Q3 2023 Blade Air Mobility Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to the Blade Air Mobility fiscal third quarter 2023 earnings release Conference call. At this time all participants are in a listen only mode. Later, we'll conduct a question and answer session and instructions will follow at that time.

As a reminder, this call is being recorded.

I would now like to turn the conference call over to Mr. Lee Gold Investor Relations you may begin.

Thanks, and good morning, Thank you for standing by and welcome to the Blade and mobility conference call and webcast for the quarter ended September 32020, we appreciate everyone. Joining us today before we get started I would like to remind you of the company's forward looking statements and Safe Harbor language statements made in this conference call that are not.

Historical facts, including statements about future time periods.

In two countries forward looking statements within the meaning of the private Securities Litigation Reform Act of 95.

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 there a steep island Lady disclaims any intent or obligation to.

These forward looking statements, except as required by law.

Today's call. We will also discuss certain non-GAAP financial measures, which we believe will be may be useful in evaluating our financial performance.

Reconciliation of the most directly comparable consolidated GAAP financial measures to those non-GAAP financial measures is provided in our earnings press release and Investor presentation.

Press release Investor presentation and our.

<unk> Form 10-Q are available on the Investor Relations section of our website at IR Dot blade dotcom.

non-GAAP measures should not be considered in isolation or a substitute for financial results prepared in accordance with GAAP.

Hosting todays call are Rob, we can call founder and Chief Executive Officer of Blade and will Haberman, Chief Financial Officer, I will now turn the call over to Rob Wingo.

Thank you Lee good morning, everyone. We are very pleased to deliver our first quarter of positive free cash flow and positive adjusted EBITDA, while maintaining rapid revenue growth in both the passenger and medical segments revenue in the quarter ending September 32023 increased 56% to $71.

$4 million versus $45 7 million in the comparable 2022 period, we achieved free cash flow of $1 3 million in Q3 2023.

$7 8 million improvement from Q3 2022, while adjusted EBITDA of $8 million in Q3, 2023 improved $5 3 million versus Q3, 2022 importantly, as we turned the corner to profitability. We are doing so without sacrificing revenue growth starting to passenger.

Short distance delivered another quarter of significant growth with revenue up 49% year over year, driven by our acquisitions in Europe and improvement across our entire short distance route network. We are especially pleased that our flagship urban air Mobility service Blade Airport enjoyed continue.

<unk> improved financial performance with strong revenue growth. In addition to positive flight profit contribution for the first time during Q3 2023 <unk>.

<unk> Airport is one of our most important growth vectors for the passenger business as it will be the very first use case for our electric vertical aircrafts EMEA or industry parlance, EV Tal, but the ramp up has required patients from both of you our investors and our management team. It's taken two years of steadily growing our passenger.

Your volumes glued offerings average check out price and see utilization to reach today's critical profitability milestone in Q4 2023 quarter to date, we've seen solid fee growth that we expect will unlock continued incremental profitability for airport in the future.

We have also made great progress in optimizing our aircraft capacity agreements to capitalize on our growing scale, enabling blade to benefit from the economic leverage of the more active fleet.

We're already seeing this translate to flight profit margin expansion in both our medical and passenger segments. This is a win win both for our operators and our customers as we direct more flight hours to our most reliable and efficient aircraft providers and jet. Another we also saw strong growth as revenue increased 49.

1% to seven 6 million.

Our growth across passenger coupled with our turn to profitability in the airport contributed to a significant 88, 7% increase in passenger segment adjusted EBITDA to $2 8 million for Q3 2023 on.

On the strategic front, we continue expanding our infrastructure footprint in Atlantic City, we partnered with Ocean casino to create an exclusive blade heliport, allowing our flyers to land directly at the resort charter services are available today and by the seat service Backstopped by Ocean Casino is planned for spring <unk>.

<unk> 24 in France at Nice International Airport, the opening of an on tarmac security checkpoint will enable our flyers to bypass crowded terminals and proceed directly to their commercial airline gate after landing on a blade helicopter. This will reduce the travel time between the blade helicopter arrivals.

And the commercial gate by 45 minutes or more for all of our European Urban Air mobility products, where passengers are connecting.

Two airlines in knees.

This is consistent with our infrastructure strategy around the world, we are able to leverage our significant passenger volumes and brand recognitions to strike partnerships with infrastructure honors that provide unique access to terminal space improving the passenger experience with limited cost. These arrangements are a win win for.

All parties and will provide an important strategic advantage as we began to transition from conventional rotorcraft to EMEA in the coming years, we made important progress on the EBITDA front, just last week as our operator for Blake, Canada, which operates as Hell, let yet placed an order for the beta technologies Alere electric vertical aircrafts, which is.

To provide quiet emission free air mobility service for Blade Flyers in Canada. This order is for the same aircraft that blade recently utilized during our first DVA tasks and the New York City area in Q1.

Now I will turn to medical where we delivered 65% organic growth driven by continued new hospital wins business expansion with existing hospital and strong end market growth. We continue to demonstrate the strong operating leverage in this business with medical segment adjusted EBITDA increasing 123.

8% to $3 3 million.

We're also excited to announce the launch of our new Oregon placed in service and operating that has been requested by a significant portion of our existing customers. This new business line, which goes live on December one brings us further upstream in the organ transplantation process by helping transplant centers to determine and Oregon as a match for a.

Recipient when paired with our existing logistics services, we can now provide even more seamless engagement simplify the communication process for our customers and increased our revenue per transplant.

The wider the breadth of our services, we offer our hospital clients. The more we can help them and the deeper we become integrated in their mission to save lives all of that will provide some additional details on the unit economics shortly.

As evidenced by this quarter's results we remain on track with our commitment to deliver a meaningful improvement in full year adjusted EBITDA in 2023 versus 2022, and we also expect further year over year adjusted EBITDA improvement in Q4 of this year.

Looking to 2024, we expect even better results with significantly improved adjusted EBITDA versus 2023.

We plan to provide guidance for both the full year 2024, and 2025 as part of our Q4 2023 earnings release with that I'll turn the call over to will.

Thank you Rob are turned to profitability this quarter highlights the results of our strong execution on growth initiatives, coupled with a relentless focus on cost efficiencies as we shrunk adjusted unallocated corporate expenses by 29%, while still growing revenue, 56% in Q3 2023 versus the prior year period.

We tactically optimized corporate overhead while staying focused on our customers. The maintain the seamless experience, we're known for and both our passenger and medical businesses.

I'll now walk through a few highlights from our business segments in the third quarter.

I'll start with medical where revenue increased 65% to $33 4 million in the third quarter of 2023 versus $20 2 million in the comparable 2022 period.

Approximately 45% of this quarter's growth was driven by the addition of new customers with the remainder driven by growth with existing clients as well as strong overall market growth as.

As discussed during last quarter's earnings call in Q2, 'twenty three we supported a non contracted customer on a temporary basis that should not reoccur. Excluding this customer Q3, 2023 would've seen low single digit sequential growth versus Q2 2023.

In addition to strong overall volume growth, we continue to see increases in flight hours per trip versus the prior year period as transplant centers have shown a willingness to fly farther to enable a transplant.

Medical segment adjusted EBITDA was $3 3 million in the current quarter, an increase of $1 9 million or 124% versus $1 $5 million in the comparable 2022 period, we're happy to see EBITDA growing faster than revenue, which reflects growth coupled with our ability to bring in dedicated aircraft capacity behind our <unk>.

New customer contracts this lowest costs and increases reliability for our customers by eliminating aircraft repositioning, while enabling better flight profit margins for blade.

With respect to the forward outlook for our medical segment, we expect to average low single digit percentage sequential growth in the coming quarters, but keep in mind that Q4, historically has exhibited mild seasonality and thus we expect revenues to be flat or lower sequentially for this Q4, we expect slight margins in the 18% to 19% range for Q4.

24, with continued steady improvement towards 20% plus in the future medical SG&A should grow in the low single digits sequentially over the next couple of quarters as we ramp up our new Oregon matching service on that front, we're pleased to announce the launch of Trinity, Oregon placement services or tops with two key customers.

On December one 2023, and this new role, we will benefit from fixed annual contracts typically between $5 million and $1 $5 million per year, depending on the size of the transplant center over time, we hope that many of our 70 plus existing contracted customers will choose to vertically integrate with us for Oregon placement as well.

And we also expect that some centers with other transportation providers would utilize these services.

Our two launch customers will cover the fixed costs for this new business, while we expect contribution margin to be in line with our overall medical average in 2024 as we scale up.

Finally for medical there seems to have been some confusion in the marketplace recently accuray perfusion device manufacturer began to bundle aviation services with their device, we estimate that 10% to 15% of our trips. This quarter utilized this specific device, we've not lost a single contract to this.

This company that we take all competition seriously at the end of the day, we found that our pricing can be as much as 50% lower given a lower cost platform and our scale in terms of trips geographies and number of dedicated aircraft as such we believe that the impact to our business will be minimal.

Turning to the passenger business and short distance revenues were up 49% to $30 4 million in the third quarter of 2023 versus $20 4 million in the comparable 2022 period.

<unk> was driven by our acquisition of Blade Europe, which closed on September one 2022 growth in our blade airport business and strong growth across the rest of our <unk> portfolio as Rob mentioned airport was a positive contributor to flight profit for the first time, meaning that it covered all costs related to air and for terminal ground transportation for our fliers.

Europe was soft relative to our expectations slightly dragging down our adjusted EBITDA This quarter.

Flexibility is a key benefit of our asset light model and we're taking this opportunity to rightsize, our European business for the opportunity ahead, optimizing our cost structure and accessible aircraft fleet to match demand, we'll have more to share on this front as part of our Q4 earnings release.

In your segment slight profit increased by $3 3 million or 54% to $9 4 million in the third quarter of 2023 from $6 1 million in the same period of 2022.

This increase was attributable primarily to the acquisition of Blade Europe, which contributed in only one month of the 2022 period.

Also contributing were higher jet charter volumes increased seat utilization and average seed pricing for plate airport and profit growth across the rest of our U S short distance portfolio.

All of this led to an 88, 7% increase in passenger segment adjusted EBITDA to $2 8 million in the third quarter of 2023 versus $1 5 million in the prior year period.

Looking ahead for passenger and an effort to tighten our focus on the highest growth and most profitable business lines, we opted to discontinue our by the seat jet service between New York and South Florida as a result, when coupled with an expected year over year decline in jet charter volume, we expect jet slash other revenue to be approximately $2 million.

Lower than Q4 2023 versus Q4 2022.

In short distance, we expect revenue to increase in Q4 in the low single digits year over year.

Overall passenger segment slight margin should improve by 100 to 200 basis points year over year next quarter, given airports turned to profitability.

We continue to optimize corporate costs with adjusted unallocated corporate expenses and software development, which relates to the overall blade shared services platform decreased $2 2 million or 29% in Q3 2023 versus the prior year period. Despite our significant growth. We're pleased to see the play's underlying operational platform.

<unk> is creating economic leverage and we continue to look for opportunities to optimize our cost structure to.

To drive further operating expense leverage as we look to the fourth quarter of 2023, we expect total adjusted unallocated corporate expense to remain roughly flat sequentially.

When you roll up the segment level Q4, 2023 guidance. We've just walked you through you should arrive on a consolidated basis at approximately high Forty's revenue fight profit margin in the mid to high teens and adjusted corporate expenses in the $13 million to $15 million range. This would result in solid year over year improvement in adjusted EBITDA in Q2.

As Rob mentioned, we also expect to see significant year over year EBITDA improvement for full year 2024, and we plan to provide a detailed outlook for the full year 2024, and 2025 as part of our Q4 2023 earnings release with respect to our balance sheet. We continue to have zero debt and approximately 100.

$73 million in cash and short term securities as of the end of the third quarter of 2023, an increase versus Q2 2023.

Given our improving financial performance, we expect a significant majority of our cash to be available for acquisitions and closing our hard work continues as we remain committed to expanding flight profit margins optimizing our cost base and adding profitable new business lines like our new organ matching service to maximize free cash flow generation.

With that I'll turn it back over to Rob.

You will ensure we are proud of the work the team did to deliver outstanding third quarter results and our first positive adjusted EBITDA and free cash flow quarter. We look forward to building on this momentum as we continue to drive towards overall corporate profitability, we look forward to providing full year guidance for 2012.

Four in 2025 during our Q4 earnings announcements.

I'll now turn it over to Lee for questions.

Thanks, Rob we'll start by taking questions from the analyst community will follow with a few questions from the say Q&A platform I will now turn it over to the operator for analyst questions.

Thank you.

To ask a question. Please press star one one on your telephone and wait for your name to be announced.

Towards draw your question Press Star one again.

Yeah.

Our first question comes from the line of Hillary with Deutsche Bank. Your line is now open.

Hi, Thanks for taking my questions and congratulations on a great quarter.

I just wanted to get a better understanding of how your new business was.

You said.

The two contracts 500, I think you said 500.

1 million to $1 5 million, how long how long are the contracts and how long do you expect.

Contract would be in general.

And then also how.

Yeah.

How do you actually match the Oregon.

Potential recipients.

Exactly.

That.

Hey, guys just wanted to get a better understanding of how you do that.

Thanks for the question Hillary will here so.

So really exciting we're essentially moving upstream in our process with our customers. So right now once the center has accepted an Oregon. That's one blade gets pulled in tools to help with the logistics now we're going to be part of the conversation at the moment that the center received an offer so essentially what <unk>.

<unk> right. It's the organ procurement organization is responsible for coordinating with the potential donor.

They're uploading some information about that donor and the donor organ to the database and then that database is matching organs to pre central recipients based on the database and making offers that now when blade will be involved working on behalf of our customers to continue.

Through the various matching criteria that they may set to see if they wanted to accept that offer for an Oregon. So it's going to help in a lot of different ways.

One is just going to streamline the process for communication, but two youre going to get more of a heads up when a potential oregon could be coming down the pipe. So it allows us to be much more efficient on logistics side in terms of picking aircrafts that might need less repositioning and it'll be lower cost for the center. So there's a lot of benefits.

Doing this both for the center and for our business in terms of efficiency and on the unit economics side Youre right. The contracts tend to be between $5 million and 1 million $5 a year tipping.

Typically annual commitments is what we're going to see in this business and it's based on the expected volume of organs that we think that center is going to access.

So that's kind of how we do the pricing and ultimately youre getting dedicated $24 seven resources from blade to help you make that evaluation and Thats, what youre paying for it and then one thing its Raj speaking the more we're integrated with the hospitals the more services, we provide that more balanced.

It provides us to continue providing our air transport services for the hospitals.

It's a big power driver for increased contracts and happy customers.

And did I did I missed the second part of your question.

No no no that was that was very helpful very detailed and and then you can understand.

Congratulations it sounds like an exciting opportunity.

And then my second question is.

He then opening.

<unk> security checkpoint at the airport. It also sounds like something that both passenger and would really appreciate is that something that you could work with me in New York as well sometime in the future.

Sure.

So let's talk about Europe.

No cost to us we have this is a real competitive edge.

It is a concession agreement, obviously press supply intercompany between Monaco.

And so the ability for people to fly either into needs from New York or wherever.

Or when they return to be able to go from straight from Monaco State of New York and literally land by helicopter bypass the internal security data security on the tarmac illustrates their gate will save literally 45 minutes and obviously this is something that we're keenly focused on in New York, We have Barry.

<unk>.

International Airport helicopter lounge.

Country at Newark International Airport.

And we're obviously looking forward to working with the Port authority and <unk>.

Our airline partners to see if we can do something similar here, but obviously that will take some time.

Okay, sorry about that.

Something that you can.

I'll take that.

Could happen potentially.

No I think everyone wants it.

Good question.

Okay, great. Thank you so much.

Thank you thank.

Thank you.

Please for our next question.

And our next question comes from the line of Jason <unk> with Oppenheimer.

Everyone is doing.

So few questions.

Well theres elaborate a little more than a single customer you were talking about was that was that medical or on.

Passenger side.

Like can you elaborate a bit there.

That's the first question and the <unk>.

Second question. It seems like obviously, there's a lot of concern about consumer spending it seems like.

Theres continents, maybe like a sweet spot for you that you are.

<unk> seen certain folks maybe downgrading from some services to you.

But.

Maybe Rob your comments about kind of what youre seeing kind of overall demand relative to consumer spending levels.

And then I guess.

Obviously, while investors.

I presume will be applauding.

The move to breakeven in the quarter and kind of the.

<unk> outlook for the fourth quarter are you still have a lot of cash what should investors assume you do with the cash given that.

Even if you lean into some growth next year, you won't spend that much money. Thank you.

Thanks for the great questions, Jason I'll take the first one on the temporary customer was in our medical business. This is what we talked about last quarter, we had a non contracted customer that needed. Some help turned out to be material to that quarter is not reoccurring they've returned.

They have essentially.

Dedicated local operator to them that they've used for many years and they are back to using them, but whenever people have a temporary disruption we're always there to help.

But but wanted to give you the guidance if theres still would have been low single digit sequential growth. If we hadn't help them out during the Q2 period.

I'll, let Rob take the one on consumer spending.

The cash as well alright so.

But let me take the cash one first yes, we.

Added to the cash balance.

Of our company this year.

171 or roughly.

And we hope to continue doing that in the years to come. So we do have a lot of cash the good news from our perspective is obviously the debt markets are close valuations in the private side are down it has ever been a better time for us to make.

Purchased strap on kind of.

Bolt on asset acquisitions or.

Medical where we see a lot of opportunities and maybe some other places now with time, but it has to be something that low risk in terms of integration accretive day, one and really where the platform. We built can supercharge the value to us and we're looking at those and we're seeing those every day. So that's something that's new.

Number two we are.

Our economic value animals, we do not believe the share price represent accurately the value of these assets.

If I thought there was a way at some point to do a stock buyback, where our liquidity wasn't compromised.

That's something we would entertain requires different different secondary financial technologies, and a different kind of environment, but we are open to any type of tool in our toolbox that we can accelerate.

The stock price to start representing the average represent accurate b or excuse me our assets.

Accurately represent the value of our assets because right now it's just not doing that but obviously today is a great day in terms of proving that we can actually add free cash flow to the company and then your net company question, whether the pizza that consumer spending and we're spending on the consumer spending side.

Here's what we're seeing.

The 27 million people that go to the airport each year that is such a huge or two in front of the New York City airports that is such a huge Tam Jason.

I'm not seeing it there and back we're seeing increased average check at prices.

Now that are lowering our.

In a matter of the number.

Passengers that we need to be positive cash flow for each flight, where we are seeing in a bit.

It's definitely a shift.

This summer or leisure routes like the Hamptons.

Little bit from charter to buy the seats. So I definitely saw the kind of let's call. It the ultra high net worth guys, who might be charting their own helicopters suddenly that own their own.

Hello captors, when they are flying alone as opposed to a family buying a seat on blade. So on one hand, you can say that.

Reduce the.

None of our charters, but an increase.

Our most important business and one of the potential for the highest margin highest Tam which is our by the seat. So we did see it a little bit there. So any other follow ups on that Jason.

Yes.

And then on the jet side. This is obviously like a pretty good quarter I mean, how are you thinking inkjet and other.

How are you thinking about that going forward.

Jason it's it can be variable and difficult to predict.

On the one hand, you have seen some press theres definitely some corporate customers that want to charter and maybe you see a little bit less if people are using corporate plans and you see people wanting the and in M&A.

Flying with a tail that can't be track, specifically to them, but it's hard for us to predict that business and so.

So.

I think it's not going to be quite as strong in Q4, as we talked about in the script.

But it's a great business and at the end of the day, it's incremental flight profit dollars for US Jason Let me take a slightly more optimistic.

Position, then my colleague here, but.

But we are being cautious about it there are tons of companies out there that wrap that basically went out and bought a lot of aircrafts to serve is essentially what was pandemic era spending okay. So a lot of these jet people a lot of companies out there raised a lot of money to increase the jet business thinking that.

This will continue past the pandemic enough for a couple of those companies that ended up being essentially the <unk> of the year alright that those aircraft are now basically searching for a mission. So I actually think there is a very good chance havent seen it yet be cautiously optimistic that our big winter.

Winter season, North South that we may see a lot of availability hopefully better prices can count on it but it's definitely something that.

We see moves in the market out there are a lot more availability because of this big ramp up by a number of companies that you are well aware.

Thank you.

Thank you one moment please for our next question.

And our next question comes from the line of Bill Peterson with Jpmorgan.

Yeah, good morning, nice job to achieve our free cash flow milestone.

Two questions first on short distance so.

I think I'm guessing that profitability is now driven by the mature out west 30 to JFK.

I guess, how should we think about the profitability for.

Premium that is true how should we think about the path of profitability for unprofitable routes and guessing Newark, but.

As you know our profitable how should we think about expansion into other airports may be laguardia, maybe using these 34 things like that.

Well I'll start just on the profitability front that the whole airport business was slight profit positive in the quarter. So that's not just covering a flight covering the other cars on the ground and everything.

Though the longest standing route from the west side of Manhattan JFK is the most profitable.

We're now seeing profitability from from all the routes.

Ones that haven't had as much time, they're not contributing as much but we're really excited at the progress that we've made and it's been a long time coming and we've got to be really patient and as we've talked about in prior calls we're coming at it from both angles, we got more passengers flowing through the system.

But in addition, we're seeing passengers are left to pick more flexible fare options, they're going for upgrades, it's raising that average price per seat, which makes it easier to get to that profitability level too. So we're really pleased that it's across the routes.

As we talked about in the script still seeing really strong growth in the number of seats flown quarter to date. So the best is yet to come and I'll, let Rob talk a little bit about.

<unk> expansion, yes.

Let's take a look at it and there's no question.

That our JFK route as the flagship for absolute blade is consistently profitable it's high margin and it also offers the biggest time savings, especially from the west side.

Okay.

Literally saving up to two hours for people, who would normally drive from the west side.

Sure I think it is.

Fine.

It has profitability.

Side to West side, I think it would be very careful because their eastern east ICU JFK, if theres a little bit of cannibalization, we have to be careful about where people are in between both of those so we're kind of program and those carefully. So our goal is really like get this into profitability and know that they were saying that annualized.

<unk> parts.

They may not be flying as much and new routes Laguardia as they start getting getting through all their construction is a lot of construction there we needed goods service on the ground and right now if we can get even a helicopter to your airline and assuming if thats great to have you gone through 510 minutes of traffic that's longer than you're flat.

And right now Thats, where we are right now so we're looking forward to laguardia, finishing a lot of their construction.

You know that we also.

We opened one of the first view.

Hello ports in.

In New Jersey.

And.

That one we're using charter only we see some opportunity or very low risk by the <unk> potentially.

Also looking hard.

In Westchester, New York, where there are a lot of commuters coming from the greater Connecticut, Westchester area again don't expect us to sit and invest in that compromise profitability. We think there are ways of us starting that in kind of a risk free basis, we heard about Atlantic City. That's a backstop deal. So we do not take risk and.

So were really looking hard at ways, though.

Kind of starting new routes that can add on to our platform without incremental costs, where we are not taking.

Any type of.

Risks in terms of utilization or minimizing that where it makes sense to actually take that lead and get into something so growth is really important to us. So I do see a lot of opportunity here and also as we finish our integration in Europe, which is our number one priority seem to other opportunities in Europe like Milan and.

Elsewhere and remember Bill.

With the asset light model.

It's really easy and low cost for us to add frequencies to routes that are going great. So west 30, particularly in the afternoons to and from JFK on a Thursday Friday I think one of the first things you will see us increasing the frequency so that you've got an option.

Every 20 minutes every 10 minutes, that's something Thats easy for us to do with the asset light model and given that you already have a base of profitability during those day parts.

Not taking risk on dragging down your overall profitability. So there is lots of options for us.

Yes, thanks for the comprehensive answer.

On the metal mobility, you spoke a little bit about competition, but I guess, it's been a while since we've kind of heard how you see your share trends or maybe the market opportunity.

As this market has grown as you've kind of pointed out in your slide deck, how should we think about your current share.

Forward market opportunity.

In this space as well as your competitive moats.

We think we have a lot of opportunity to grow in a market thats growing really fast so she.

<unk> is probably kind of core heart liver lung air transportation, We think we're probably in the high <unk> in terms of our share there where we've been grabbing incremental share is really through vertical expansion. We're doing a lot more of the ground ourselves now we've talked about how we have some owned via.

Calls in areas of density we pay those back in just a matter of months and then we're making 30% margins on the ground, we're making the experience much more integrated for our customers and now with the introduction of tops. We've got another service that we can provide those same customers just to make their lives easier and make them.

Smoother. So I think you have got those vertical expansions that are already in progress that are above and beyond just core heart liver lung air transportation and I think theres, a big opportunity to continue grabbing share.

It's a very fragmented market as we've talked about at length and as we have more scale in aviation that means our costs are going down that means we can have more aircrafts that are dedicated 100% of blade, we can put more hours on those aircrafts.

And that ultimately makes the cost that we have to charge, our transplant center lower and makes us much more attractive. So I think we're really firing on all cylinders and Rob talked a little bit about there's definitely some opportunities for for horizontal expansion into other critical cargo or thinking about.

<unk>, we could makes it could make the medical business, even more efficient and so we're exploring all of those things simultaneously in a market.

We've seen months, where heart liver lung transplants are growing just units and mid to high teens.

So the market itself is incredibly healthy and as we talked about in the script a little bit we're still seeing huge growth in number of flight hours per organ transplant centers are getting more aggressive so lots of different growth vectors that we're excited about frankly, we're just trying to make sure that we keep up and we give our customers that fantastic service that we are.

We'd say, yes, because that's the most important thing to our long standing contracts with customers that when we pick up the phone we have a plan for them and it can be there on time.

Okay. So if I can sneak in one more I mean, where the shares are trading effectively had cash at this point.

What type of M&A or other opportunities for expansion look most attractive now passenger like outside of the U S.

More vertical integration opportunities with meta mobility cargo something else, we're not thinking about.

Sure let me.

Let me take that.

On the passenger side, we are now in the three largest.

Vertical transportation markets in the world.

Northeast U S Southern Europe.

In Canada, then obviously, but we have a small joint venture.

Yes.

So until electric vertical aircrafts are here and we have more landing zones I can't tell you we see anything.

Telling yet on the passenger side.

And I think there is so much addressable market each of our passenger verticals were.

As I said the three most important largest opportunities in markets that are today that.

Our best our best use of time and money is making sure that that we can.

Kind of build those into what they can be with expanded routes on a profitable basis.

So the number one area that I see and we see as a company in terms of M&A is on leveraging our medical business and that could be horizontal expansion in the existing <unk>.

Existing medical business like you see with tax, which I think is going to give us a hell of a lot more.

Firepower in terms of offering a compelling offering to our hospital clients and being able to maintain and extend those relationships going forward.

But also we'll engine critical cargo it.

It could be radioisotopes, we can move into.

Other aspects of the Oregon business, we're not in kidneys, yet at next slide out, but a lot of our logistics services could be useful to that so clearly when you're moving as many pieces of critical Carnival Carnival 24 hours a day there are other things to move and things are moving fast and people want things now there's parts that it needs to.

Be sent on demand for machinery or even aviation itself. So we're seeing those opportunities every day. Some of them are buy side. Some of them are in size, but we clearly have the balance sheet to do those and to do those quickly.

<unk> necessarily any type of incremental debt.

Okay. Thanks for all the insights.

Thank you.

Thank you one moment please for our next question.

Yeah.

And our next question comes from the line of Nicolai with Citi.

Great. Thanks, good morning, everyone.

Just a couple of questions Firstly, a few financials.

I think you mentioned for better mobility outlook for 20% flight margins, there's a little bit better than what we've talked about in the past around mid teens. So hoping you can you could talk a bit more about that and then secondly, I was hoping you could quantify the drag from Europe on flight margins this quarter as well.

Sure great questions.

The medical side, it's really all about more reliance on those dedicated aircrafts.

When we grow really quickly like we have been growing well be servicing an significant amount of our demand through the charter market.

Then what we do is behind those contracts with hospitals will dedicate supply that's located in the right locations to eliminate repositioning and Thats. How we can you've seen those quite margins creep up quarter by quarter and that's how ultimately we can start to get above that 20% level and the other thing that we talked about.

In the past is bringing in dedicated vehicles, we use a lot of third party ground. When we're growing quickly, but we have so much scale and a lot of markets now it can be a lot more efficient a better service, we can provide and at a lower cost to our customers. If we go ahead and buy our own license sirens Suvs.

And then provide that ground transportation ourselves and then that gets us to kind of 30% plus slight profit margins on the ground portion. So theres a lot of different levers that we can pull and tops.

Once we get to scale, which we talked about kind of covering our initial fixed cost with the first two customers that are launching in December but getting to average medical quite margins and the full year 2024, that's going to pull up our margins a little bit as well to once we get to scale. There. So a lot of different things.

They're helping us get to those good solid margins and then you see our overall SG&A in that business not growing nearly as quickly so youre getting that operating leverage.

Does that answer your question on that.

Yeah, perfect and then maybe the flight margin drag from Europe, this quarter and kind of if you could quantify that.

Yeah, So Europe actually had a little bit better flight profit margin than the corporate average.

It's a good guy on that front, where it was a little bit disappointing for US was just on the overall cost side, we've talked about this.

There were three different businesses that needed to be integrated for a lot of reasons.

We decided to be more cautious on that integration process, which increased our costs. So that was really the disappointment were not going to go into sort of specific numbers on a region in terms of EBITDA contribution.

We're really on the right path there in terms of right sizing the cost structure and right sizing our fleet availability for the opportunity.

Yes, I think I would say just to add on to that when you think about generally.

Sure.

Cost per seat and your cost of aircrafts that back that.

That is one of the best margins in our passenger segment. The cost side is a lot easier to manage than improving our flight margins in terms of just what you charge versus the cost of the aircraft the cost of the aircraft that's a very difficult thing to kind of.

Now in terms of kind of the cost below that line integration and common shared services, that's something thats.

A much easier lift so.

Definitely optimistic looking forward with that business for 24.

That's very clear and helpful. If I could just sneak in one last question on Blair Blade Airport.

The momentum Youre seeing including.

Thus far in Q4 for the seat growth I'm. Just curious one do you think you're taking share from from rideshare.

And second.

Just maybe just talk about.

Repeat flyers and kind of what youre seeing there in terms of that incremental momentum you're seeing.

Sure I'll start maybe we'll do it on the rupee Flyers that has some data data on that.

But.

Look we are one of one our competition is ground, okay, and if you take a look at the average cost of.

<unk> right now an amount of time. It takes you kind of a newer black that goes between 195 are way over $200 with an airport passed we're down to kind of $95 in terms of price.

So that is really the alternative that people are looking at but I'll also mention that from a <unk>.

Marketing perspective, we're getting those people to motive, we have a marketing venture with Uber, where if you are going to have from the airport or to or from a hotel you will actually get us get served.

<unk>.

And.

And at that allows you to defer your car to a blade labs do take your flight, which is extremely Colby that's exactly where you wanted to do what youre sitting in traffic and all of a sudden you get in the car and you're worried about how long it can take to the airport you want that certainty.

And you have that ability right through the use of our app to use our marketing message and get and have a diversion and so and then in terms of the repeat buyers who are very happy with the amount of repeat buyers I think once someone's got a blade.

Over one over one time kind of too.

Two going to going forward I believe the numbers going vascular exception is actually about five times.

Once they've gone past that perhaps from the second 0.2nd second trip and then will can give you just give you some other views on.

Repeat usage.

Yeah.

We're not going to give sort of specific numbers, but what I'll say is that everything that we track the number of new customers that we're adding every quarter, that's increasing substantially year over year, the actual number of customers.

Is increasing the cost that we pay to acquire those customers is going down and we're seeing when we measure in cohorts of newly acquired customers. We're seeing those cohorts when we measure over the same period of time flying more as.

As we continue to re target folks to supply again, and that's the most important input rates our lifetime value to customer model. How many times can we get those folks supply. So the marketing team has done a fantastic job, making sure that we do continue to take share from Brown, we give people flying again, and again and we get people buying.

Our airport passes which were $795 a year you can be fine for as low as $95 a seat and now youre, beating <unk>. Most of the time, if you've got that airport passed so really excited to see the metrics going the right way wont be sharing kind of metric level, CPA and ltvs, but everything is moving in the right direction.

Terrific, that's all very helpful. Thanks.

Yes.

Thank you one moment please.

Our next question.

Our next question comes from the line of Jon Hickman with Ladenburg Thalman.

Hi.

All my questions really have been asked and answered except.

Is the earn out from the medical side is that over now or is that going to continue.

This year is the last year of the earn out.

So there we will do some again in Q4.

Yes, we've been accruing it during the year.

And it's been added back to EBITDA is related to the transaction.

So you'll continue to see that accrual just for the next quarter.

It will be paid in cash.

In the next year, but you won't see it again.

Okay. Thanks.

Thank you.

This concludes our analyst Q&A I will now turn the call back over to Lee of bleed.

Thank you we're going to start by taking a few questions first say Q&A platform.

A number of questions and we're going to combined those that have similar themes. Our first question is how defensible is blades mode, such as your air rights and first mover advantage.

I'll take that on I. Appreciate the question I appreciate the opportunity to deal with to answer questions from people on the same platform.

We built this company to create the ecosystem from urban Air mobility, and all the key markets in the world and infrastructure is a key part of that because whether its helicopters today or electric critical aircraft Tomorrow. If you do as many flights as we do in new.

New York Airport services, the largest operating urban air mobility effort in the World right now in terms of number of passengers you need places to aggregate your customers.

SaaS luggage and safely get people on their aircraft and turn those aircraft time and time again really quickly sometimes it five minutes.

And in New York City, the biggest market. We have you have the blades from our lead side the blades from our west side. We in fact expanded what we actually have a dedicated departures and arrivals flash on the west side and that is exclusive.

In terms of however, long the operator has been is going to be there. They have been there for over 30.

Eight years and then we also have kind of geographic exclusivity out to save where you have.

Certain terminals, where you just can't build another facility. So we believe our competition is going to have to go through general aviation or by other means of dealing with their passengers do you want group, but you need your own dedicated space.

Obviously, what I mentioned in Europe with these.

The concession agreement that allows people to apply for Monaco cities. So when you think about people connecting it needs.

That is a competitive mode as we have that conversion ramonica cities, where we can actually stay at an incremental 40 minutes for people to land and then go straight to mitigate by doing security helicopter side.

So this is a core strategy going forward and as we move Burma helicopters to electric vertical aircrafts that this is something that the.

The competition in electric vertical aircrafts will be using electric vertical aircrafts I don't view that it's better.

That's going to be something that's going to be important and something that has real strategic value that you can capture and kind of quarter to quarter numbers.

Thank you. We also had a few questions on shareholder value.

<unk> doing to bring value to shareholders and what are some reasons that shareholders shouldnt diverse given the performance.

Yeah, Great question, a couple of thoughts on this and this quarter in particular demonstrated that our platform works. It can generate free cash flow and positive EBITDA the right scale and the end of the day. The most basic way, we can increase shareholder value by making money and that's exactly what we're doing this is our number one focus and as discussed earlier.

We're committed to building on this great progress and we really all believe that the best comp.

We're in a fortunate position, where we have more cash and we believe we'll need to execute on the organic growth plan and we do see as Rob talked about early significant opportunity for M&A with a focus on ways to diversify and enhance the profitability of our medical business and what I'd say is even owning a small number of aircraft makes sense financially.

Or could help us win a really important customer we consider that as well we're constantly evaluating opportunities in this genre, but what I would say the bar is extremely high to ensure that any acquisition will be immediately accretive I'll.

Add on to that as well outside safety, our number one priority is creating value for our shareholders and our employees period, our stock price does not reflect accurately the value of these assets I think that is clear not only when you take a look at some of the parts valuation or if you just take a look at the fact that we're at.

Adding cash to our balance sheet with free cash flow. This quarter I think we're going to continue adding value by doing by kind of very conservatively expanding these routes and taking advantage of our addressable market and our existing routes and also.

Really executing against that.

Some of these bolt on acquisitions that are accretive day, one that are kind of in our minds low risk and do not require.

Incremental overhead that can utilize our shared service platform.

The cost side. So we got to do is keep executing and keep this path to profitability going that you can only control we control and then the share price will better reflect that ultimately.

Our last question is on shallow less shareholder question is what is the updated timeline for EMEA deployment any update on data technology, we're very excited about.

How quickly the certification process is going and in fact, I think youre going to be seeing a number of tests very soon.

In major metropolitan areas, including our own here in New York.

And I think that will catalyze investor interest I think it will catalyze industry and again the reason why our transition to EBITDA is so important is that it's not that it's going to get you to the airport and a quicker it will still be about five minutes and not going to be that need that much cheaper, it's because it's quiet.

Mission freeze also great to get.

The public and.

Stakeholders behind it acquired is the unlock too.

Wow, you to open more landing zones, and any payer landing zone is a brand new business Alright, we have east side West side ability Atlanta Wall Street, if we had incremental landing zones in Manhattan, We believe the growth could be exponential same thing goes for.

Europe.

And that's why we're excited about that ability to unlock places Atlanta I can if I can maybe if I can have a landing zone that you can walk across the street to that's a hell of a lot more valuable than what you have to.

Either.

Jump in a cab to get to that five or 10 minutes away.

This concludes our question and answer session. Thank you for joining the blade Q3 2020 earnings release.

Ladies and gentlemen, thank you for participating this concludes today's program and you may now disconnect.

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