Good morning, ladies and gentlemen and welcome to the Blade Air Mobility Fiscal Third Quarter 2024 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 over to Matt Schneider, Vice President of Investor Relations and Strategic Finance. Matthew, you may begin.

Thank you for standing by and welcome to Blade Air Mobility conference call and webcast for the quarter ended September 30, 2024. We appreciate everyone joining us today. Before we get started, I would like to remind you of the company's forward-looking statement and 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. These forward-looking statements are subject to risks and uncertainties and actual future results may differ materially from those expressed or implied by the forward-looking statements. We refer you to our SEC filings, including our annual report on Form 10-K filed with the SEC, for a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this conference call are only made 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 as required by law. During today's call, we will also discuss certain non-GAAP financial measures which we believe may be useful in evaluating our financial performance. A reconciliation of the most directly historical comparable consolidated GAAP financial measures to those historical non-GAAP financial measures is provided in our earnings press release and investor presentation. Our press release, investor presentation and our Form 10-Q and 10-K filings 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 Wiesenthal, Founder, Chief Executive Officer of Blade; and Will Heyburn, Chief Financial Officer. I will now turn the call over to Rob.

Thank you, Matt and good morning, everyone. I'm extremely proud of our team's effort in achieving an important milestone this quarter in our passenger business achieving positive segment adjusted EBITDA in a trailing twelve month period ending September 30, 2024, more than a full year ahead of our previous guidance to achieve profitability by the end of 2025. In Q3 2024 we saw significant margin expansion driven by both our passenger and medical segments resulting in a 27.3% year-over-year increase in flight profit, while adjusted EBITDA of $4.2 million increased more than fivefold compared to the $0.8 million in the prior year period. We're also pleased to see strong conversion of adjusted EBITDA into cash flow as we generated $6.4 million of operating cash flow and $3.7 million of free cash flow before aircraft acquisitions in the quarter. I will now review the key business, operational and strategic highlights for Q3 2024 starting with passenger. We had a strong summer season, particularly for Northeast leisure, that drove Q3 2024 short distance revenue up 6.5% year-over-year or 9.8% excluding our discontinued Canadian operations. Our passenger segment enjoyed a significant improvement in profitability in the quarter, with passenger flight profit rising 31% the prior year period while passenger segment adjusted EBITDA doubling versus the prior period and passenger segment adjusted EBITDA margin rising to 14.4% versus 7.3% in the year ago period. On top of strong underlying customer demand, several factors contributed to our faster path to profitability in passenger. We've taken action to exit unprofitable business lines and focus on routes with the most attractive growth and profitability characteristics that are strategic in nature. For example, we formally exited the Western Canada market during Q3 2024, an intention we discussed on our Q2 earnings call. In Europe our management team has…

Thank you, Rob. I'll now walk through the financial highlights from the quarter starting with passenger. Short distance revenue for Q3 2024 increased 6.5% year-over-year or 9.8% excluding Canada as we formally exited the Western Canada market at the end of August. In jet and other, revenues declined 15% year-over-year, driven primarily by lower revenue per flight given softer jet charter industry pricing. As Rob mentioned, we saw significant margin improvement in passenger this quarter as Passenger flight margin and adjusted EBITDA margin expanded by approximately 700 basis points year-over-year. The profitability improvement in passenger was driven by several factors including strength in our Northeast leisure routes, improved pricing, higher load factor and New York airport transfers and early benefits from our European restructuring. Turning now to our medical business. Medical revenue rose 7.8% year-over-year to $36.1 million. On a sequential basis medical revenue fell 5.9% versus Q2 2024. Blade's air trip volumes declined in line with industry heart liver lung transplant volumes in Q3 versus Q2 2024, though our sequential revenue decline was slightly higher than the industry given a reduction in empty leg aircraft repositioning. As we've increased the size of our dedicated aircraft fleet and made space more aircraft at the home airports of our customers, we're able to significantly reduce empty aircraft repositioning time and costs, fortifying our value proposition to hospitals and making many other operators uncompetitive in these regions. This had a discrete impact on revenue in Q3, but it is the right decision for us and for our customers. Long-term this is a win win saving money for our customers, enabling shorter crawl out times and longer trips while at the same time these well positioned dedicated aircraft generate more flight profit dollars per hour and per trip. For example, even in Q3…

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

Thank you. [Operator Instructions] And our first question comes from Jason Helfstein at Oppenheimer and Company. Your line is open.

Thanks. Good morning everybody. So just first some questions on Medical. So just to elaborate a bit more, obviously there were some factors that went on in the quarter in the industry. Transmedic talked about it just but broadly talk about why the industry had kind of headwinds in the quarter and ultimately again kind of why you see those headwinds abating. And you know, and then it also seemed like both there was general, I guess, more downtime of the planes. Like you cited that and Transmedic cited it. And so I'm just curious like was there something going on with just getting kind of, I don't know, necessary, you know, maintenance work, et cetera. But just why were there more planes down on average this quarter? And then with the higher fleet ownership, is there a way to leverage potentially any downtime in those planes for passengers or any synergies there? And then I might have one follow up. But let's just start with that on Medical. Thank you.

Thanks, Jason. Will here. We'll start on the Q3. Look, what I would say is that you look at Q1 and Q2. For us, our sequential trip growth was well ahead of the industry volume growth. And then in Q3, if you look at our trip volumes. We were right in line with the industry volume declines. So, there's always going to be some lumpiness. It has to do with a lot of different factors. It can be vacation schedules for individual surgeons. It can just be ebbs and flows of the availability of donors. But what we're really confident in is that we're going to continue to outperform the market in the long-term for two simple reasons. We continue to take market share, we're winning new customers, and we're not losing any customers. So you might see some quarter-to-quarter volatility. But because of that fact, we feel really good that we're going to keep outpacing the market like we did in the beginning of the year. Moving over to your question, around the downtime of aircraft, this is a new program for us. But let's sort of just put the strategy in broader context. There's always going to be some quarter-to-quarter unexpected maintenance. But if you look at the trend of the strategy and you look year-over-year at Q3 this year versus Q3 last year, we're seeing growth in our flight profit per flight hour flown, that's up 18% year-over-year. We're seeing growth in the average flight profit generated per trip, that's up about 11% year-over-year. And we're doing that without having to take price beyond the built in revenue growth that's in our contractual escalators and our contracts. So, I think looking at the overall trend, we're happy that things are going in the right direction. And then you look to October, we've seen a bounce back not only in the overall volumes that we're performing for our customers, but also in the performance of the fleet. So, I don't think there's anything industry wide, Jason, to your question that's causing the downtime, but we're happy to see that things are bouncing back to the level that we expected. And Q2, of course, was an exceptionally great performance, both on the volume side and we got the fixed cost leverage there, but also in just not having much maintenance downtime at all.

And Jason, I'll just add, despite any month-to-month vagaries in terms of when you own the aircraft, whether it be unscheduled maintenance or any kind of lumpiness that you would see, the margins from owning these aircraft even in this kind of quarter versus the margins on a non-owned aircraft are far superior. At the same time, we're trying to strike a balance between owned and dedicated aircraft versus non dedicated aircraft. And it's still a minority of our trips that are done on the dedicated aircraft. Also, as I said earlier, if you take a look at October, October was an incredibly strong performance. So I think you're going to continue to see this kind of thing. And obviously Q3, as Will said, because of the summer surgeons on vacation, there are a whole bunch of reasons why Q3 historically has been soft versus other quarters. And I think your last question was around just opportunities to leverage the fleet for other business lines. Certainly, there's some incremental capacity on those aircraft and we're exploring opportunities to use, for example, empty legs to move passengers and also exploring that same opportunity within other time critical cargo. So, we definitely see that as an opportunity. It's fortunately we've been blessed that we have so much demand on the Medical side that these planes are flying quite a bit. But that's definitely something we'll look to leverage more as the fleet gets to kind of the steady state size, we want it to be. And Jason, as you would know very well, you think even about the largest charter corridor in the world, which is New York to South Florida, having planes in Teterboro, if you had a situation where there might not be enough cushion of duty hours for Medical mission, that plane could easily go down into a passenger mission for Florida, southern Florida under certain circumstances.

And Rob, just a bigger picture question. So, with kind of a Republican kind of sweep of the elections, how do you think about that impacting potential expansion of the passenger business on the traditional side? So, you did highlight, you think it would accelerate eVTOL, kind of potential approval, etc. But did you think you get more reprieve around helicopter access or really this is still.

Yeah, I think, that's a very good question. I think, you know, as you know, there's been, you know, a fair amount of discussion about existing, you know, heliports and airports, curfews, you know, issues on fueling, types of fuel, you know, a whole bunch of things. And I think that it's clear that this administration and even a lot of the local representatives that were elected at this time are very, you know, pro urban air mobility, whether it be with helicopters today or electric vertical aircraft tomorrow. So we definitely, you know, are looking forward to a bit of a reprieve. And I really think that the people who I've spoken to who are, you know, amidst this current and this incoming administration, understand the importance of the infrastructure we have now. Because when Electric Vertical Aircraft are here, they'll be using our infrastructure to start or the infrastructure that we use. And then clearly our, as you know, our proprietary terminals and such are going to be critical for that early period before new infrastructure is built. So, I agree with the statement you said.

Thank you.

Thank you. Our next question comes from Lauren Lee of Deutsche Bank. Your line is open.

Hey, thank you for taking my question and congratulations on a great quarter. So, my first question is about the passenger segment about like what's your thoughts on 2025? I think the guidance is around $85 million to $95 million. So, the midpoint should be down to flight year-on-year. Just want to make sure. Are there any other factors we should consider except the Canada exit?

The biggest factor on the top line for Passenger is just as part of our overall drive towards profitability, we decided to exit the Western Canada market which was not giving us the strategic advantage we thought and we didn't believe it had the growth or profitability potential that we were looking for in the near term. So that's why you're seeing the new guidance on passenger for the remainder of the short distance business. We continue to expect single digit revenue growth and we're very enthusiastic about continued performance improvements we're seeing for growing products like our airport transfer products here in New York City and also profitability improvements that come along with that.

Yeah, just a couple things I would add. We're in this period right now since in many markets we're one of one without competition. So, you know, there's been definitely a focus. It's not growth at all costs, it's smart growth and being profitable which we've accelerated through our restructuring in Europe which is just completed. And by getting out of Western Canada, which we just didn't see the short to midterm opportunity there. And as Will said on Airport in October, just as an example, we had a record passenger count, monthly passenger count this past October. So, you're going to, I would call it considered growth is what our strategy is to ensure that we have a continued profitability in passenger. As you saw, we originally said in our last couple of calls when we put out guidance on Passenger that we'd be profitable in 2025. And we've actually achieved that over a year early the last 12 months and obviously for all of '24. So, I think the strategy is working.

Okay, appreciate that. Also, I get a question about the Medical segment. I think you mentioned there is for this quarter, there's a reduction in block hours for trips, something like that. Just curious, think about your strategy of moving the fleet closer to the large hospital clients. Does that make like economic sense for Blade or it's mainly for pushing out the competitors?

It does make economic sense for Blade because our margins on a per hour and per trip basis, the flight profit dollars that we make are higher with dedicated aircraft. And then by moving the aircraft closer to our customers, we get a number of advantages for our customer and for us, most importantly, we don't have to bill our customers for repositioning. And still on average, we're making more dollars of flight profit per trip. So that's a win win there. But also operationally, when your aircraft is based near your customer, you have more time to go pick up an organ because you're not burning crew duty to reposition that aircraft then. So, it gives our customers more flexibility and it increases the aperture of how far they could fly and how long they can afford to wait to pick up an organ. And also reduces the call out time. If something comes in very last minute and the aircraft is already sitting right next to your customer, you have a much better chance of being able to go right away. So strategically we think it's absolutely the right move. To your point, it does help us competitively as well because that's difficult to compete with. If we built a strategy around that and financially it still makes sense. But most important to us is it gives us the strategic advantage that we think is leading to us continuing to win new customers and not losing our existing customers.

Laura, I would say put it in three things. Better economics on a per trip basis for these kind of trips. Strategic in terms of really improving outcomes, which is the most important thing because we're getting to do the mission faster, thus the transplant happening faster, and then versus our competition. If you're competing for a contract versus Blade and you have just, you know, aircraft all over the place or where your home base is and you're not going to be at the hospital, you're going to, you know, you're not going to be competitive. So that helps getting new customers. And the fact that we have owned aircraft now has also been extremely important in getting those new customers as well.

Okay, gotcha. Yeah, that's helpful. Thank you.

Thank you. Our next question comes from Bill Peterson of J.P. Morgan. Your line is open.

Hi, this is Mahima Kakani on for Bill. Thanks so much for sharing more about the partnership with OrganOx. Can you maybe elaborate on what share of the market that Metra Perfusion currently accounts for? And was this sort of incremental market opportunity on top of what you were already expecting to support medical growth. And then maybe as a follow up, it sounds like OrganOx's technology is supply constrained rather than demand constrained. Does that give you additional pricing power on that share of chips? Thanks.

Hey Mahima, thanks for the questions. Look, we don't have market share data across the country for OrganOx specifically, but what we can tell you is from talking to our customers, there is more demand for this machine than the current available supply. We talked about that a little bit in the press release. And so, what we're going to do with them is take extra machines that will be around the country and rather than have them sit at one customer for the occasional use, if that's a low volume customer, we'll fly or drive the machine to folks that need them on a one-off basis and then fly them over to the next customer. So, we expect to be able to significantly increase the utilization of those machines and help OrganOx get greater market penetration there. One of the reasons from talking to our customers that we think they're really interested in this machine is just it's really economical relative to some of the alternatives that are out there. And that's going to allow them to allocate their dollars towards more organs by using a machine like this. And all sorts of benefits in terms of giving centers additional time to evaluate if a liver is a good fit for the recipient, extending the amount of time that it can travel. So hard to put sort of firm numbers around what the market share is today and what it's going to be in the future. But really this is an example of us hearing from our customers that this is something that they want greater access to and then working directly with the manufacturer to come up with a win win strategic alliance to make that possible.

Okay, thank you, that's helpful. And then passenger margins really outpaced this quarter, you know, with optimizations made in Europe with the restructuring and the exit from Canada. Can you touch on your steady state assumptions for this business and do you see further sort of pricing power from the tiered pricing that you guys have used or have seen kind of in the past?

Yeah, I think one of the more underappreciated benefits that we've seen in the passenger business is just increasing the load factor. And products like our New York Airport transfer service, you know, if you rewind the clock, that was really almost at breakeven flight profit a year ago and now it's starting to get closer to where we'd like it to be targeted. Still not at our overall target margins for the passenger business. So we have some room to continue there particularly using strategies like the one you just described, having folks pick a higher priced fare class for more flexibility. So, I think that there's definitely an opportunity to see continued margin expansion in Passenger. And also remember we've just completed our restructuring in Europe which we think is going to improve the profitability of that business. And we've just exited the Western Canada market which was drag on our overall profitability. So, it's pretty exciting to me that in Q3 when you really aren't seeing the full benefit of either of those things that we had such a fantastic performance in Passenger. And I do think the best is yet to come. One last thing on what your point about different fare classes and upgrades and things like that. We've consistently added more fare classes with more benefits for our passenger, more add ons and what you find is when this business started, when it was $195 a set, I think now we're well north of $300 on an average checkout. But the important thing is it's giving passengers the ability to play the spectrum. They want something that's kind of low cost and low flexibility with a lot of perks, they can purchase that. Or if they want something where they have flexibility in changing their fare, they have extra luggage, they want a car on the other end when they arrive. People are opting for that. And that has helped, you know, over the past year kind of supercharge those average checkout prices which ultimately ends up with, you know, higher margins for us. So, we're pretty happy with that performance.

Okay, thank you so much. I'll hop back in the queue.

Thank you. Our next question comes from Jon Hickman of Ladenburg Thalmann. Your line is open. Jon, your line is open.

Hi, can you hear me?

We can hear you now.

Okay. Okay, thanks. Sorry. Well, I'm. My questions have actually been answered. I was just about to deraise my hand, but could you go over your guidance for the, I couldn't write down fast enough but could you have your guidance for the passenger side for Q4?

Sure. For Q4 and passenger we suspect about $13 million of top line revenue. And that reflects the Canadian business being discontinued. And then we expect to see roughly flat jet and other revenue year-over-year and continued single digits year-over-year growth in the short distance business. Jon.

Okay, thank you so much. That's helpful. I got it down this time. Appreciate it. And congratulations on the quarter.

Thank you. I'm showing no further questions. I'd like to turn it back to Matt Schneider.

Great. So we're going to take a few questions from our, Say, Q&A platform. We're going to start with a few questions for Rob on vVTOL or EVA. First question is, do we believe the manufacturers are going to work with Blade as they kind of expand their fleet of aircraft over time? And which manufacturers are we most excited about?

I think we have great relationships with all the manufacturers now. We speak to them extremely often, almost every week, I would say at this point. They're very excited about working with Blade, given the fact that we are flying more people by vertical transportation than any other company in the world and have more proprietary infrastructure than any other company. I think that I'm very excited about what Joby and Archer are doing, especially in terms of how far along the process they are in terms of certification and what their plans are. I think that, you know, they're definitely, you know, in a position, you know, especially, you know, given the current administration, to try to expedite, you know, their time to market. I think that, you know, really will help them remain on time here in the U.S. you know, from the years that they've put out there. But also, I think that there are others out there as well that we've had, you know, we have relationships with in terms of, you know, Beta, Hyundai, Eve, Wisk and everybody else. And I think, look, they're all doing a great job and we're looking forward to them getting a certification. It's only going to help supercharge Blade's business.

Great. Our next question is for Will on flight margin, and the question is generally what's the path for flight margin expansion from here?

Thanks for the question. I think we talked about some of the great levers that we've already started to pull in the passenger business, including the restructuring in Europe and our exit of the Western Canada market and then some continued pricing and growth in products like airport that's going to drive that passenger flight margin up. On the Medical side, we're fortunate that now we're going to get a lot more fixed cost leverage as we grow. And as we add flight hours, that's one of the big benefits of having the owned fleet. We're in the middle of onboarding more aircraft, which does create some near-term lumpiness for us. And there could be a little bit more of that as we just announced that we'll be buying two more aircraft that are not yet producing revenue flights for us. But in the long-term, the more we fly now, the less it costs. Every hour costs a little bit less to fly. So that's how you're going to start to get that adjusted EBITDA margin on segment, adjusted medical EBITDA to the high teens over the next few years and we think there's a really clear path to that.

Great. Why don't you take one more Will just on medical competition and NRP. So, the question is, I heard the question is how are you thinking about the competitive landscape evolving as different devices and methods like NRP become more popular?

Yeah, look, we've been getting a lot of questions about this. It's a really exciting new therapy, Normothermic Regional Perfusion. As we said in the script, we've seen year-to-date about three times as many volumes of cases where transplant centers are performing NRP year-to-date 2024 versus year-to-date 2023. So that's really interesting and exciting to see. It's still about a low single digit percentage of our overall cases. The other thing we're seeing that's kind of exciting is more and more we see OPO organ procurement organization led NRP. So rather than the transplant center being the driver of selecting the use of NRP for a donor, circulatory death donor, we're seeing the OPO choose to do it. And then what happens is maybe they thought they were only going to match a kidney for that particular donor and then after being on NRP for a bit of time they re-offer the liver to a few other centers and it gets accepted. And so when we talk to some of the OPOs we work with, we have heard from a few folks that it is their goal to try to use NRP for the largest percentage of their donors as they possibly can simply because they see it as increasing the yields that they are going to get from those donors. So it's early days for this. Certainly, you know, there's a number of third-party service providers that are trying to make this easier and put a bow around it to help both the OPOs and the transplant centers. And like we've always said, we're agnostic and we'll work with our customers with whatever device, procedure, therapy they want to use. We're there to support them no matter what. So really excited about the future and definitely will be a growing driver of more supply of donor organs becoming available.

So, to just add to that in terms of the hospitals that our medical team talks to, NRP has often been described as a game changer and I think that we can we only believe that this is going to help our business going forward on the Medical side.

Great. Should be exciting to watch this play out over the next few years Rob. The last question we're going to take is on capital allocation. The question is just an update on how we're thinking about capital allocation and use of cash.

Sure, we're continuing to be prudent, smart, but yet aggressive in terms of uncovering the opportunities that we see here. You saw that we did a very quick tuck in, single digit, multiple creative day one acquisition. As I like to say in the medical side, with respect to Graham Transportation, we're looking at things every day, both large and small. And we're happy to have the size balance sheet that we have and being debt free in order to achieve those goals. Excuse me. And so, there'll be a lot more to come. So, we're excited about the future with respect to the opportunities that we see. And again, the folks will be on the Medical side on M&A.

Great. So that's the end of our Say Q&A questions. Operator, we'll turn it back over to you.

Thank you. This concludes today's conference call. Thank you for participating. And you may now disconnect.