Blade Air Mobility : Q3 2024 Investor Update Letter

Published: 2024-11-12 07:28:30 ET BLDE

Q3 2024 Investor Update

To Our Shareholders,

I'm extremely proud of our team's effort in reaching an important milestone this quarter in our Passenger business, achieving positive Segment Adjusted EBITDA in the 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 $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.

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 this quarter, with Passenger Flight Profit up 31.0% versus the prior year period, Passenger Segment Adjusted EBITDA doubling, and Passenger

Segment Adjusted EBITDA margin increasing to 14.4%

versus 7.3% in the prior year 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 taken several aggressive steps to improve profitability. During Q3, we restructured our European operations which is expected to generate significant cost savings and enable stronger organizational and commercial alignment with our local partner. As a result, we expect to see improvement in profitability for Europe, which will mostly manifest itself during the busy summer months given the seasonality of the market.

We've also been laser-focusedon maximizing cost efficiencies across Passenger with year-to-date Segment Adjusted SG&A falling approximately 6% compared to the same period in 2023.

Blade's vertical transportation platform is now stronger than ever and well positioned for the transition to Electric Vertical Aircraft, what we call EVA or eVTOL in industry parlance. This transition from conventional rotorcraft and seaplanes to EVA is now coming closer into focus following the FAA's recent release of the necessary guidelines for EVA operations as well as the incoming administration's stated agenda of achieving adoption ahead of other countries.

The timing couldn't be better for Blade. We've always said that our strategy is to create an urban air mobility platform that can operate profitably at scale today, using conventional aircraft before the introduction of EVA, which we expect will lead to an abundance of conveniently located landing locations throughout all major metropolitan areas as well as lower costs of operation.

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Blade Hamptons

Today, we've achieved a key milestone with a Passenger Segment Adjusted EBITDA positive year for the twelve months ending September 30, 2024 - over one full year earlier than expected. I couldn't be more proud of the hard work from our team to make this possible.

Our Passenger business, given its captive infrastructure, proprietary technology, large flier base and strong brand, has never been more valuable to our customers and EVA manufacturers. Blade has only fortified its position as the largest operating vertical transportation company for commuters in the world, and we are without competitors for many of our key services.

Medical Segment Adjusted EBITDA improved 15.1% in Q3 2024 versus the prior year period, with margins expanding 70 basis points year over year despite a softer than expected quarter for US organ transplant volumes. We remain extremely bullish regarding the long term opportunities for our Medical business. The fundamental growth drivers of organ transplants in America continue to gain momentum as well as our ability to continue to gain market share. We're seeing increased adoption of existing and rapidly emerging technologies to increase the supply of donor organs in the US including organ perfusion and preservation devices, procedures like Normothermic Regional Perfusion, or NRP, and a thriving industry of companies to provide the surgical staffing necessary for hospitals to increase recovery volumes.

This reinforces the validity of our strategy to remain agnostic as to the technologies, procedures and services embraced by our hospital partners and we welcome the opportunity to work directly with these innovative companies whenever the need arises.

To that end, we're excited to announce a strategic alliance with OrganOx to broaden access to their metra perfusion device, which extends liver preservation times, aids in the identification of viable donor livers, enables longer-distancetransportation and increases the utilization of donor organs. OrganOx will preposition metra devices at strategic locations across the United States, utilizing Blade's air and ground logistics to enable rapid deployment to transplant centers for on- ground use. We know from speaking with our customers that demand for OrganOx's metra device currently exceeds the supply of available machines. This partnership will enable higher utilization of available devices through rapid distribution to centers who need them on a case-by-casebasis. As livers make up more than half of all heart, liver and lung transplants in the US, increased access to this device could have a huge positive impact.

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Our Medical platform continues to strengthen with 10 owned and 20 dedicated aircraft strategically positioned near our customers, a growing ground logistics capability with 9 hubs and 45 vehicles around the country and an organ placement services offering ("TOPS") that is gaining traction in the industry with five signed customers and a strong sales pipeline.

Looking through the quarter to quarter volatility, our continued market share gains are highlighted in our performance and reinforce the strength of our platform. In the last two months we won competitive RFPs for two new high volume transplant centers that we expect to begin flying in early 2025. Importantly, over the last year we have not lost a single contracted customer, a testament to the service and value that we are providing.

Turning to our Medical aircraft strategy, seven of the eight previously announced aircraft acquisitions were operational in the quarter, with the eighth aircraft entering service in the last week of September after a significant entry into service delay.

We signed agreements to acquire two additional aircraft during Q3 that are expected to enter service by early 2025

and increase our owned fleet size to ten aircraft. This strategy is already bearing fruit, enabling us to win new medical contracts in recent months that required aircraft ownership. It's important to note that at a fleet size of ten, our owned fleet will only represent approximately one third of our Medical flying hours with the majority remaining on third-party aircraft.

We remain focused on maintaining a strong balance sheet and our capital allocation priorities remain unchanged, prioritizing low-risk,financially accretive investments in Medical aircraft and ground vehicles as well as bolt-onacquisitions in Medical that enhance our competitive posture or enableexpansion into other time critical logistics verticals that include industrial manufacturing, parts for grounded aircraft or other medical cargo use cases. During Q3, we completed a tuck-inacquisition in Medical to geographically expand our captive network of ground vehicles. We will continue to weigh these acquisition priorities relative to opportunistic share repurchases.

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Blade Airport - New York City

Financial Results and Outlook

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 15.0% year-over-yeardriven primarily by lower revenue per flight given softer jet charter industry pricing. 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 in New York Airport transfers and early benefits from our European restructuring.

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-legaircraft repositioning. As we've increased the size of our dedicated aircraft fleet and based more aircraft at the home airports of our customers, we are 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 is the right decision for us and our customers. Long term this is a win-win, saving money for our customers, enabling shorter call- 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.

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Blade Medical

Even in Q3 2024, a quarter with unusually high owned aircraft related expenses and lower than expected volumes, we saw a nearly 20% increase in flight profit per flight hour and an approximately 10% increase in average flight profit per air trip, despite only a low-single digit increase in flight revenue per hour flown, which is consistent with our contractual annual escalators.

Medical segment profitability metrics continued to improve on a year over year basis but declined sequentially in the quarter.

Medical Flight Margin expanded 240 basis points year-over-year to 20.8% in Q3 2024 up from 18.4% in the year ago

period. On a sequential basis, Medical Flight Margin declined by 280 basis points. Medical Segment Adjusted EBITDA Margin increased by 70 basis points year over year to 10.7% in Q3 2024 up from 10.0% in Q3 2023, but declined 370 basis points sequentially.

Several factors contributed to the sequential Medical margin decline in the quarter, the majority of which are timing related and set to improve from here. The lower revenue sequentially drove negative fixed cost leverage in the quarter. In addition, above average maintenance downtime and owned fleet expenses also contributed to the sequential margin decline, including start-up costs and delays in aircraft onboarding for the owned fleet.

The good news is that we've seen a quick rebound in industry volumes and Medical segment revenue, and we expect to see a meaningful improvement in margins and our owned fleet performance in Q4 2024 relative to Q3 2024 driven by increased volumes, a normalization in maintenance downtime, the entry into service of our eighth aircraft and a normalization of other owned fleet costs. This outlook is consistent with our actual financial performance in October.

Moving forward, we think it's reasonable to expect quarter to quarter variability in our Medical business given the non-linear growth of organ transplant volumes and our owned fleet that brings with it some unpredictability with respect to timing of certain expenses and maintenance downtime.

We'd also like to highlight some data around an exciting industry trend poised to drive even faster growth in availability of donor organs: Normothermic Regional Perfusion. We're seeing higher adoption of this technique which improves transplant outcomes and yields, meaning the total number of usable organs recovered from one donor, in recoveries from

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Blade Europe - Monaco

donors who have undergone cardiac death. Hospitals and Organ Procurement Organizations can often utilize off-the-shelf equipment to perform this technique at low cost and we've seen a more than threefold increase in the number of NRP recoveries performed by our transplant center customers year-to-date in 2024 versus 2023. NRP is still a low-single digit percentage of our total recoveries and, based on conversations with our customers, we believe it is still early days for this exciting growth driver.

We continue to focus on controlling Unallocated Corporate Expenses and Software Development, which declined

1.3% year over year in Q3 2024 and shrunk 50 basis points as a percentage of revenues to 7%. On the cash flow front, the difference between our Adjusted EBITDA of $4.2 million and cash from operations of $6.4 million in the quarter was primarily driven by a cash inflow from working capital.

Our capital expenditures, inclusive of capitalized software development costs, were $9.9 million in the quarter and driven primarily by $7.3 million of aircraft acquisition payments, while capitalized aircraft maintenance was approximately $900 thousand. This aircraft acquisition amount includes payments for our eighth aircraft, delivered in the last week of the quarter, along with two additional aircraft that we purchased during the quarter, but did not begin flying. We have approximately $1.9 million of remaining payments on the ten aircraft that we expect to pay in Q4 2024. Beyond the ten aircraft acquisitions previously discussed, we do not have any other aircraft purchases in process currently and our focus right now is on onboarding the final two planes and optimizing the financial performance of the current fleet. However, given the significant strategic and financial benefits of our owned aircraft, we will opportunistically consider adding a low single digit number of similarly priced aircraft to the fleet over the next 9 to 12 months.

We ended the quarter with no debt and $136.3 million of cash and short-term investments, providing flexibility for

strategic investments in aircraft, acquisitions in Medical and opportunistic share repurchases.

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Conclusion

In summary, we are pleased to have achieved such an important milestone by achieving full-year Passenger Segment Adjusted EBITDA profitability a year ahead of our guidance. We remain focused on delivering value to our shareholders through disciplined execution towards our financial and operational targets in the quarters ahead.

Thank you all for your continued support.

Sincerely,

Rob Wiesenthal

Founder and Chief Executive Officer

Q3 2024 Investor Update | 8

Use of Non-GAAP Financial Information

Blade believes that the non-GAAP measures discussed below, viewed in addition to and not in lieu of our reported U.S. Generally Accepted Accounting Principles ("GAAP") results, provide useful information to investors by providing a more focused measure of operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies. Adjusted EBITDA, Adjusted Unallocated Corporate Expenses, SG&A, Adjusted SG&A, Flight Profit, Flight Margin, Free Cash Flow and Free Cash Flow before Aircraft Acquisitions have been reconciled to the nearest GAAP measure in the tables within this press release.

Adjusted EBITDA - Blade reports Adjusted EBITDA, which is a non-GAAP financial measure. Blade defines Adjusted EBITDA as net loss adjusted to exclude depreciation and amortization, stock-based compensation, change in fair value of warrant liabilities, interest income and expense, income tax, realized gains and losses on short-term investments, impairment of intangible assets and certain other non-recurring items that management does not believe are indicative of ongoing Company operating performance and would impact the comparability of results between periods.

Adjusted Unallocated Corporate Expenses - Blade defines Adjusted Unallocated Corporate Expenses as expenses that cannot be allocated to either of our reporting segments (Passenger and Medical) and therefore attributable to our Corporate expenses and software development, less non-cash items and certain other non-recurring items that management does not believe are indicative of ongoing Company operating performance and would impact the comparability of results between periods.

SG&A and Adjusted SG&A - Blade defines SG&A as total operating expenses excluding cost of revenue. Blade defines Adjusted SG&A as total operating expenses excluding cost of revenue and excluding non-cash items and certain other non-recurring items that management does not believe are indicative of ongoing Company operating performance and would impact the comparability of results between periods.

Flight Profit and Flight Margin - Blade defines Flight Profit as revenue less cost of revenue. Cost of revenue consists of flight costs paid to operators of aircraft and vehicles, landing fees, depreciation of aircraft and vehicles, right-of-use ("ROU") asset amortization, internal costs incurred in generating organ ground transportation revenue using the Company's owned vehicles and costs of operating our owned aircraft including fuel, management fees paid to the operator, maintenance costs and pilot salaries. Blade defines Flight Margin for a period as Flight Profit for the period divided by revenue for the same period. Blade believes that Flight Profit and Flight Margin provide an important measure of the profitability of the Company's flight and ground operations, as they focus solely on the non discretionary direct costs associated with those operations such as third party variable costs and costs of owning and operating Blade's owned aircraft.

Free Cash Flow and Free Cash Flow, before Aircraft Acquisitions - Blade defines Free Cash Flow as net cash provided by / (used in) operating activities less capital expenditures and capitalized software development costs. Blade also reports Free Cash Flow, before Aircraft Acquisitions, which is Free Cash Flow excluding cash outflows for aircraft acquisitions. Blade believes that Free Cash Flow and Free Cash Flow before Aircraft Acquisitions provide important insights into the cash-generating capability of the business, with Free Cash Flow before Aircraft Acquisition specifically highlighting the cash generated by our core operations before the impact of discretionary strategic investments in new aircraft.

Q3 2024 Investor Update | 9

Financial Results

BLADE AIR MOBILITY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

September 30,

December 31,

2024

2023

Assets

Current assets:

Cash and cash equivalents

$

20,028

$

27,873

Restricted cash

1,378

1,148

Accounts receivable, net of allowance of $224 and $98 at September 30, 2024 and December 31, 2023,

respectively

24,481

21,005

Short-term investments

116,310

138,264

Prepaid expenses and other current assets

9,563

17,971

Total current assets

171,760

206,261

Non-current assets:

Property and equipment, net

30,550

2,899

Intangible assets, net

13,957

20,519

Goodwill

42,952

40,373

Operating right-of-use asset

22,813

23,484

Other non-current assets

913

1,402

Total assets

$

282,945

$

294,938

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses

$

16,028

$

23,859

Deferred revenue

6,681

6,845

Operating lease liability, current

4,472

4,787

Total current liabilities

27,181

35,491

Non-current liabilities:

Warrant liability

2,692

Operating lease liability, long-term

19,271

Deferred tax liability

302

Total liabilities

49,446

Stockholders' Equity

Preferred stock, $0.0001 par value, 2,000,000 shares authorized; no shares issued and outstanding at

September 30, 2024 and December 31, 2023, respectively

-

Common stock, $0.0001 par value; 400,000,000 authorized; 78,314,023 and 75,131,425 shares issued at

7

September 30, 2024 and December 31, 2023, respectively

Additional paid in capital

406,424

Accumulated other comprehensive income

4,173

Accumulated deficit

(177,105)

Total stockholders' equity

233,499

4,958

19,738

451

60,638

-

7

390,083

3,964

(159,754)

234,300

Total Liabilities and Stockholders' Equity

$

282,945

$

294,938

Q3 2024 Investor Update | 10

Disclaimer

Blade Air Mobility Inc. published this content on November 12, 2024, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on November 12, 2024 at 12:26:04.432.