Blade Air Mobility Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

Key Takeaways

  • Blade reported positive free cash flow of $1.3 million and positive adjusted EBITDA of $0.8 million in Q3 2023, a year-over-year improvement of $7.8 million and $5.3 million respectively, alongside 56 percent revenue growth to $71.4 million.
  • The Blade Airport urban air mobility service achieved flight profit contribution for the first time in Q3 2023, following two years of passenger, pricing, and utilization improvements, with continued seat growth expected to drive further profitability in Q4.
  • In the Medical segment, revenue rose 65 percent to $33.4 million and adjusted EBITDA increased 124 percent to $3.3 million, fueled by new hospital contracts, expanded business with existing clients, and the upcoming launch of an organ placement service on December 1.
  • Blade reduced adjusted unallocated corporate expenses by 29 percent despite 56 percent revenue growth, ended Q3 2023 with zero debt and $173 million in cash and short-term securities, positioning it for potential acquisitions.
  • The company advanced its infrastructure footprint with an exclusive heliport at Atlantic City’s Ocean Casino, an on-tarmac security checkpoint at Nice Airport, and placed orders for Beta Technologies’ electric vertical aircraft to support future eVTOL operations.
AI Generated. May Contain Errors.
Earnings Conference Call
Blade Air Mobility Q3 2023
00:00 / 00:00

There are 9 speakers on the call.

Operator

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 will 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.

Operator

Lee Gold, Investor Relations. You may begin.

Speaker 1

Thanks and good morning. Thank you for standing by and welcome to the Blade Air Mobility conference call and webcast for the quarter ended September 30, 2023. We appreciate everyone joining us today. Before we get started, I'd like to remind you of this company's forward looking statement in Safe Harbor language. Statements made in this conference call that are not historical facts, including statements about future time periods, may be deemed to constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker 1

These forward looking statements are subject to risks and uncertainties and the 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 ks filed with the SEC for a more detailed discussion of the risk factors that could cause these differences. Any forward looking statements provided during this conference call are made only as of the date of this call. As stated in our SEC filings, Blade disclaims any intent or obligation to update or revise these forward looking statements except required by law. During 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.

Speaker 1

A 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. Our press release, investor presentation and our Form 10 Q are available on the Investor Relations section of our website at ir. Blade.com. These non GAAP measures should not be considered in isolation or a substitute for financial results prepared in accordance with GAAP. Hosting today's call are Rob Wiedendahl, Founder and Chief Executive Officer of Blade and Will Hayburn, Chief Financial Officer.

Speaker 1

I will now turn the call over to Rob Wiedendahl. Rob?

Speaker 2

Thank you, Lee. Good morning, everyone. We are very pleased to deliver our Q1 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 30, 2023 increased 56 percent to $71,400,000 versus $45,700,000 in the comparable 2022 period. We achieved free cash flow of $1,300,000 in Q3 2023, a $7,800,000 improvement from Q3 2022, while adjusted EBITDA of $800,000 in Q3 2023 improved $5,300,000 versus Q3 2022.

Speaker 2

Importantly, as we turn the corner to profitability, we are doing so without sacrificing revenue growth. Starting in 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 continued improved financial performance with strong revenue growth in addition to positive flight profit contribution for the first time during Q3 2023. Airport is one of our most important growth vectors for the passenger business as it will be the very first use case for electric vertical aircraft, EVA or in industry parlance, eVTOL. But the ramp up has required patience from both you, our investors and our management team.

Speaker 2

It's taken 2 years of steadily growing our passenger volumes, food offerings, average checkout price and seat utilization to reach Today's critical profitability milestone. In Q4 2023 quarter to date, we've seen solid seat 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 a more active fleet, we are already seeing this translate to Flight profit margin expansion in both our Medical and Passenger segments.

Speaker 1

This is a win win

Speaker 2

both for our operators and our As we direct more flight hours to our most reliable and efficient aircraft providers. In Jet and Other, we also saw strong growth as revenue increased 49.1 percent to $7,600,000 Our growth across passenger coupled with the return to profitability in the airport contributed to a significant 88.7 percent increase in passenger segment adjusted EBITDA to $2,800,000 for Q3 2023. 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 available today and by the seat service Backstopped by Ocean Casino is planned for spring 2024. 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.

Speaker 2

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 to airlines in Nice. 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 owners 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 begin to transition from conventional rotorcraft to EVA in the coming years. We made important progress on the EVA front just last week as our operator for Blade Canada, which operates as Hellajet, Placed an order for the Beta Technologies' Aliyah Electric Vertical Aircraft, which is expected to provide quiet emission free air mobility service For Bladeflyers in Canada, this order is for the same aircraft that Blade recently utilized during our first EVA test in the New York City area in Q1.

Speaker 2

Now, we'll turn to Medical, where we delivered 65% organic growth, driven by continued new hospital wins, business expansion with existing hospitals and strong end market growth. We continue to demonstrate the Strong operating leverage of this business with Medical segment adjusted EBITDA increasing 123.8 percent to $3,300,000 We're also excited to announce the launch of our new organ placement service, an offering that has been requested by Significant portion of our existing customers. This new business line, which goes live on December 1, brings us further upstream in the organ transplantation process By helping transplant centers determine if an organ is a match for a potential recipient. When paired with our existing logistics services, We can now provide even more seamless engagement, simplify the communication process for our customers and increase 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.

Speaker 2

I'll let 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 2025 as part of our Q4 2023 earnings release.

Speaker 2

With that, I'll turn the call over to Will. Thank you, Rob. Our turn 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 to maintain the seamless experience we're known for in both our passenger and medical businesses. I'll now walk through a few highlights from our business segments in the 3rd We'll start with medical, where revenue increased 65 percent to $33,400,000 in the Q3 of 2023 versus $20,200,000 in the comparable 2022 period.

Speaker 2

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 discussed during last quarter's earnings call, In Q2 2023, we supported a non contracted customer on a temporary basis that should not reoccur. Excluding this customer, Q3 2023 would have 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 Medical segment adjusted EBITDA was $3,300,000 in the current quarter, an increase of $1,900,000 or 124 versus $1,500,000 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 new customer contracts.

Speaker 2

This lowers 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 flight margins in the 18% to 19% range Trinity Organ Placement Services or TOPS with 2 key customers on December 1, 2023. In this new role, We will benefit from fixed annual contracts, typically between $500,000 $1,500,000 per year, depending on the size of the transplant center.

Speaker 2

Over time, we hope that many of our 70 plus existing contracted customers will choose to vertically integrate with us for order placement as well. We also expect that some centers with other transportation providers will utilize these services. Our 2 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 after a perfusion device manufacturer began to bundle aviation services with their device. We estimate that 10% to 15% of our trips this quarter utilize this specific device.

Speaker 2

We've not lost a single contract to this device company, but we take all competition seriously. At the end of the day, we found that our pricing can be as much as 50 lower given our 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. In short distance, revenues were up 49% The $30,400,000 in the Q3 of 2023 versus $20,400,000 in the comparable 2022 period.

Speaker 2

Growth was driven by our acquisition of Blade Europe closed on September 1, 2022, growth in our Blade Airport business and strong growth across the rest of our short distance portfolio. As Rob mentioned, airport was a positive contributor to flight profit this quarter for the first time, meaning that it covered all costs related to air And for terminal ground transportation for our flyers. 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 right size 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.

Speaker 2

Passenger segment flight profit increased by $3,300,000 or 54 percent to $9,400,000 in the Q3 of 2023 from $6,100,000 in the same period of 2022. This increase was attributable primarily to the acquisition of Blade Europe, which contributed in only 1 month of the 2022 period. Also contributing were higher jet charter volumes, increased and passenger segment adjusted EBITDA to $2,800,000 in the Q3 of 2023 versus $1,500,000 in the prior year period. Looking ahead for passenger, in 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 jetother revenue to be approximately $2,000,000 lower in Q4 2023 versus Q4 2022.

Speaker 2

In short distance, we expect revenue to increase in Q4 in the low single digits year over year. Overall, passenger segment flight margins should improve by 100 200 basis points year over year next quarter given Airports' turn to profitability. We continue to optimize Corporate costs as adjusted unallocated corporate expenses and software development, which relate to the overall Blade shared services platform, decreased $2,200,000 or 29 percent in Q3 2023 versus the prior year period despite our significant growth. We're pleased to see that Blade's underlying operational platform is creating economic leverage and we continue to look for opportunities to optimize our cost structure to drive further operating expense leverage. As we look to the Q4 of 2023, we expect total adjusted unallocated corporate expense to remain roughly flat sequentially.

Speaker 2

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 40s revenue, slight profit margin in the mid to high teens and adjusted corporate expenses in the $13,000,000 to $15,000,000 range. This will result in solid year over year improvement and adjusted EBITDA in Q4. As Rob mentioned, we also expect to see significant year over year EBITDA improvement for full year 2024 We plan to provide a detailed outlook for the full year 2024 2025 as part of our Q4 2023 earnings release. With respect to our balance sheet, we continue to have 0 debt and approximately $173,000,000 in cash and short term securities as of the end of the Q3 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.

Speaker 2

In 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. Thank you, Will. In short, we are proud of the work the team did to deliver outstanding third quarter results and our 1st 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.

Speaker 2

We look forward to providing full year guidance for 2024 2025 during our Q4 earnings announcement. I'll now turn

Speaker 1

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

Speaker 3

Thank you.

Operator

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

Speaker 4

Hi, thanks for taking my questions and congratulations on the great quarter. I just want to get a better understanding of how your new Tops Business Parks, you said the 2 contracts, 500 I think you said $500,000 to $1,500,000 How long are the contracts and how long do you expect The contracts to be in general. And then also, how does the how do you actually match the organ For a potential recipient, like what is your exact role? Like how does that yes, just want to get a better understanding of how you do that?

Speaker 5

Thanks for the question, Hillary. Will here. So really exciting. We're essentially moving upstream in the process with our customers. So right now, Once the center has accepted an organ, that's when Blade gets pulled into the loop to help with the logistics.

Speaker 5

Now we're going to be part of the conversation At the moment that the center receives an offer. So essentially what happens, right, is the organ procurement organization And then that database is matching organs to potential recipients based on the database and in making offers. That's 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 want to accept that offer for an organ. So it's going to help in a lot of different ways. 1, it's just going to streamline the process for communication.

Speaker 5

But 2, you're going to get more of a heads up when a potential organ could be coming down the pipe. So it allows us to be much more efficient on logistics side In terms of picking aircraft that might need less repositioning and it will be lower cost for the center. So there's a lot of benefits to doing this, both for the center And for our business in terms of efficiency and on the unit economics side, you're right that the contracts tend to be Between $500,000 $1,500,000 a year, 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 accept. So that's kind of how we do the pricing. And ultimately, you're getting dedicated 20 fourseven resources from Blade to help you make that Evaluation and that's what you're paying for.

Speaker 5

And the more one

Speaker 3

thing, it's Rob speaking. The more we're integrated with the hospitals, the more services we provide, The more ballast it provides us to continue providing our air transport services for the hospitals. So it's a big

Speaker 5

And did I miss the second

Speaker 2

part of your question, Hillary?

Speaker 4

No, no, no. That was very helpful, very detailed and very easy to understand. So congratulations, it sounds like an exciting opportunity. And then my second question is, just even opening the on tarmac security checkpoint at the NICE airport also It sounds like something that most passengers would really appreciate. So is that something that you could also do in New York as well sometime in the future?

Speaker 3

Well, let's talk about Europe. This is of no cost to us. We have this is a real competitive vote in the sense that it is a concession agreement obviously for us to fly intercompany between Monaco and NICE. So the ability for people to fly Either into knees from New York or wherever, or when they return to be able to go from straight from Monaco State to New York And literally land by helicopter, bypass the internal security, do their security on the tarmac, go straight to their gate, will save literally 45 minutes. And obviously, this is something that we're keenly focused on in New York.

Speaker 3

We have the very first international airport helicopter lounge In country at Newark International Airport. And we're obviously looking forward to working with the Port Authority and our airline partners to see if we can do something similar here, but obviously that will take some time.

Speaker 4

Okay. Sounds good. So it does sound like something that you can look into and something that Could happen potentially.

Speaker 3

No, I think everyone wants it.

Speaker 5

And it's just a question of how

Speaker 3

and when.

Speaker 4

Okay, great. Thank you so much.

Speaker 1

Thank you.

Operator

Thank you. One moment please for our next question. And our next question comes from the line of Jason Helfstein with Oppenheimer.

Speaker 6

Hi, everyone. How are you doing? So a few questions. Can you, Will, just elaborate a little more that the single customer you were talking about, was that medical or on the Passenger side, just like or jet, like can you elaborate a bit there? That's the first question.

Speaker 6

And the second question, it seems like obviously there's a lot of concern about consumer spending. It seems like there's kind of this maybe like a sweet spot for you that You're potentially seeing certain folks maybe downgrading from some services to you, but You maybe Rob your comments just about kind of what you're 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 improved outlook for the Q4, 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.

Speaker 2

Thanks for the great questions, Jason. I'll take

Speaker 5

the first one on the temporary customer within 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. It's not reoccurring. They've returned They have essentially a dedicated local operator to them that they've used for many years and they're back to using them.

Speaker 5

But Whenever people have a temporary disruption, we're always there to help, but wanted to give you the guidance that there still would have been Low single digit sequential growth if we hadn't helped them out during the Q2 period. And I'll let Rob take the one on consumer spending.

Speaker 3

And I guess, that's with the cash as well. All right. So, let me take the cash one first. Yes, we added to the cash balance of our company this year. I mean, this quarter, I mean, from what $170,000,000 or $174,000,000 roughly.

Speaker 3

And we hope to continue doing that in The good news from our perspective is obviously the debt markets are closed, valuations in the private side are down. There's ever been a better time for us to make purchase strap on kind of bolt on acquisitions for Medical where we see a lot of opportunities and maybe some other places and now is the time. So they have to be something that Low risk in terms of integration, accretive day 1 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 number 1.

Speaker 3

Number 2, we are economic value animals. We do not believe the share price represents 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'd entertain that requires different financial technologies and a different kind of environment, but We're open to any type of tool in our toolbox that we can accelerate the stock price to start representing The accurate represent accurate 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 next company question was about consumer spending.

Speaker 3

On the consumer spending side, here's what we're seeing. The 27,000,000 people that go to the airport each year, that is such a huge and or to and from the New York City airport, that is such a huge TAM, Jason, I'm not seeing it there. In fact, we're seeing increased average checkout prices now that are lowering our In a matter of the number of passengers that we need to be positive cash flow for each flight. What we are seeing in a bit is, it was definitely a shift This summer for leisure routes like the Hamptons, a little bit from charter to by the seat. So I definitely saw the kind of, Let's call it the ultra high net worth guys who might be charting their own helicopters, some even own their own helicopters When they were flying alone as opposed to a family, buying a seat on blades.

Speaker 3

So on one hand, you could say that reduced The number of charters, but an increase our most important business and the one with the potential for the highest margin, highest TAM, which is our by the seat business. So we did see it a little bit there. So any other follow ups on that, Jason?

Speaker 6

Yes, I mean just and then on the jet side, this was obviously like a pretty good jet quarter. I mean how are you thinking in jet and other, How are you thinking about that going forward?

Speaker 5

Jason, it can be variable and difficult to predict. On the one hand, you've seen some press, but there's definitely some corporate customers that want to charter and maybe you see a little bit less of We're using corporate planes and you see people wanting the anonymity of flying with a tail that can't be tracked specifically to them, but it's hard for us to Predict that business. And 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.

Speaker 3

Jason, I was going to take a slightly more optimistic position than my colleague here, But we are being cautious about it. There are tons of companies out there that basically went out and bought a lot of aircraft to serve as 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 Increase the jet business thinking that this will continue past the pandemic and for a couple of those companies that ended up being essentially the Peloton of the year, All right. Those aircraft are now basically searching for missions. So I actually think there's a very good chance, haven't seen it yet, Be cautiously optimistic that this our big winter season north south that we're going to see a lot of availability and hopefully better prices can count on it, But it's definitely something that we see moves in the market out there of a lot more availability because of this big ramp up by a number of companies that you're well aware

Speaker 5

Thank you.

Operator

Thank you. One moment please for our next question. And our next question comes from the line of Bill Peterson with JPMorgan.

Speaker 7

Good morning and nice job to achieve a free cash flow milestone. And I have few questions. First on short distance. So I think that I'm guessing the profitability is now driven by the mature route, West 30th to JFK. I guess, how should we think about the profitability for It's proving that's true.

Speaker 7

How should we go out the path of profitability for unprofitable routes? I'm guessing Newark. But and then as you now are profitable, how should we think about Expansion into other airports, maybe LaGuardia, maybe using East 34th, things like that.

Speaker 5

I'll start just on the profitability front. The whole airport business was flight profit positive in the quarter. So That's not just covering the flight path, that's covering the cars on the ground and everything. And though the longest standing route from the west side of Manhattan to JFK Is the most profitable. We're now seeing profitability from all the routes.

Speaker 5

The ones that haven't had as much time, they're 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 had to be really patient. And As we 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 elect to pick Profitability level too. So we're really pleased that it's across the roots and as we talked about in the script, Still seeing really strong growth in the number of seats flown quarter to date.

Speaker 5

So the best is yet to come. And I'll let Rob talk a little bit about route expansion.

Speaker 3

Yes. So, look, I take a look at it and there's no question that our JFK route is the flagship route for Blade. It's Consistently profitable, it's high margin and it also offers the biggest time savings, especially from the west side to JFK. We're literally saving up to 2 hours For people who would normally drive on the Westside, newer, I think is doing fine. It has profitability.

Speaker 3

Eastside to Westside, I think we'd be very careful because there Eastside to JFK, there's a little bit of cannibalization we have to be careful about where people are in between both of those. So we're kind of programming those carefully. So our goal is really like Get this into profitability and now exactly we're saying let's analyze day parts that may or may not be flying as much And New Roots, LaGuardia, as they start getting through all their construction, there's a lot of construction there, we need a good service on the ground. And right now, if we can get you from the helicopter to your airline in 2 minutes, that's great. But if you're going through 5, 10 minutes of traffic, that's longer than your flight.

Speaker 3

And right now, that's where we are right now. So we're looking forward to LaGuardia finishing a lot

Speaker 2

of their

Speaker 3

construction. You know that we also We opened 1 of the first new heliports in New Jersey, and That one we're using charter only. We see some opportunity for very low risk by the seat potentially. We're also looking hard At Westchester to 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 and compromise profitability. We think there are ways of us starting that on kind of a risk free basis.

Speaker 3

You heard about Atlantic City, that's a backstop deal. So we do not take risk in utilization. So we're really looking at hard ways of Kind of starting new routes that can add on to our platform without incremental costs where we are not taking Any type of risk in terms of utilization or minimizing that where it makes sense to actually take that leap and get into something. So growth is really important to us. So I do see a lot of opportunity here.

Speaker 3

And also as we finish our integration in Europe, which is our number one priority, seeing the other opportunities in Europe like Milan and elsewhere.

Speaker 5

And remember, Bill, with the asset light model, it's really easy and low cost for us to add frequency to routes that are going great. So West 30th, particularly in the afternoons to and from JFK on a Thursday, Friday, I think one of the first things you'll see is Increasing the frequency so that you got an option every 20 minutes, every 10 minutes, that's something that's easy for us to do with the asset light model. And given that it's you already have a base of profitability during those dayparts, you're not taking risk on dragging down your overall profitability. So there's lots of options

Speaker 7

Yes. Thanks for the comprehensive answer. On the Meta Mobility, you spoke a little bit 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 kind of pointed out in your slide deck, how should we think about your current share and forward market opportunity in this space as well as your competitive moats?

Speaker 5

We think we have a lot of opportunity to grow In a market that's growing really fast. So shares is probably for kind of core heart, liver, lung, air transportation. We think we're probably in the high 20s in terms of our share there, where we've been grabbing incremental shares really through vertical expansion. We're doing a lot more of the ground ourselves now. We talked about how we have some owned vehicles in areas of density.

Speaker 5

We pay those back in just a matter of months and then we're making 30 plus percent 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 the process smoother. So I think you've got those vertical expansions that are already in progress that are above and beyond just core Heart, liver, lung, air transportation. And I think there's a big opportunity to continue grabbing share.

Speaker 5

It's a very fragmented market as we talked about at And as we have more scale in aviation that means our costs are going down. That means we can have more aircraft that are Opportunities for horizontal expansion into other critical cargo or thinking about acquisitions we could make that could make the medical business Even more efficient and so we're exploring all of those things simultaneously in a market that we've seen months where Heart, liver, lung transplants are growing just units in the mid to high teens. So the market itself It's 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 As transplant centers are getting more aggressive, so lots of different growth sectors 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 always say yes, because that's the most important thing to our long standing contracted customers that When we pick up the phone, we have a plane for them and it can be there on time.

Speaker 7

Okay. If I can sneak in one more, I mean, where the shares are trading Sorry to be at cash at this point. What type of M and A or opportunities for expansion look most attractive now? Passenger, like outside of the U. S?

Speaker 7

More vertical integration opportunities with Meta Mobility, cargo, something else we're not thinking about?

Speaker 3

Sure. Let me take that. On the passenger side, we are now in the 3 largest vertical transportation markets in the world, Northeast U. S, Southern Europe and Canada, then obviously we have a small joint venture in India. So until electric vertical aircraft are here and we have more landing zones, I can't tell you we see anything Compelling yet on the passenger side.

Speaker 3

And I think there's so much addressable market in each of our passenger verticals where They are, as I said, the 3 most important, the largest opportunities in markets that are today that Our best use of time and money is making sure that we kind of build those into what they can be with expanded roots on a profitable basis. So the number one area that I see and we see as a company in terms of M and A is leveraging our medical business. And that could be horizontal expansion in the existing medical business like you see with tops, which I think is going to give us a hell of a lot more Firepower in terms of offering that compelling offering to our hospital clients and being Maintain and extend those relationships going forward, but also as Will mentioned, critical cargo. You could be radioisotopes. It could be we could move into Other aspects of the organ business were not in kidneys yet, that's next slide out, but a lot of our logistics services could be useful to that.

Speaker 3

So Clearly, when you're moving as many pieces of critical particle 24 hours a day, there are other things to move and things are moving fast And people want things now. There's parts that need to be sent on demand for machinery or even aviation itself. So we're seeing those opportunities every day. Some of them are by size, some of them are in size, but we clearly have the balance sheet to do those and to do those quickly and without necessarily any type of incremental debt.

Speaker 7

Okay. Thanks for all the insights.

Speaker 3

Thank you. Thank you. One moment

Operator

please for our next question. And our next question comes from the line of Ittai Micali with Citi.

Speaker 8

Great. Thanks. Good morning, everyone. Just a couple of questions. First, maybe a few financials.

Speaker 8

Well, I think you mentioned for MetaMobility and outlook for 20 plus percent flight margin, I think it's a little bit better than what we talked about in the past around mid teens. So hoping you can talk a bit more about that. Then secondly, I was hoping you could quantify the drag from Europe on flight margins this quarter as well?

Speaker 5

Sure. Great questions. On the medical side, it's really all about more reliance on those dedicated aircraft. When we grow really quickly like we've been growing, we'll be servicing a significant amount of our demand through the charter market. Then what we do is behind those contracts with hospitals, we'll dedicate supply that's located in the right locations To eliminate repositioning and that's how we can you've seen those slight margins creep up quarter by quarter and that's how ultimately we can start to get Above that 20% level.

Speaker 5

And the other thing that we talked about in the past is bringing in dedicated vehicles. We use a lot of 3rd party grounds when we're growing quickly, but we have so much scale in 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 flight profit margins on the ground portion. So there's 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 costs with the first two customers that are launching in December, but getting to average medical flight margins in the full year 2024,

Speaker 3

That's going

Speaker 5

to pull up our margins a little bit as well too once we get to scale there. So a lot of different things that are helping us Get to those good solid margins and then you see our overall SG and A in that business not growing nearly as quickly. So you're getting that operating leverage. Does that answer your question on that?

Speaker 8

Yes, perfect. And then maybe the flight margin drag from Europe this quarter, I don't know if you can quantify that?

Speaker 5

Yes. So Europe actually had a little bit better flight profit margins than sort of 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 talked about this.

Speaker 5

There were 3 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. We're not going to go into sort of specific numbers on a region in terms of EBITDA contribution, but we're really on the right path there in terms of rightsizing the cost structure And rightsizing the suite availability for the opportunity. Yes.

Speaker 3

I think I would say just to add on to that, when you think about generally Your cost per seat and your cost of aircraft, the fact that That is one of the best margins in our passenger segment. The cost side is a lot easier to manage Then improving your 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 get down. In terms of kind of the cost below that line, integration and common shared services, That's something that's a much easier lift. So we're definitely optimistic looking forward with that business for 'twenty four.

Speaker 8

That's very clear and helpful. If I could just sneak in one last question on Blade Airport. The momentum you're seeing, including thus far in Q4 for the seat growth. I'm just curious, 1, do you think you're taking share from rideshare? And second, Just maybe just talk about, like repeat flyers and kind of what you're seeing there in terms of that incremental momentum you're seeing?

Speaker 3

Sure. I'll tell maybe Will do on the repeat flyer side, I have some data on that. But Look, we are 1 of 1. Our competition is ground, okay? And if you take a look at the average cost of an Uber right now, the amount Time it takes you can have an Uber Black that goes between $195 or way over $200 With an airport pass, we're down to kind of $95 in terms of price.

Speaker 3

So that is really the alternative that people are looking at. But I'll also mention that from a marketing perspective, we're getting those people the mode We have a marketing venture with Uber where if you are going to or from the airport or to or from a hotel, you will actually get served with an ad that allows you to divert your car to a Blade Lounge to take your flight, Which is extremely cool because that's exactly where you want to do it. You're sitting in traffic and all of a sudden you get in the car and you're worried about how long it's going to take to the airport. You want that certainty And you have that ability right through the Uber app to use our marketing messaging get and have a diversion. And then in terms of the repeat flyers, I'm very happy with the amount of repeat flyers.

Speaker 3

I think once someone's got on blade Over one time kind of 2 going forward. I believe the numbers going back to an is actually about 5 times, once they've gotten past that from the second point, second trip and then Will can I'll give you some other views on

Speaker 5

repeat usage. Yes, Itay. 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 we continue to retarget folks to fly again and that's the most important input right there, our lifetime value to customer model is

Speaker 3

How many times can we

Speaker 5

get those folks to fly? So the marketing team has done a fantastic job making sure that we do continue to take share from ground. We get people flying again and again and we get people flying our airport passes, which for $7.95 a year, you can be flying for as low as $95 And now you're beating UberX most of the time if you've got that airport pass. So really excited to see the metrics Going the right way, we won't be sharing kind of metric level CPAs and LTVs, but everything is moving in the right direction.

Speaker 8

Terrific. That's all very helpful. Thanks.

Operator

Thank you. One moment please for our next question. Our next question comes from the line of Jon Hickman with Ladenburg Thalmann.

Speaker 1

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?

Speaker 5

This year is the last year of the earn out. So there will be

Speaker 1

some again in Q4?

Speaker 5

Yes, we've been accruing it during the year And it's been added back to EBITDA as it's 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.

Speaker 1

Okay. Thanks.

Operator

Thank you. This concludes our analyst Q and A. I will now turn the call back over to Lee of Blade.

Speaker 1

Thank you. We're going to start by taking a few questions from our SAI Q and A platform. We received a number of questions and we're going to combine those that have Our first question is how defensible is Blade's mode such as your air rights and first mover advantage?

Speaker 3

Lee, I'll take that. And I appreciate the question. I appreciate the opportunity to deal with to answer questions from people on the SAFE platform. We built this company to create the ecosystem from urban memorability in all the key markets in the world and infrastructure is a key part of that because Whether it's helicopters today or electric vertical aircraft tomorrow, if you do as many flights as we do and Our New York airport service is 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, assess luggage and safely get people on their aircraft and turn those aircraft time and time, again really quickly, sometimes in 5 minute turn.

Speaker 3

And in New York City, the biggest market we have, you have the blades from the lean side, the blades from the west side. We in fact expanded what we actually have it dedicated to partners And an arrival lounge on the Westside and that is exclusive in terms of however long the operator has been is going to be there. They've been there for 38 years and then we also have kind of geographic exclusivity, I would say, 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 find other means of Dealing with their passengers, if you want throughput, you need your own dedicated space. Obviously, what I mentioned in Europe with It's a concession agreement that allows people to fly from Monaco to the east.

Speaker 3

So when you think about people connecting in That is a competitive mode as we have that concession for Monaco to these where we can actually stay at an incremental 40 minutes for people To land and then go straight to the gate by doing security helicopter side, so to speak. So this is a core strategy going forward. And as we move from helicopters to electric vertical aircraft, this is something that the competition in electric vertical aircraft We'll be using electric vehicle aircraft, I want to view this as competitive. That's going to be something that's going to be important And something that has real strategic value that you can't capture in kind of quarter to quarter numbers.

Speaker 1

Thank you. We also had a few questions on shareholder value. What is Blade doing to bring value to shareholders? And what are some reasons that shareholders shouldn't divest given the performance?

Speaker 5

Great question. A couple of thoughts on this. This quarter in particular demonstrated that our platform works. It can generate free cash flow And positive EBITDA at the right scale. And at the end of the day, the most basic way we can increase shareholder value is by making money and that's exactly what we're doing.

Speaker 5

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 is yet to come. 2nd, we're in a fortunate position where we have more cash than we believe we'll need to execute on the organic growth plan. And we do see, as Rob talked about earlier, significant opportunity for M and A with a focus on ways to diversify and enhance the profitability of our medical business. And what I'd say is even if owning a small number of aircraft makes sense financially or could help us win a really important We consider that as well. We're constantly evaluating opportunities in this genre.

Speaker 5

But what I'd say is the bar is extremely high to ensure that any acquisition We'll be immediately accretive.

Speaker 3

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 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 Our existing routes and also really executing against some of these bolt on acquisitions that are accretive to day 1 That are kind of in our mind low risk and do not require incremental overhead that can utilize our shared service platform on the cost side.

Speaker 3

So what we got to do is keep executing and keep this path to profitability going. That we can only control, we control and then

Speaker 1

Our last question is on our last shareholder question is, What is the updated timeline for EVA deployments? Any update on beta technology?

Speaker 3

I think that we're very excited about How quickly the certification process is going and in fact, I think you're 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 interest. And again, the reason why our transition to EVA is so important is that It's not that it's going to get you to the airport any quicker, it will still be about 5 minutes. And it's not going to be that much cheaper, it's because it's quiet. Mission 3 is also great to get the public and stakeholders behind it.

Speaker 3

But quiet is the unlock to allow you to open more landing zones. And any pair of landing zones is a brand new business, All right. So we have Eastside, we have Westside, billion land at Wall Street. If we had incremental lending zones in Manhattan, we believe the growth could be exponential. Same thing goes for Europe and Canada.

Speaker 3

And that's why we're excited about EVA, that ability to unlock 2 places to land. 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

Speaker 1

This concludes our question and answer session. Thank you for joining the Blade Q3 2023 earnings release.

Operator

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

Powered by Quartr