be almost where they can we can give guarantees chartered all of Sudan.
We have multiple under leveraged for demand, but they have not activated.
As an example.
We had a moratorium in November and the contemporary still but Walsh. The majority of the demand is to take care of our existing core members alright, there is people searching on our platform.
Corporate accounts and we are not showing available to take them because we are actually focused on servicing our existing members.
One is as we get more supply of the supply demand.
It gets more efficient as we can actually open up that aperture for non member customers can search and book on our platform and those broad markets totaled.
Better margins for us so we have levers to kind of change the demand not guessing membership because we actually see tactical map with Ethernet switching.
So both on the demand side on the supply side I think.
What percent of these at risk.
Yes, Hey, Marvin one lab there.
One last thought there just to reinforce what the nice thing and I know Eric reported on at the block sales continue to be strong that gives us great revenue visibility.
What we're looking at forward.
Our offering our model.
It is not.
Kate on ownership so.
Like I said the.
The demand there just feels good but the blocks really tell the story people vote with their with their ability to put money down I know you had one more.
Actually it was going to ask about but I just wanted to confirm just as a housekeeping question. So.
The prepaid blood number that was as of the end of the first quarter right. So that wasn't.
Factored in any way by this.
<unk>.
A new increase of the cap rates right.
That doesn't have any impact on that.
Yes, I would say, we will not be announced.
Yes, the first quarter was not affected and we think that.
Early indications are that people are.
Are reacting well to both the fuel surcharges and.
The cap rate, which really is our membership has its privileges.
Feature which is it protect you against Serge spot market pricing.
Great.
I don't know about.
Just some comments there but.
Thanks.
Thank you Marvin and as a reminder, if you'd like to ask a question today. Please press star followed by one on your telephone keypad now and our next question is from Michael Bellisario from Baird.
Michael Your line is now open. Please go ahead.
Thanks, Good afternoon, everyone.
Just want to go back to the business versus leisure trends that you mentioned, you're seeing a shift in which segment in buying blocks and then also the rate at which they are being used today.
So Derek.
Eric So you don't really report out details on types of.
Our members buying blocks that said.
Our corporate sales have been very very strong and our partnership with Delta benefited.
As we have access to some of their corporate clients.
Yes, yes.
I just wanted to add.
As I said, we don't report on it.
<unk> business and individual customer.
Sales are up year on year.
We won't report on the specifics.
Very pleased with the growth in both the sufficient.
Got it that's helpful. And then just can you maybe dig into the active users on a flattish sequentially.
What happened in the first part of the year and was there a step back presumably because of the moratorium and then what have you.
<unk> seen maybe more recently after that was lifted.
Given the tightness in supply the doubling down on servicing our membership base. So.
We really havent opened up the opportunity to non members and that's why you see sort of flattish.
On the active user.
CNS active members DTC growth sequentially and year over year.
Got it thank you.
Related to opening that up to non members is there an updated thinking in terms of <unk>.
Timing for that.
Yes.
Michael.
Getting smarter about how we do that like so right now all technology.
Is it allows you to.
Allow access to based on your type of membership you had what prevents you get.
And we can start seeing fluctuation in demand in August cyclical Walsh and alternative and the technology. They are selectively we can serve actually opening up demand numbers, depending on cabin clubs, depending on what route.
And it would have been enough time increase at that particular building.
That's going to be like a switch on former members. What we will do is selectively pushing that out.
Based on availability based on behalf of steps have making profits and actually add the supply demand mix.
The next step of getting better open up that that percent multiple months. So that's what we're going to be.
Okay. Thank you.
And we have no further questions. Today. So my question is to hand back to kidney tissue for any closing remarks.
Yes, Thank you and first off everybody that joined the call. We appreciate you spending the time.
Just we look forward to our August .
Reporting of the second quarter, and we wish everybody a great day. Thank you.
Thank you to everyone who has joined US. This concludes the conference call and you may now disconnect your lines.
Okay.
[music].