Q2 2024 Surf Air Mobility Inc Earnings Call

August 14, 2024

Speaker Change: Thank you for standing by. At this time I would like to welcome everyone to today's Surf Air Mobility second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Operator: second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Operator: Air Mobility second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star one on your telephone keypad. Once again, that is star one.

Operator: After the speakers are marked, there will be a question and answer session. If you'd like to ask a question during this time, simply press star one on your telephone keypad. Once again, that is Star One. Thank you.

Speaker Change: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star 1 on your telephone keypad. Once again, that is star 1. Thank you. I would now like to turn the call over to Sam Levinson. Sam, please go ahead.

Operator: Thank you. I would now like to turn the call over to Sam Levinson. Sam, please go ahead.

Operator: I would now like to turn the call over to Sam Levinson. Sam, please go ahead.

Sam Levinson: Thank you, operator.

Sam Levinson: Thank you, operator. This is one of Surf Air Mobility's second quarter, 2024. Ernie's call. I'm joined today by Deanna White, Chief Operating Officer and Interim Chief Executive Officer, and Oliver Reeves, Chief Financial Officer. Our earnings results can be found on the SEC EGGER website and on our Surf Air Mobility Investor Relations page at investors.surfair.com. During this call, we will discuss our outlook and expectations for future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or other similar statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from those views expressed today.

Sam Levinson: Welcome to Surf Air Mobility second quarter 2024 earnings call. I'm joined today by Deanna White, Chief Operating Officer and Interim Chief Executive Officer, and Oliver Reeves, Chief Financial Officer. Our earnings results can be found on the SEC Edgar website and on our Surf Air Mobility Investor Relations page at investors.surfair.com.

Sam Levinson: Thank you, Operator. Welcome to Surf Air Mobility's 2nd Quarter 2024 Earnings Call. I'm joined today by Deanna White, Chief Operating Officer and Interim Chief Executive Officer, and Oliver Reeves, Chief Financial Officer.

Speaker Change: Our earnings results can be found on the SEC EGGER website and on our Surfair Mobility Investor Relations page at investors.surfair.com.

Sam Levinson: During this call, we will discuss our outlook and expectations for future performance. These forward-looking statements may be preceded by words such as "we expect," "we believe," "we anticipate," or other similar statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from those views expressed today. Some of these risks have been set forth in our earnings release and in our periodic reports filed with the SEC.

Speaker Change: During this call, we will discuss our outlook and expectations for future performance.

Speaker Change: These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or other similar statements.

Speaker Change: These statements are subject to risks and uncertainties, and our actual results could differ materially from those views expressed today.

Speaker Change: Some of these risks have been set forth in our earnings release and in our periodic reports filed with the SEC.

Sam Levinson: During today's call, we will present both GAP and non-GAP measures. Additional disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures, are included in the earnings release we issued earlier today, posted on the Surf Air Mobility Investor Relations website, and in our findings with the SEC.

Sam Levinson: Some of these risks have been set forth in our earnings release and in our periodic reports filed with the SEC. During today's call, we will present both GAAP and non-GAAP measures. Additional disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures, are included in the earnings release we issued earlier today, posted on the CERF Air Mobility Investor Relations website, and in our findings with the SEC. I'll now turn the call over to Surfer Mobility's Interim CEO, Deanna White. Deanna?

Speaker Change: During today's call, we will present both GAP and non- GAAP measures . Additional disclosures regarding non- GAAP measures , including a reconciliation of GAP to non- GAAP measures , are included in the Ernie's release for issued earlier today, posted on the Surf Air Mobility Invest relations website, and in our

Sam Levinson: I'll now turn the call over to Surf Air Mobility's interim CEO, Deanna White. Deanna?

Diana White: I'll now turn the call over to Surfer Mobility's Interim CEO , Deanna White. Deanna?

Deanna White: Thank you, Sam.

Deanna White: Thank you, Sam. I would like to welcome everyone who has joined our call this evening. As many of you know, I have been with Surfshare Mobility since 2021 and previously served as the Chief Financial Officer. Approximately 90 days ago, I became the Chief Operating Officer and Interim Chief Executive Officer. I know the organization well and understand our opportunities to lead innovation in our industry. I am excited to be here to execute our strategy.

Deanna White: I would like to welcome everyone who has joined our call this evening. As many of you know, I have been with Surf Air Mobility since 2021 and previously served as the Chief Financial Officer. Approximately 90 days ago, I became the Chief Operating Officer and Interim Chief Executive Officer. I know the organization well and understand our opportunities to lead innovation in our industry. I am excited to be here to execute our strategy.

Diana White: Thank you, Sam. I would like to welcome everyone who has joined our call this evening.

Diana White: As many of you know, I have been with Surfshare Mobility since 2021 and previously served as the Chief Financial Officer.

Diana White: Approximately 90 days ago, I became the Chief Operating Officer and Interim Chief Executive Officer.

Diana White: I know the organization well and understand our opportunities to lead innovation in our industry.

Diana White: I am excited to be here to execute our strategy.

Deanna White: Let me start by noting how pleased we are with the financial results of the second quarter. Revenue for the quarter exceeded our expectations and rose over 13% year-over-year on a pro forma basis. Adjusted EBITDA results were materially better than our expectations, with an adjusted EBITDA loss of $11.8 million, as compared with our expectations of a loss of $16.8 million.

Deanna White: Let me start by noting how pleased we are with the financial results of the second quarter. Revenue for the quarter exceeded our expectations and rose over 13% year-over-year on a pro-forma basis. Adjusted EBITDA results were materially better than our expectations, with an adjusted EBITDA loss of $11.8 million, as compared with our expectations of a loss of $16 to $18 million.

Diana White: Let me start by noting how pleased we are with the financial results of the second quarter.

Diana White: Revenue for the quarter exceeded our expectations and rose over 13% year-over-year on a pro-forma basis.

Diana White: Adjusted EBITDA results were materially better than our expectations.

Diana White: with an adjusted EBITDA loss of $11.8 million as compared with our expectations of a loss of $16 to $18 million.

Deanna White: Let me take a moment to address the important announcement we made yesterday related to our new venture with Palantir Technologies. We have been working with Palantir since 2021. We have been working with Palantir and analytical tools across all three of our air travel brands. Going forward, we will form a new venture with Palantir. Surfair Technologies LLC to further develop, market, and sell a software platform solution for the advanced air mobility industry. at the center of the solution that Surf OS, a category-designing operating system, and an all-in-one holistic suite of software tools to enable operators to more efficiently run their businesses.

Deanna White: Let me take a moment to address the important announcement we made yesterday related to our new venture with Palantir Technologies. We have been working with Palantir since 2021, and we use their analytical tools across all three of our air travel brands. Going forward, we will form a new venture with Palantir, Surfair Technologies, LLC, to further develop, market, and sell a software platform solution for the advanced air mobility industry. At the center of this solution sits SurfOS, a category-defining operating system and an all-in-one holistic suite of software tools to enable operators to more efficiently run their business.

Diana White: Let me take a moment to address the important announcement we made yesterday related to our new venture with Palantir Technologies.

Diana White: We have been working with Palantir since 2021, developing the best software and analytical tools across all three of our air travel brands.

Diana White: Going forward, we will form a new Venture with Palantir.

Deanna White: Components will include Flight Distribution, Airline and Charter Operations, Revenue and Demand Management, business intelligence, financial reporting, and customer service. Surf Air Mobility will become the first customer of surf air technology, and will, thereafter, leverage Palantir's sales force to offer SurfOS to Part 135 operators, existing aircraft manufacturers, and manufacturers of clean-sheet-designed electric aircraft.

Diana White: Surfair Technologies LLC to further develop, market, and sell a software platform solution for the advanced air mobility industry.

Diana White: At the center of this solution sits SurfOS, a category-defining operating system and an all-in-one holistic suite of software tools to enable operators to more efficiently run their businesses.

Deanna White: Components will include flight distribution, airline and charter operations, revenue and demand management, business intelligence, financial reporting, and customer service. Surf Air Mobility will become the first customer of Surf Air Technologies and will thereafter leverage a volunteer sales force to offer Surf OS to Part 135 operators, existing aircraft manufacturers, and manufacturers of clean-sheet design electric aircraft. Surf Air Technology has the unique relationship with Palantir, designed to penetrate the Part 135 market, and harness the growth of the emerging regional air mobility segment of the aviation industry, which vacancies the estimate at between 75 billion and 115 billion by 2035.

Diana White: Components will include

Diana White: Flight Distribution, Airline and Charter Operations.

Diana White: Revenue and Demand Management, Business Intelligence, Financial Reporting, and Customer Service.

Diana White: Surfair Mobility will become the first customer of Surfair technologies.

Diana White: And will, thereafter, leverage Palantir's sales force to offer SurfOS to Part 135 operators

Diana White: Existing Aircraft Manufacturers, and Manufacturers of Clean Sheet Designed Electric Aircraft.

Deanna White: Surfair Technologies has a unique relationship with Palantir, designed to penetrate the Part 135 market and accelerate the growth of the emerging regional air mobility segments of the aviation industry, which McKinsey estimates at between $75 billion and $115 billion by 2035. Using Palantir tools and processes, we will advance our efficiency, innovation, and leadership position. An important reason for the formation of surf air technologies is to sub-capitalize, or separately finance our software platform and reduce the capital burden on surf air mobility.

Diana White: Surfair Technologies has a unique relationship with Palantir, designed to penetrate the Part 135 market and harness the growth of the emerging regional air mobility segment of the aviation industry.

Speaker Change: which McKinsey estimates at between $75 billion and $115 billion by 2035.

Deanna White: Using Palantir tools and processes, we will advance our efficiency, innovation, and leadership positions. An important reason for the formation of Surf Air Technologies is to sub-capitalize or set the finance, our software platform, and reduce the capital burden on Surf Air Mobility.

Speaker Change: Using Palantir tools and processes, we will advance our efficiency, innovation, and leadership positions.

Speaker Change: An important reason for the formation of surf air technologies is to sub-capitalize.

Speaker Change: or set refinance our software platform and reduce the capital burden on surf air mobility.

Deanna White: During the second quarter, we made significant strides in the development of our software, adding exciting new features to our platform. First, we layered a Palantir-powered solution into our new pilot check-in mobile app, which validates a pilot's eligibility before he or she takes a flight. Second, we started training a large language model, ASSAM, on operational documentation such as aircraft manuals and operating specs, pilot training manuals, and flight logs to serve our future AI needs. Third, we worked on digitizing flight log records. Today, one of our pilots can take a picture of a handwritten flight log, which our mobile app will automatically digitize it, store it, and allow someone to make crumbs against the data using Open AI engines via Palantir.

Deanna White: During the second quarter, we made significant strides in the development of our software, adding exciting new features to our platform. First, we've layered a pound-year-powered solution into our new pilot check-in mobile app, which validates the pilot's eligibility before he or she takes a flight. Second, we started training a large-language model, ASTAM, on operational documentation such as aircraft manuals and operating specifications, pilot training manuals, and flight logs to serve our future AI needs.

Speaker Change: During the second quarter, we made significant strides in the development of our software.

Speaker Change: adding exciting new features to our platform.

Speaker Change: First, we've layered a Palantir-powered solution into our new pilot check-in mobile app.

Speaker Change: which validates the pilot's eligibility before he or she takes a flight.

Speaker Change: Second, we started training a large language model, ASTAM, on operational documentation such as aircraft manuals and operating specs, pilot training manuals, and flight logs to serve our future AI needs.

Deanna White: Today, one of our pilots can take a picture of a handwritten flight log, and our mobile [inaudible] will automatically digitize it, store it, and allow someone to make crumbs against the data using an open AI engine, the appellant here.

Speaker Change: Third, we worked on digitizing flight log records.

Speaker Change: Today one of our pilots can take a picture of a handwritten flight log with our mobile app.

Speaker Change: which will automatically digitize it, store it, and allow someone to make prompts against the data using OpenAI Engine via Palantir.

Deanna White: These features are just a small example of how software solutions and AI applications can meet the needs of our industry, which will only become more complex as the industry matures and expands. Turning to our electrification initiatives, our Aircraft Electrification Program remains on track to complete the conceptual design phase by the end of the fourth quarter of 2024. At that stage, we will have selected the key supplier for the electric EP1 variant and will have concluded a commercial agreement with our core supplier group. Regarding the hybrid EP1 variant, we have made significant progress on the preliminary design, having completed a series of trade studies.

Speaker Change: These features are just a small example of how software solutions and AI applications can meet the needs of our industry.

Speaker Change: which will only become more complex as the industry matures and expands.

Deanna White: Turning to our electrification initiatives, our aircraft electrification program remains on track to complete the conceptual design phase by the end of the fourth quarter of 2024. At that stage, we will have selected the key supplier for the electric EP1 variant, and will have concluded commercial agreements with our core supplier group. Regarding the hybrid EP1 variant, we have made significant progress on the preliminary design, having completed a series of trade studies. We are now confident in the system's performance and viability and the capacity of the supply chain to support its commercialization. With regard to our STC, we remain on track in our 2027 deadline.

Speaker Change: Turning to our electrification initiatives, our Aircraft Electrification Program remains on track to complete the conceptual design phase by the end of the fourth quarter of 2024.

Speaker Change: At that stage, we will have selected the key supplier for the Electric EP1 variant and will have concluded commercial agreements with our core supplier group.

Speaker Change: Regarding the hybrid EP1 variant, we have made significant progress on the preliminary design, having completed a series of trade studies.

Deanna White: We are now confident in the system's performance and viability and the capacity of the supply chain to support its commercialization. With regard to our STC, we remain on track to meet our 2027 deadline. We intend to take a similar approach with our electrification initiatives as we have with our software and technology initiatives.

Speaker Change: We are now confident in the system's performance and viability and the capacity of the supply chain to support its commercialization.

Speaker Change: With regard to our STC, we remain on track to meet our 2027 deadline.

Deanna White: We intend to take a similar approach with our electrification initiative as we have with our software and technology initiatives. Partnering with leading electrification supply chain partners to create a venture focused on building electrified powertrain for the system of caravan in their after other turbo aircraft. As with our software platform initiatives, we intend to pursue the subcapitalization of our electrification initiative.

Speaker Change: We intend to take a similar approach with our electrification initiatives as we have with our software and technology initiatives.

Deanna White: Partnering with leading electrification supply chain partners to create a venture focused on building electrified power for the Cessna Caravan and thereafter, other turbo air vehicles. As with our software platform and, we intend to pursue the sub-capitalization of our electrification initiative. Now turning to our mobility. In the last three months, we have moved rapidly to effect change and reposition our regional airline operations. [inaudible] First, we have augmented our... In June, we named Jim Sullivan President of Air Mobility.

Speaker Change: Partnering with leading electrification supply chain partners to create a venture focused on building electrified powertrains for the Cessna Caravan and thereafter other turbo aircraft. Learn more at www.plastics-car.com

Speaker Change: As with our software platform initiatives,

Speaker Change: We intend to pursue the sub-capitalization of our electrification initiative.

Deanna White: Now turning to our mobility initiative. In the last three months, we have moved rapidly to affect change and reposition our regional airline operations for success. First, we have augmented our leadership teams. In June, we named Jim Sullivan, President of Air Mobility. Jim is an airline industry veteran with experience as CEO and COO of a Canadian airline and previous experience as a commercial pilot and VP of flight operations at both Jeff Lou and Frontier. Jim is overseeing our regional airline operations and commercial strategy across all three of our travel brands. In July, we named Louie Sonsier, president of our Hawaiian operations, reporting to Jim.

Deanna White: Jim is an airline industry veteran with experience as CEO and COO of a Canadian airline and previous experience as a commercial pilot and VP of flight operations at both JetBlue and Frontier. Jim is overseeing our regional airline operations and commercial strategy across all three of our travel brands. In July, we named Louis Foncier president of our Hawaiian operations, reporting to Jim.

Speaker Change: Now turning to our mobility initiative.

Speaker Change: In the last three months, we have moved rapidly to effect change and reposition our regional airline operations for success.

Speaker Change: First, we have augmented our leadership team.

Speaker Change: In June, we named Jim Sullivan president of Air Mobility.

Jim Sullivan: Jim is an airline industry veteran with experience as CEO and COO of a Canadian airline and previous experience as a commercial pilot and VP of flight operations at both JetBlue and Frontier.

Jim Sullivan: Jim is overseeing our regional airline operations and commercial strategy across all three of our travel brands.

Speaker Change: In July , we named Louis Foncier president of our Hawaiian operations reporting to Jim.

Deanna White: Louie previously served in operations and guest experience roles at Hawaiian Airlines, Air Canada, and WestJet. Jim and Louie have joined me to bring new focus and rigor to our regional airline operations. And as the second quarter results show, we are not seeing many early wins. Our regional airline operations previously known as Southern Airways produced positive adjusted eve adopt to the second quarter, which reversed a long standing trend. An early focus of a new team was to examine the profitability of each of our scheduled routes. This analysis identified unprofitable routes we have begun to discontinue. As mentioned last quarter, we added two new routes between Curvy University and O'Hare and between Williamsport, Pennsylvania, and Dollars.

Speaker Change: Louis previously served in operations and guest experience roles at Hawaiian Airlines, Air Canada, and WestJet.

Deanna White: Louis previously served in operations and guest experience roles at Hawaii Airlines, Air Canada, and WestJet. Jim and Louis have joined me to bring new focus and rigor to our regional airline operations. And, as the second quarter results show, we are notching many early wins.

Speaker Change: Jim and Louie have joined me to bring new focus and rigor to our regional airline operations.

Speaker Change: And, as the second quarter results show, we are notching many early wins.

Deanna White: Our regional airline operations, previously known as Southern Airways, produced positive adjusted EBITDA for the second quarter, which reversed a long-standing trend. An early focus of a new team was to examine the profitability of each of our scheduled routes. This analysis identified unprofitable routes we have begun to discontinue.

Speaker Change: Our regional airline operations, previously known as Southern Airways, produced positive adjusted EBITDA for the second quarter, which reversed a long-standing trend.

Speaker Change: An early focus of the new team was to examine the profitability of each of our scheduled routes.

Speaker Change: This analysis identified unprofitable routes we have begun to discontinue.

Deanna White: As mentioned last quarter, we added two new routes between Purdue University and O'Hare and between Williams Ford, Pennsylvania, and Dallas. Next, we are focused on our Essential Air Service Rouch, which currently serves 20 markets and the anticipated positive impact from the passage of the FAA reauthorization application, which raises the cap on sub... The race cap will potentially make existing routes more profitable when they are needed and open new markets that would be attractive for us to bid on.

Speaker Change: As mentioned last quarter, we added two new routes between Purdue University and O'Hare and between Williamsport, Pennsylvania and Dulles.

Deanna White: Next, we are focused on our essential air service routes, which currently serve 20 markets and the anticipated positive impact from the passage of the FAA reauthorization apps. Which raises the cap on subsidies. The raised cap will potentially make existing routes more profitable when they are needed and open new markets that would be attractive for us to bid on. Third, we are implementing new systems, processes, and workflows coupled with real-time operational and financial KPIs to accurately measure performance against aviation standards. We are developing a Best in Class Operations Center, network of Maintenance Facilities, and stations to more effectively support our geographic footprint.

Speaker Change: Next, we are focused on our essential air service routes, which currently serve 20 markets, and the anticipated positive impact from the passage of the FAA Reauthorization Act.

Speaker Change: which raises the cap on subsidies.

Speaker Change: The raised cap will potentially make existing routes more profitable when they are rebid and open new markets that would be attractive for us to bid on.

Deanna White: Third, we are implementing new systems, processes, and workflows, coupled with real-time operational and financial KPIs to accurately measure performance against aviation standards. We are developing a Best in Class Operations Center, Network of Maintenance Facilities, and stations to more effectively support our geographic footprint. Fourth, we are applying rigor to identify new growth markets for scheduled services and mapping out the timing of our needed equipment. We will be taking delivery of eight new Caravan aircraft in the third and fourth quarters of this year.

Speaker Change: Third, we are implementing new systems, processes, and workflows.

Speaker Change: coupled with real-time operational and financial KPIs to accurately measure performance against aviation standards.

Speaker Change: We are developing a best-in-class operations center, network of maintenance facilities, and stations to more effectively support our geographic footprint.

Deanna White: Fourth, we are applying rigors to identify new growth markets for scheduled services and mapping out the timing of our needed equipment. We will be taking delivery of eight new Caravan aircraft in the third and fourth quarters of this year. These initial deliveries will replace aging equipment and will have an immediate positive impact on fleet availability and completion rates, which in turn will drive increased revenue and maintenance cost reductions. Going forward, we are optimizing the quantity and timing of new aircraft deliveries to most effectively deploy new aircraft to growth markets. Further expanding our leadership position as the largest commuter airline in the U.S.

Speaker Change: Forced, we are applying rigor to identify new growth markets for schedule services and mapping out the timing of our needed equipment.

Speaker Change: We will be taking delivery of eight new caravan aircraft in the third and fourth quarters of this year.

Deanna White: These initial deliveries will replace aging equipment and will have an immediate positive impact on fleet availability and completion rates, which in turn will drive increased revenue and maintenance cost reduction. Going forward, we are optimizing the quantity and timing of new aircraft deliveries to most effectively deploy new aircraft to growth markets, further expanding our leadership position as the largest commuter airline in the U.S. by departure. To put it simply, our first priority is improving our existing operations, and our second priority is ensuring that we enter new markets profitably.

Speaker Change: These initial deliveries will replace aging equipment and will have an immediate positive impact on fleet availability and completion rates, which in turn will drive increased revenue and maintenance cost reductions.

Speaker Change: Going forward, we are optimizing the quantity and timing of new aircraft deliveries to most effectively deploy new aircraft to growth markets.

Speaker Change: Further expanding our leadership position as the largest commuter airline in the U.S. by departures.

Deanna White: by Departures.

Deanna White: To put it simply, our first priority is improving our existing operations, and our second priority is ensuring that we enter new markets profitably. Last, it is important to understand that we work today with over 15% of the Part 135 operators in North America booking charter flights. These operators are vendors to us today, and will be our customers tomorrow for our CertOS software platform and our electrification products. As evidenced by the revenue growth we have achieved in on-demand services, our distribution platform continues to expand, further enhancing the network effect in our business model.

Speaker Change: To put it simply, our first priority is improving our existing operations.

Speaker Change: And our second priority is ensuring that we enter new markets profitably.

Deanna White: Last, it is important to understand that we work today with over 15% of the Part 135 operators in North America looking for charter flights. These operators are vendors to us today and will be our customers tomorrow for our SurfOS software platform and our electrification products, as evidenced by the revenue growth we have achieved in on-demand services.

Speaker Change: Last, it is important to understand that we work today with over 15% of the Part 135 operators in North America booking charter flights.

Speaker Change: These operators are vendors to us today and will be our customers tomorrow for our SurfOS software platform and our electrification products.

Speaker Change: As evidenced by the revenue growth we have achieved in on-demand services, our distribution platform continues to expand, further enhancing the network effects in our business model.

Deanna White: Our distribution platform continues to expand, further enhancing the network effects in our business model. To govern the transformation of surf air mobility, I have implemented a strategic process across people, process, and technology, which is serving as our roadmap for change. I look forward to discussing these pillars with you in more detail when we host our investor day in a few months. At that time, we will also discuss the early signs of progress from the work we have done, as well as our revised Go Forward strategy. Now, let me take a moment to summarize what I have shared with you.

Deanna White: To govern the transformation of circular mobility, I have implemented a strategic process across people, process, and technology, which is serving as our roadmap for change. I look forward to discussing these pillars with you in more detail when we host our best or day in a few months. At that time, we will also discuss the early signs of progress from the work we have done, as well as our revised Go Forward strategy.

Speaker Change: To govern the transformation of surf air mobility, I have implemented a strategic process across people, process, and technology.

Speaker Change: with his serving as our road map for change.

Speaker Change: I look forward to discussing these pillars with you in more detail when we host our investor day in a few months.

Speaker Change: At that time, we will also discuss the early signs of progress from the work we have done as well as our revised go-forward strategy.

Deanna White: Now, let me take a moment to summarize what I have shared with you. We are moving fast. We are repositioning our strategy to drive profitability, reduce our capital needs, and expand our industry leadership. We are partnering with exceptional companies such as Palinfear and Textron to leverage our joint capabilities and further distance ourselves from the competition. We have new leadership, new systems, processes, and workflows, and a new strategic roadmap that we are executing against. We are notching early wins. We have a commitment to success, and we look forward to keeping you informed of our progress over the coming quarters.

Speaker Change: Now let me take a moment to summarize what I have shared with you.

Deanna White: We are moving fast. We are repositioning our strategy to drive profitability, reduce our capital needs, and expand our industry leadership. We are partnering with exceptional companies, such as Palantir and Textron, to leverage our joint capabilities and further distance ourselves from the competition. We have new leadership, new systems, processes, and workflows, and a new strategic road map that we are executing again. We're knocking on the early wind.

Speaker Change: We are moving fast.

Speaker Change: We are repositioning our strategy to drive profitability, reduce our capital needs, and expand our industry leadership.

Speaker Change: We are partnering with exceptional companies, such as Palantir and Textron, to leverage our joint capabilities and further distance ourselves from the competition.

Speaker Change: We have new leadership, new systems, processes, and workflows, and a new strategic roadmap that we are executing against.

Deanna White: We have a commitment to success, and we look forward to keeping you informed of our progress over the coming quarter. With that, I will now turn the call over to Oliver to discuss our Q2 results and our outlook for the third quarter. Oliver, Thank you, Deanna.

Speaker Change: We're notching early wins. We have a commitment to success and we look forward to keeping you informed of our progress over the coming quarters.

Oliver Reeves: With that, I will now turn the call over to Oliver to discuss our Q2 results and our outlook for the third quarter. Oliver?

Speaker Change: With that, I will now turn the call over to Oliver to discuss our Q2 results and our outlook for the third quarter.

Oliver Reeves: Thank you, Diana. Revenue in the second quarter of 2024 rose to 17.2% over the prior year period on a pro-forward basis to 32.4 million, exceeding expectations of 28 to 31 million. This double digit revenue growth was driven by 13.8% growth in scheduled service revenue and 11.7% growth in on-demand service revenue. The increase in scheduled service revenue was primarily driven by the launch of subsidised flight operations on the Lini route in Hawaii and a Purdue and Williamsport routes. The increase in on-demand service revenue was driven by a 13.1% increase in departures over the comparable period.

Oliver Reeves: Revenue in the second quarter of 2024 rose 13.2% over the prior year period on a proforma basis to $32.4 million, exceeding our expectations of $28 to $31 million. This double-digit revenue growth was driven by 13.8% growth in scheduled service revenue and 11.7% growth in on-demand service revenue. The increase in scheduled service revenue was primarily driven by the launch of subsidized flight operations on the Lanai route in Hawaii and the Purdue and Williamsport routes. The increase in on-demand service revenue was driven by a 13.1% increase in departures over the comparable period.

Speaker Change: Oliver?

Oliver: Thank you, Deanna. Revenue in the second quarter of 2024 rose 13.2% over the prior year period on a proforma basis to $32.4 million, exceeding our expectations of $28 to $31 million.

Oliver: This double-digit revenue growth was driven by 13.8% growth in scheduled service revenue and 11.7% growth in on-demand service revenue.

Oliver: The increase in scheduled service revenue was primarily driven by the launch of subsidized flight operations on the Lonei route in Hawaii and a Purdue and Williamsport routes.

Oliver: The increase in on-demand service revenue was driven by a 13.1% increase in departures over the comparable period.

Oliver Reeves: As Yana mentioned in her comments and as we discussed on our call last quarter, we undertook an analysis of all of our scheduled routes and have taken steps to either discontinue or improve the profitability of underperforming routes. Overall, increased subsidies and necessary cost cuts contributed to our improved profitability. As a result, our regional airline operations produced positive adjusted even after the second quarter. Importantly, this did not come at the expense of revenue growth and, as expected, does not yet reflect any positive impact from the FAA Reauthorization Act. On a platform of basis, adjusted EBITDA loss increased modestly year over year to 11.8 million from 11.1 million.

Oliver Reeves: As you mentioned in her comments and as we discussed on our call us quarter, we undertook an analysis of all of our scheduled routes and have taken steps to either discontinue or improve the profitability of underperforming routes. Overall, increased subsidies and necessary cost cuts contributed to our improved profitability. As a result, our regional airline operations produced positive adjusted EBITDA for the second quarter. However, this did not come at the expense of revenue growth and, as expected, does not yet reflect any positive impact from the FAA reauthorization. On a per-forma basis, adjusted EBITDA losses increased modestly year-over-year to $11.8 million from $11.1 million.

Oliver: As Jana mentioned in her comments and as we discussed on our call last quarter, we undertook an analysis of all of our scheduled routes and have taken steps to either discontinue or improve the profitability of underperforming routes.

Jana: Overall, increased subsidies and necessary cost cuts contributed to our improved profitability.

Jana: As a result, our regional airline operations produced positive adjusted EBITDA for the second quarter.

Jana: Importantly, this did not come at the expense of revenue growth and, as expected, does not yet reflect any positive impact from the FAA Reauthorization Act.

Jana: On a performer basis, adjusted EBITDA loss increased modestly year over year to $11.8 million from $11.1 million. We are very pleased with this outcome as it is materially better than our expectations of an adjusted EBITDA loss of between $16 and $18 million for the quarter.

Oliver Reeves: We are very pleased with this outcome as it is materially better than our expectations and with an adjusted EBITDA loss of between $16 and $18 million for the core share. Renewed rigor on cost control implemented by the new management team is already beginning to show results, and we are now targeting positive adjusted EBITDA at our regional airline operations for the full fiscal year. In terms of liquidity, as of June 30, 2024, CFM Mobility had $1.5 million of cash on hand, with the ability to draw $90 million in committed draws and up to $296 million in follow-on draws, subject to the terms of the GEMS Share Subscription Facility.

Oliver Reeves: We are very pleased with this outcome as it is materially better than our expectations and an adjusted EBITDA loss of between 16 and 18 million for the quarter.

Oliver Reeves: Renewed Resort on Cost Control implemented by the new management team is already beginning to show results, and we are now targeting positive adjusted EBITDA at our regional airline operations for the focus for year.

Speaker Change: Renewed Resort on Cost Control implemented by the New Management Team is already beginning to show results, and we are now targeting positive adjustment EBITDA at our regional online operations for the focus for yet.

Oliver Reeves: Time to liquidity, as of June 30th, 2024, the availability had 1.5 million of cash on hand, with the ability to draw 90 million in committed draws and up to 296 million in follow-on draws subject to the terms of the gem-share subscription facility. As a reminder, we continue to purposefully manage our cash balance to minimise the utilization of the GEM facility. Recently, we closed on our previously announced 35.2 million convertible security with Gem Global High Yield. The new security cancels a significant portion of gem currently issued and freely tradable shares in the company. It imposes a volume restriction on daily trading and gives us the flexibility to redeem all or part of the security in cash at 115% of the then outstanding car amount.

Speaker Change: Turning to liquidity, as of June 30, 2024, CFM Ability had $1.5 million of cash on hand, with the ability to draw $90 million in committed draws and up to $296 million in follow-on draws, subject to the terms of the GEMS Share Subscription Facility.

Oliver Reeves: As a reminder, we continue to purposefully manage our cash balance to minimize the utilization of the GEM facility. Recently, we closed on our previously announced $35.2 million convertible security with GEM Global High Yield. The new security cancels a significant portion of GEM's currently issued and freely tradable shares in the company. It imposes a volume restriction on daily trading and gives us the flexibility to redeem all or part of the security in cash at 115% of the then outstanding par amount.

Speaker Change: As a reminder, we continue to purposefully manage our cash balance to minimize the utilization of the GEM facility.

Speaker Change: Recently, we closed on our previously announced 35.2 million convertible security with GEM Global High Yield. The new security cancels a significant portion of GEM's currently issued and freely tradable shares in the company.

Speaker Change: It imposes a volume restriction on daily trading and gives us the flexibility to redeem all or part of the security in cash at 115% of the day-not-standing paramount.

Oliver Reeves: Importantly, as Janna mentioned, we have agreed to form Surfer Technologies, eventually with Poundtier, and we'll be working together with them to bring in outside investment to sub-capitalise and fund our Surfer OS software initiative and thereby reduce the spend from Surfer Mobility.

Oliver Reeves: Importantly, as Diana mentioned, we have agreed to form Surfair Technologies, a venture with Palantir, and we will be working together with them to bring in outside investment to sub-capitalize and fund our SurfOS software initiative, and thereby reduce the spend from Surfair Mobility. Now, turning to our guidance for the third quarter, we expect... Third quarter 2024 revenue in the range of $25 million to $28 million. Proformer-adjusted Eva Dalloth in the range of 10 million to 13 million, which excludes the expected impact of stockpakes compensation, changes in fair value of financial financial instruments, and other non-repairing items.

Speaker Change: Importantly, as Deanna mentioned, we have agreed to form Surfair Technologies, a venture with Palantir, and we will be working together with them to bring in outside investment to sub-capitalize and fund our SurfOS software initiative and thereby reduce the spend from Surfair Mobility.

Oliver Reeves: Now, turning to our guidance for the third quarter, we expect third quarter 2024 revenue in the range of 25 million to 28 million. Performer adjusted EBITDA loss in the range of 10 million to 13 million, which excludes the expected impact of stock-based compensation, changes in fair value of financial instruments and other non-recurring items. The company's expectations for the third quarter reflect the impact of unplanned maintenance of aircraft over the last two months, resulting in lower completion factors. Due to these factors, the company currently expects those regional airline operations will be marginally unprofitable on an adjusted EBITDA basis in the third quarter.

Deanna White: The company's expectations for the third quarter reflect the impact of unplanned maintenance of aircraft over the last two months, resulting in lower completion factors. Due to these factors, the company currently expects that its regional airline operations will be marginally unprofitable on an adjusted EBITDA basis in the third quarter. However, importantly, the company continues to execute a series of actions to improve profitability and is targeting profitable regional airline operations for the full year.

Speaker Change: Now, turning to our guidance for the third quarter, we expect.

Speaker Change: 3rd course at 2024 revenue in the range of 25 million to 28 million. Perform a justive eway dial-off in the range of 10 million to 30 million, which excuse the expected impact of stock-based compensation, changes in fair value of financial instruments and other non-recaring items.

Speaker Change: The company's expectations for the third quarter reflect the impact of unplanned maintenance of aircraft over the last two months, resulting in lower completion factors.

Speaker Change: Due to these factors, the company currently expects that its regional airline operations will be marginally unprofitable on an adjusted EBITDA basis in the third quarter.

Oliver Reeves: Importantly, the company continues to execute a series of actions to improve profitability and is targeting profitable regional airline operations for the full year.

Speaker Change: Importantly, the company continues to execute a series of actions to improve profitability and its targeting profitable regional airline operations for the full year. With that, let me turn the call back over to the anniversary closing thoughts.

Deanna White: With that, let me turn the call back over to Diana for some closing talks. Thank you, Oliver.

Deanna White: With that, I will turn the call back over to Diana for some closing thoughts. Thank you, Oliver. In my new capacity as Chief Operating Officer and Interim CEO, I would like to take a moment to share with you why I am so excited about the opportunities ahead for this company. We are the largest commuter airline operator in the US, and we are advancing the very notion of air mobility. We operate in a vast marketplace ripe for disruption. By partnering with Palantir, Textron, and other leading organizations, we are bringing new innovations to the market.

Deanna White: In my new capacity as Chief Operating Officer and interim CEO, I would like to take a moment to share with you why I'm so excited about the opportunity to head for this company. We are the largest commuter airline operator in the U.S. and we are advancing the very notion of air mobility. We operate in a vast marketplace, white purchase option. By partnering with Palantir, Textron, and other leading organizations, we are bringing new innovations to the market. We are pioneering the path into fertile territory. Empowering our operations to capture market growth, drive the efficiencies and profitability, and expand our offering across air mobility networks worldwide.

Oliver: Thank you, Oliver.

Speaker Change: In my new capacity as Chief Operating Officer and Interim CEO, I would like to take a moment to share with you why I am so excited about the opportunities ahead for this company.

Speaker Change: We are the largest commuter airline operator in the U.S. and we are advancing the very notion of air mobility.

Speaker Change: We operate in a vast market play, white or disruption.

Speaker Change: By partnering with Palantir, Textron, and other leading organizations, we are bringing new innovations to the market.

Operator: We are pioneering the path into fertile territory, empowering our operations to capture market growth, drive efficiencies and profitability, and expand our offering across air mobility networks worldwide. We are still very early in the game, but we cannot be more excited about what lies ahead. I would like to thank everyone who's been with us on this call today. I will now turn the call over to our operator so that we may take some of your questions. Thanks, Deanna. And at this time, I would like to remind everyone that in order to ask a question, press the star and then the number one on your telephone keypad. Once again, star number one.

Speaker Change: We are pioneering the path into fertile territory, empowering our operations to capture market growth, drive efficiencies and profitability, and expand our offering across air mobility networks worldwide.

Deanna White: We are still in very early ending.

Deanna White: But we cannot be more excited about what lies ahead, and we look forward to keeping you a prize of our progress.

Speaker Change: We are still in very early innings.

Speaker Change: But we cannot be more excited about what lies ahead and we look forward to keeping you apprised of our progress.

Deanna White: I would like to thank everyone who has been with us on this call today.

Operator: I will now turn this call over to our operator so that we may take some of your questions. Thanks, Deanna. And at this time, I would like to remind everyone that, in order to ask a question, press star and then the number one on your telephone keypad. Once again, star one. And we will pause just a moment to compile the Q&A roster.

Speaker Change: I would like to thank everyone who has been with us on this call today. I will now turn this call over to our operator so that we may take some of your questions.

Operator: And we will pause just a moment to compile the Q&A roster. And while we're waiting, just want to remind you again that joining us today to answer your questions are Deanna White, Chief Operating Officer and Interim CEO, Oliver Reed, Chief Financial Officer, Sudhin Shahani, Co-Founder of Surf Air Mobility, and Ido Gruberger, Chief Strategy Officer. And it looks like our first question today comes from the line of Austin Muller with Canaccord Genuity. Austin, please go ahead.

Deanna: Thanks, Deanna.

Speaker Change: And at this time, I would like to remind everyone that in order to ask a question, press star and then the number one on your telephone keypad once again, star one. And we will pause just a moment to compile the Q&A roster.

Operator: And while we're waiting, just want to remind you again, joining us today to answer your questions are Deanna White, Chief Operating Officer and Interim CEO, Oliver Reed, Chief Financial Officer, Sudhin Shahani, Co-Founder of Surf Air Mobility, and Ido Gruberger, Chief Strategy Officer. And it looks like our first question today comes from the line of Austin Muller with Canaccord Genuity. Austin, please go ahead.

Operator: Hi, good afternoon. Just my first question here: what is the passenger load factor on Purdue and Williams for reps currently, and how many flights do you scale per week? I'm Deanna. Thank you for your question. You broke up a little bit.

Speaker Change: And while we're waiting, just want to remind you again, joining us today to answer your questions are the Anna White Chief Operating Officer and Interim CEO, Oliver Reed, Chief Financial Officer, Sudhen Chahani, co-founder of Surf Air Mobility and Edo Gruberger Chief Strategy Officer.

Speaker Change: And it looks like our first question today comes from the line of Austin Muller with Canacord Genuity. Austin, please go ahead.

Austin Muller: All right, good afternoon. Just my first question here.

Austin Muller: What was the passenger load factor on the Deanna?

Austin Muller: Hi, good afternoon. Just my first question here, what was the passenger load factor on the Purdue and Williams sport routes currently and how many flights do you schedule per week?

Deanna White: It was hard to hear the second part of it, but you were talking about the load factors on our newly launched Purdue and Williamsport routes. The load factors are in the 50% range and improving, and both of those routes have shown us to be profitable for the time we've operated them right out of the gate with the private subsidies we have with those two partnerships. Thank you for attending our webinar. We appreciate you having scheduled a week of events.

Deanna White: Thank you for your question. You broke up a little bit. It was hard to hear the second part of it, but you were talking about the load factors on our newly launched Purdue and Williamsport routes. The load factors are in the 50% approximately and improving. And both of those routes have shown us to be profitable for the time we've operated them right out of the gate. With the private subsidies we have with those two partnerships. Austin, we're having a hard time hearing you. Yeah. Can you go ahead? A little better. Go ahead.

Speaker Change: Thank you for your question. You broke up a little bit. It was hard to hear the second part of it. You were talking about the load factors on our newly launched.

Speaker Change: Purdue and Williams Fort Routes.

Speaker Change: The load factors are in the 50 percent approximately and improving and both of those routes have shown us to be profitable for the time we've operated them right out of the gate with the private subsidies we have with those two partnerships.

Speaker Change: Thank you very much for joining us today. Thank you very much.

Deanna White: Austin, we're having a hard time hearing you. [inaudible] A little better. Go ahead. I asked how many flights you have scheduled on those routes per week. I think you said how many flights we have scheduled on each one of those routes per week?

Speaker Change: Can you hear me now?

Speaker Change: A little better. Go ahead.

Speaker Change: I'm going to start by asking how many flights you have scheduled on this route per week.

Deanna White: Austin, the city, I think you said how many flights do we have scheduled on each one of those routes per week?

Speaker Change: I'm awesome in the city and I think you said, how many flights do we have scheduled on each one of those routes per week? I don't have those exact numbers with me, but I can get back with you and circle back with an answer after the call.

Deanna White: I don't have those exact numbers with me, but I can get back with you and circle back with an answer after the call.

Deanna White: I don't have those exact numbers with me, but I can get back with you and circle back with an answer after the call. OK. Great. Thanks for the details. All right. Thank you, Austin. And, ladies and gentlemen, that does conclude our prepared remarks today. Thank you so much for joining us, and you may now disconnect. Have a good day, everyone. Thanks for watching!

Austin Muller: All right, thank you, Austin. And ladies and gentlemen, that does conclude our prepared remarks today. Thank you so much for joining, and you may now disconnect. Have a good day, everyone.

Speaker Change: OK, thanks for the details.

Speaker Change: All right. Thank you, Austin.

Speaker Change: And ladies and gentlemen, that does conclude our prepared remarks today. Thank you so much for joining and you may now disconnect. Have a good day, everyone.

Operator: Air Mobility Second Quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers are marked, there will be a question and answer session. If you'd like to ask a question during this time, simply press star one on your telephone keypad. Once again, that is star one. Thank you.

Sam Levinson: I would now like to turn the call over to Sam Levinson. Sam, please go ahead. Thank you, operator. Welcome to Surf Air Mobility Second Quarter 2024 earnings call. I'm joined today by Deanna White, Chief Operating Officer and Interim Chief Executive Officer, and Oliver Reeves, Chief Financial Officer. Our earnings results can be found on the SEC Edgar website, and on our Surf Air Mobility Investor Relations page at investors.surfair.com. During this call, we will discuss our outlook and expectations for future performance.

Sam Levinson: These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or other similar statements. These statements are subject to risks in uncertainties, and our actual results could differ materially from those views expressed today. Some of these risks have been set forth in our earnings release, and in our periodic reports filed with the SEC. During today's call, we will present both GAP and non-GAP measures. Additional disclosures regarding non-GAP measures, including a reconciliation of GAP to non-GAP measures, are included in the earnings release we issued earlier today, posted on the Surf Air Mobility Investor Relations website, and in our findings with the SEC.

Deanna White: I'll now turn the call over to Surf Air Mobility's Interim CEO, Deanna White. Deanna? Thank you, Sam.

Deanna White: Let me start by noting how pleased we are with the financial results of the second quarter. Revenue for the quarter exceeded our expectations and rose over 13% year-over-year on a pro-forma basis. Adjusted EBITDA results were materially better than our expectations with an adjusted EBITDA loss of $11.8 million, as compared with our expectations of a loss of $16.8 million.

Deanna White: Going forward, we will form a new venture with Palantir. Surfair Technologies LLC to further develop market and sell a software platform solution for the advanced air mobility industry, at the center of the solution that Surf OS, a category-designing operating system, and an all-in-one holistic suite of software tools to enable operators to more efficiently run their businesses. Components will include flight distribution, airline and charter operations, revenue and demand management, business intelligence, financial reporting and customer service.

Deanna White: Surf air mobility will become the first customer of Surf Air technologies and will thereafter leverage volunteer sales force to offer Surf OS to part 135 operators, existing aircraft manufacturers, and manufacturers of clean-sheet design electric aircraft. Surf Air technology has the unique relationship with Palantir, designed to penetrate the part 135 market, and harness the growth of the emerging regional air mobility segment of the aviation industry, which vacancies the estimate at between 75 billion and 115 billion by 2035.

Deanna White: Using Palantir tools and processes, we will advance our efficiency, innovation, and leadership positions. An important reason for the formation of Surf Air technologies is to sub-capitalize or set the finance, our software platform, and reduce the capital burden on Surf Air Mobility.

Deanna White: Third, we worked on digitizing flight log records. Today, one of our pilots can take a picture of a handwritten flight log, which our mobile app, which will automatically digitize it, store it, and allow someone to make crumbs against the data using open AI engines via Palantir.

Deanna White: Turning to our electrification initiatives, our aircraft electrification program remains on track to complete the conceptual design phase by the end of the fourth quarter of 2024. At that stage, we will have selected the key supplier for the electric EP1 variant, and will have concluded commercial agreements with our core supplier group. Regarding the hybrid EP1 variant, we have made significant progress on the preliminary design having completed a series of trade studies. We are now confident in the systems performance and viability and the capacity of the supply chain to support its commercialization.

Deanna White: With regard to our STC, we remain on track in our 2027 deadline. We intend to take a similar approach with our electrification initiative as we have with our software and technology initiatives. Partnering with leading electrification supply chain partners to create a venture focused on building electrified powertrain for the system of caravan in their after other turbo aircraft. As with our software platform initiatives, we intend to pursue the subcapitalization of our electrification initiative.

Deanna White: Now turning to our mobility initiative. In the last three months, we have moved rapidly to affect change and reposition our regional airline operations for success.

Deanna White: First, we have augmented our leadership teams. In June, we name Jim Sullivan, President of Air Mobility. Jim is an airline industry veteran with experience as CEO and COO of a Canadian airline and previous experience as a commercial pilot and VP of flight operations at both Jeff Lou and Frontier. Jim is overseeing our regional airline operations and commercial strategy across all three of our travel brands.

Deanna White: In July, we named Louie Sonsier, President of our Hawaiian Operations, reporting to Jim. Louie previously served in operations and guest experience roles at Hawaiian Airlines, Air Canada and WestJet. Jim and Louie have joined me to bring new focus and rigor to our regional airline operations.

Deanna White: And as the second quarter results show, we are not seeing many early wins. Our regional airline operations previously known as Southern Airways produced positive adjusted eve adopt to the second quarter, which reversed a long standing trend. An early focus of a new team was to examine the profitability of each of our scheduled routes. This analysis identified unprofitable routes we have begun to discontinue. As mentioned last quarter, we added two new routes between curvy university and O'Hare and between Williamsport, Pennsylvania and dollars.

Deanna White: Third, we are implementing new systems, processes and workflows coupled with real-time operational and financial KPIs to accurately measure performance against aviation standards. We are developing a Best in Class Operations Center, Network of Maintenance Facilities, and stations to more effectively support our geographic footprint. Fourth, we are applying rigors to identify new growth markets for scheduled services and mapping out the timing of our needed equipment. We will be taking delivery of eight new Caravan aircraft in the third and fourth quarters of this year.

Deanna White: These initial deliveries will replace aging equipment and will have an immediate positive impact on fleet availability and completion rates, which in turn will drive increased revenue and maintenance cost reductions. Going forward, we are optimizing the quantity and timing of new aircraft deliveries to most effectively deploy new aircraft to growth markets. Further expanding our leadership position as the largest commuter airline in the U.S, by Departures.

Deanna White: To put it simply, our first priority is improving our existing operations, and our second priority is ensuring that we enter new markets profitably. Last, is important to understand that we work today with over 15% of the Part 135 operators in North America booking charter flights. These operators are vendors to us today, and will be our customers tomorrow for our CertOS software platform and our electrification products. As evidenced by the revenue growth we have achieved in on-demand services, our distribution platform continues to expand further enhancing the network effect in our business model.

Deanna White: To govern the transformation of circular mobility, I have implemented a strategic process across people, process and technology, which is serving as our roadmap for change. I look forward to discussing these pillars with you in more detail when we host our best or day in a few months. At that time, we will also discuss the early signs of progress from the work we have done as well as our revised Go Forward strategy.

Deanna White: We have new leadership, new systems, processes and workflows, and a new strategic roadmap that we are executing against. We are notching early wins.

Deanna White: We have a commitment to success, and we look forward to keeping you informed of our progress over the coming quarters.

Oliver Reeves: With that, I will now turn the call over to Oliver to discuss our Q2 results and our outlook for the third quarter. Oliver? Thank you, Diana. Revenue in the second quarter of 2024 rose to 17.2% over the prior year period on a pro-forward basis to 32.4 million exceeding expectations of 28 to 31 million. This double digit revenue growth was driven by 13.8% growth in scheduled service revenue and 11.7% growth in on-demand service revenue.

Oliver Reeves: The increase in scheduled service revenue was primarily driven by the launch of subsidised flight operations on the lini route in Hawaii and a Purdue and Williamsport routes. The increase in on-demand service revenue was driven by a 13.1% increase in departures over the comparable period.

Oliver Reeves: On a platform of basis, adjusted EBITDA loss increased modestly year over year to 11.8 million from 11.1 million. We are very pleased with this outcome as it is materially better than our expectations and an adjusted EBITDA loss of between 16 and 18 million for the quarter.

Oliver Reeves: Renewed Resort on Cost Control implemented by the new management team is already beginning to show results and we are now targeting positive adjusted EBITDA at our regional airline operations for the focus for year. Time to liquidity, as of June 30th, 2024, the availability had 1.5 million of cash on hand, with the ability to draw 90 million in committed draws and up to 296 million in follow-on draws subject to the terms of the gem-share subscription facility.

Oliver Reeves: As a reminder, we continue to purposefully manage our cash balance to minimise the utilization of the gem facility. Recently, we close on our previously announced 35.2 million convertible security with gem global high yield. The new security cancels a significant portion of gem currently issued and freely tradable shares in the company. It imposes a volume restriction on daily trading and gives us the flexibility to redeem all or part of the security in cash at 115% of the then outstanding car amount.

Oliver Reeves: Importantly, as Janna mentioned, we have agreed to form surfer technologies, eventually with Poundtier, and we'll be working together with them to bring in outside investment to sub-capitalise and fund our surfer OS software initiative and thereby reduce the spend from surfer mobility.

Oliver Reeves: Now, turning to our guidance for the third quarter, we expect third quarter 2024 revenue in the range of 25 million to 28 million. Performer adjusted EBITDA loss in the range of 10 million to 13 million, which excuse the expected impact of stock-based compensation, changes in fair value of financial instruments and other non-recurring items. The company's expectations for the third quarter reflect the impact of unplanned maintenance of aircraft over the last two months, resulting in lower completion factors.

Oliver Reeves: Due to these factors, the company currently expects those regional airline operations will be marginally unprofitable on an adjusted EBITDA basis in the third quarter. Importantly, the company continues to execute a series of actions to improve profitability and is targeting profitable regional airline operations for the full year.

Deanna White: With that, let me turn the call back over to Diana for some closing talks. Thank you, Oliver.

Deanna White: We are pioneering the path into fertile territory. Empowering our operations to capture market growth, drive the efficiencies and profitability, and expand our offering across air mobility networks worldwide. We are still in very early ending. But we cannot be more excited about what lies ahead and we look forward to keeping you a prize of our progress.

Deanna White: I would like to thank everyone who has been with us on this call today.

Operator: I will now turn this call over to our operator so that we may take some of your questions. Thanks, Deanna. And at this time, I would like to remind everyone that in order to ask a question, press star and then the number one on your telephone keypad. Once again, star one. And we will pause just a moment to compile the Q&A roster.

Austin Moeller: And it looks like our first question today comes from the line of Austin Muller with Canacorn Genuity. Austin, please go ahead. All right, good afternoon. Just my first question here. What was the passenger load factor on the Deanna? Thank you for your question. You broke up a little bit. It was hard to hear the second part of it, but you were talking about the load factors on our newly launched Purdue and Williamsport routes.

Austin Moeller: The load factors are in the 50% approximately and improving. And both of those routes have shown us to be profitable for the time we've operated them right out of the gate. With the private subsidies we have with those two partnerships. Austin, we're having a hard time hearing you. Yeah. Can you go ahead? A little better. Go ahead. Austin, the city, I think you said how many flights do we have scheduled on each one of those routes per week?

Deanna White: I don't have those exact numbers with me but I can get back with you and circle back with an answer after the call. All right, thank you Austin.

Operator: And ladies and gentlemen, that does conclude our prepared remarks today.

Thank you so much for joining and you may now disconnect. Have a good day everyone.

Q2 2024 Surf Air Mobility Inc Earnings Call

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