Greetings. Welcome to flyExclusive Second Quarter and First Half 2024 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Sloan Bohlen, Investor Relations. Thank you. You may begin.

Thank you so much. Good afternoon and thank you for joining flyExclusive's second quarter and first half 2024 earnings conference call. Joining me on the call today is Jim Segrave, flyExclusive Founder and Chief Executive Officer, and Matt Lesmeister, Chief Financial Officer. On our Q1 financial results, our Q1 financial results were announced through our Form 10-Q filed with the SEC on August 12, 2024 and our Q2 financial results were announced after the market closed today, along with the filing of our Form 10-Q for the quarter ended June 30, 2024. We will be providing certain non-GAAP information during today's discussion. Important disclosures about this information and a reconciliation of the non-GAAP information to comparable GAAP information is included in our Form 10-Q filed with the SEC and available on our Investor Relations website. In addition, this discussion might include forward looking statements. Actual results might differ materially for any number of reasons, including the risk factors described in our annual report on Form 10-K, in our quarterly reports on Form 10-Q and on the press releases covering forward looking statements. Rather than rereading this information, we're going to incorporate it by reference into our prepared remarks. And with that, let me turn the call over to Jim.

Thank you Sloan and thanks to everyone for joining today. Year-to-date, flyExclusive has made significant progress across a number of strategic priorities. As discussed in our first earnings call, 2024 will be a transformational year for the company as we execute our business plan after successfully becoming a public company in late December of 2023. We are eliminating 37 non-performing aircraft, replacing those with challengers, continuing to build our fractional and club programs, building our leadership team, eliminating outside consulting expenses and rightsizing our SG&A. We have raised $75 million, $50 million and $225 million preferred equity raises and an additional $25 million in a line of credit to support our business plan year-to-date. Operationally, our Jet Club continues to take market share based on our differentiated service offerings. We expect our fleet utilization and business mix to continue to shift and accelerate toward the Club and fractional business in the second half of 2024. This direct-to-customer channel growth will improve both the contractual visibility of our revenues going forward as well as our flight operating margins from the more efficient aircraft we will deploy with our fleet refresh. We have taken large steps to institutionalize both our management team and our balance sheet to ensure flyExclusive is best positioned to execute the business plan we developed well prior to going public. We firmly believe our product offerings will continue to take market share and our platform will win as the premier, most vertically integrated private aviation operator. In the first half of 2024, flyExclusive has made significant progress on all fronts and the team has a lot to be proud of with what we have already accomplished, but we are even more energized about what we can accomplish in the quarters and years ahead. In my remarks, I'd like…

Thank you Jim, and thanks to everyone on the call as well. I'll quickly echo Jim's sentiment on the meaningful opportunity at flyExclusive. It's why I'm here and I'm excited to work with our analysts and investors to deliver the types of returns we know are achievable in this business. With that, let me organize my comments into two main buckets. First, I'll briefly review our results and then I'll speak to our balance sheet and our recent financing actions. flyExclusive reported first half revenues of $159 million, a decrease of 10%, which is made up of higher member flight hours, but offset by mix with higher light and midsize jet composition. Additionally, with the fleet refresh, we elected to replace our Gulfstream flights with the Challenger 350 aircraft. We have already sold some of our legacy heavy fleet and this has had an impact on our top line revenue. The end result will be more profitable flying in the long run. The timing of revenue shift from our terminated GRP partnership and lower flight rates compared to last year were also factors. As Jim noted, we expect the cross currents in these revenue drivers to ease in the second half and would also note that our growing Challenger 350 fleet will aid our portfolio rates given premium level demand and more limited supply compared to smaller jets or wholesale in general. In the first half, flyExclusive adjusted EBITDA loss of $35 million year-to-date was driven by revenue headwinds cited above, as well as higher operating and SG&A cost compared to a year ago. As Jim detailed my first priority with him and Mike has been cost optimization and we're pleased with the opportunities we have identified to date. We believe there is further opportunity here and we look forward…

Thank you. [Operator Instructions] Our first question is from Marvin Fong with BTIG. Please proceed.

Good evening. Thanks for taking my questions. Just a follow up on, I think, on that last bit where you mentioned the pipeline for fractional. Could you just kind of elaborate on where we stand there in terms of what's been sold and what's coming and also some commentary on how the CJ3s are doing in addition to the Challengers? That would be helpful. And then I have a follow up.

So I think we have roughly 50 people in the pipeline that are looking at the two aircraft. The Challenger 350 sales will start on the next airplane to be delivered, which we expect to be in the next 30 days. And of those 50 in the pipeline, roughly eight of those are customers that have contracts in hand being reviewed for the Challenger 350.

Okay, great. And then great color you provided just on identifying the drag and profitability from the nonperforming fleet, I mean, just for excluding the planes you plan to eliminate, just kind of talk us through the margins that, was there any pressure on that part of the business, excluding the non-performers in terms of both revenue and operating cost? It does look like some margin compression that looks beyond what could be explained by the non-performing fleet, but just kind of talk me through what you guys saw as far as the first half?

I think there was some modest, there was some modest margin pressure based on decreased rates and probably increased competition in the space, but really exacerbated by the non-performing aircraft and the operating costs associated with those airplanes. And really even more directly, the extremely poor dispatch availability of that legacy fleet of aircraft we're eliminating. So as we eliminate those airplanes and replace them with more reliable aircraft, the Challenger 350 in this case, that margin not only is returned, it's drastically improved by roughly 250%. Experience, although short for the last 60 days, and the first airplane that we have added to our certificate has been nearly 100% dispatch availability. So almost a 300% improvement over the airplane aircraft it was replacing that were averaging in the mid-30% dispatch availability margin. So the primary driver of the margin has to do with the operating cost of the older legacy fleet more than it does the rate and the competition. If not, there’s not some there. There certainly is. But I think we are mitigating that with the challenges that were adding. And as far as the demand in general, we have mitigated that by taking market share, evidenced by the 17% growth in our flight hours compared to what I think the rest of the market had single-digit growth over the same period.

Got it. Okay, thanks guys. I'll take other questions offline. I appreciate it.

Thanks, Marvin.

We have reached the end of our question-and answer-session. I would like to turn the conference back over to Jim for closing remarks.

I'll conclude with a thank you to our customers, our employees, partners, and investors. We have a lot to look forward to here at flyExclusive, and we're excited to perform and drive value for every one of you in the future. Thank you.