Strata Critical Medical, Inc. (SRTA) Q3 2021 Earnings Report, Transcript and Summary

Good morning, and welcome to the Blade Air Mobility, Inc., fiscal Third Quarter 2021 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Tom Cook, Investor Relations. Please go ahead.

Thanks, Andrew. And good morning ladies and gentlemen. Thank you for standing by and welcome to the Blade Air Mobility fiscal third quarter 2021 conference call and webcast. We appreciate everyone joining us today. Before we get started, I'd like to remind you of the company's forward-looking statement Safe Harbor language. Statements made in this conference call that are not historical fact, including statements about our future period, maybe then 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. And we refer you to our SEC filings including our Form S-15 with the SEC on May 28, 2021, and the Form 10-Q for the quarter ended June 30th, 2021, filed with the SEC on August 16th, 2021. 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 as required by law. During today's call, we will also discuss non-GAAP financial measures which we believe can be useful in evaluating our financial performance. A reconciliation of the most directly comparable GAAP financial measures to those non-GAAP financial measures is provided in our press release which will be available on our website. These non-GAAP measures should not be considered an isolation or as substitute for our financial results prepared in accordance with GAAP. With me at today's call are Rob Wiesenthal, founder and Chief Executive Officer of Blade; and Will Heyburn, Chief Financial Officer. I will now turn the call over to Rob Wiesenthal. Rob?

Thank you, Tom. Good morning, everyone. I'd like to thank you for your interest in Blade and welcome you to our earnings call for the fiscal third quarter ending June 30th, 2021, our first report as a public company. We had a great quarter and I'm very pleased to inform you of our 277% revenue growth versus 2020 and our 73% revenue growth compared to the pre-COVID 2019 period. Before we dive into our results, I'd like to thank our employees and particularly our on the ground prior experienced team replacing our fliers and their safety first as we continue to operate our business through the pandemic. The commitment of our team is particularly critical for our MediMobility service which moves human organs for transplant by helicopter and fixed wing aircraft. This business grew dramatically compared to last year and it would never have been possible without our team showing up in person every single day so that we could continue providing with essential services to hospitals across the North East. While our other business line have now rebounded before even shown growth versus the historical pre-COVID period and uncertainty still remains to the public. Our passengers trust us to get in quickly and seamlessly to whoever they need to be with the help and our safety of our fliers and employees remains paramount. Blade has led away in implementing health and safety protocols. And we continue to adjust our approach as needed. In light of the dynamic nature of the virus. We are the first aviation company to mandate in-flight masking that first they had pre-boarding blood oxygen saturation testing and first to provide on-site COVID testing for a longer whole flights. And this leadership position continues. This past Thursday, we were the first aviation company to announce the requirement for all fliers to be vaccinated starting on September 7th with the exemption that is recommended by the CVC. It's an important differentiator versus our competitors, on the ground and in the air. And we believe it will lead to increase flier volumes. With Blade, health protocols been scaled. I'd like to take a few minutes to recap our strategic priorities in course trainings before we review our results from the most recent quarter. Our asset-light model remains the key differentiator. The term "asset-light," is you liberally by aviation companies, so let me explain what it means at Blade. Blade is a platform. We need our own new operating aircrafts. Our services are enabled through our strong and growing network of highly integrated embedded aircraft operator partnerships. This approach allows us to quickly and cost effectively scale our business in response to fluctuations and customer demand as well as the macro environment. There is no better example of the flexibility of this model than our performance during the pandemic. During lockdown in early 2020, we immediately reduced our supply of non-MediMobility aircraft. And when the spring 2021 travel snapback occurred, we quickly brought them back online while we're maintaining consistent in economics and a great service for our fliers. We are committed to this approach today and as we prepare for the transition to Electric Vertical Aircraft, "EVA" as we call them or "eVTOL" in industry filings, Blade will partner with third-parties that will own and operate EVA on our behalf. When Blade's key priorities is to identify and launch short business routes that can be successful using the conventional aircraft of today but that will also be appropriate for EVA once available. To achieve this, we will continue to pursue our organic growth plans as well as undertake highly targeted acquisitions and partnerships. So, sharing the infrastructure for these groups and enabling us to maintain our unique competitive advantages. At the same time, we'll be helping our EVA manufacturer alliance partners achieve our mutual goal of bringing quiet, emission free, flight to the public. On the route group front, we resumed our New York airport service this June, beginning with flights between Manhattan and JFK airport after pausing this service at the start of the pandemic. By fall, we plan to once again service all three military airports, so far we're pleased with the performance related to JFK restart, especially as compared to the early results of this service when we first launched in in 2019 pre-COVID. We're also preparing to launch new northeast corridor routes in 2022. We will share additional details about this before the year-end. With respect to our pipeline of strategic acquisitions and partnerships, we expect to announce two transactions before the end of this calendar year that will both fortify our strategic mode and accelerate our growth. Further we have continued to support our transition required in emission-free features, I mean emission-free future like entering into new alliances with leading EVA manufacturers. Just this quarter, we announced new partnerships with magniX and Eve bringing the total number of Blade electric aircraft to four. Although respected and well-capitalized companies including Embraer where Eve is one of their UAM divisions. Two of these partners are in fact flying their aircraft today with test pilots. Our agreement with magniX will enable Blade to secure a supply of electric aircraft propulsion units for Lima or the Blade's largest aircraft operating partners. EVPs will enable Lima to converge its Blade branded fleet of ambiguous seaplanes to all-electric aircraft starting as early as 2023 when development for commercial use is completed. Electric seaplanes will be supplied across Blade's northeastern and southeastern routes and are expected to operate emission free at the same speed as the current generation of turbine aircrafts with significantly reduced noise spectrum and lower operating costs. This alliance is uniquely important as it provides a near-term bridge to EVA given the engines compatibility with already certified aircraft that are currently being utilized by Blade. Our agreement with Eve will enable Blade to deploy their EVA in South Florida and Westcoast markets beginning in 2026 when development commercial use have expected to be completed. Blade will pay by the hour fees with the aircraft which will be operated by Eve and its local partners, again consistent with our asset-light approach. These alliances in addition to our earlier partnerships with data technologies and Wisk Aero a joint venture between Boeing and Larry Page's Kitty Hawk de-risk our lines on the deployment schedule of any one manufacturer both giving Blade a portfolio of aircraft with different capabilities that are necessary for our wide variety of mission profiles. These alliances are subject to entering into additional agreements and certain FAA approvals. We'll share additional developments with respect to our EVA alliances on future calls. With that, I'd like to turn it over to our CFO, Will Heyburn to discuss our financial results in more detail.

Thank you, Rob. Blade continues to make great progress in our long-term strategic plan. We relaunched our New York City airport service in June 2021 and are very encouraged by the results so far. Two months into the relaunch, we are well ahead of the same point in our 2019 launch and we've already achieved an annualized run rate of approximately 10,000 passengers for a single route between Manhattan and JFK. For contacts at our historical pre-COVID peak in late 2019, the new running service to LaGuardia, New York and three JFK routes, we had an annualized run rate of approximately 20,000 passengers. This fall, we plan to expand our service back to include both LaGuardia and New York. Moving on to the financials for the quarter ended June 30th, 2021. Revenue increased by 277% and $3.4 million in 2020 to $13 million in 2021, marking an impressive recovery from the COVID lows. We're especially pleased with our results compared to the pre-COVID period with revenues up 73% from $7.5 million in the June 2019 quarter. Short Distance revenues increased by 810% from $600,000 in 2020 to $5.7 million in 2021 recovering to near pre-pandemic levels with revenues at 87% of the same period in 2019. This was driven primarily by strong intra-week commuter demand that exceeded pre-pandemic levels but was offset by lower demand for typical peak weekend travel which remained below pre-pandemic levels as in-office work schedules are shifting dramatically. MediMobility organ transport and jet revenues grew by 147% from $2.6 million in 2020 to $6.5 million in 2021. A comparison of this business line to the same period in 2019 is not meaningful as our MediMobility did not exist to this point at 2019. MediMobility remains an important focus area for us given the use of helicopters for short hospital-to-hospital transfer as well as last mile transfers from airports to congested city tiers. Most of these trips are very short, our cargo only and will likely be Blade's first commercial use case for electric vertical aircraft. Even last mile transfers that are currently coordinated by Blade using ground transport, we expect will often be replaced with EVA. Finally, other revenue increased from $200,000 in 2020 to $700,000 in 2021, driven primarily by brand partners who paid for exposure to Blade's fliers. Our cost of revenue decreased as the percentage of revenues from 82% in 2020 to 77% in 2021. If you look at this, is a margin of revenue less cost of revenue which includes the cost of flying pay to our operators and landing fee, we see significant improvement from 18% in 2020 to 23% in 2021. This was driven by an increase in short distance revenues and higher passenger utilization on our by the seat flights. Additionally, Blade saw a minimal negative impact from new routes this quarter which typically see cost of revenues higher than revenues for the first 18 months as they ramped to average utilization above breakeven. Airport was our only new route operating this quarter and did not begin until June with a limited schedule at launch. Importantly, we are seeing leverage from our operating costs as demonstrated by our comparable adjusted EBITDA which improved to negative $900,000 this period compared to negative $1.3 million in 2020 and negative $3.4 million in 2019. We expect to continue to benefit from this scalable platform as our approach continues. For the purposes of comparison to prior quarters when Blade was a private company, this comparable adjusted EBITDA metric excludes new recurring costs paid to third-parties which were associated with operating as a public company. These costs include incremental directors and officers liability insurance and professional services feed that were not incurred in the prior years. Our adjusted EBITDA which includes the recurring third-party costs in being a public company totaled negative $2.6 million this quarter compared to negative $1.3 million in the same period in 2020 and negative $3.5 million in 2019. A few words about the future. Though we have not seen a negative impact from the delta variant to-date, it is very difficult to forecast the effect of a potential slow return to normal office work and business travel. On the one hand, hybrid remote office policies benefitted us in late 2020 and early 2021 as our weekend driven leisure routes morph into 7-day a week commuter routes. As employers continue to delay full returns to the office, we could similarly benefit this year and going to expect our 70-mile plus commuter business to outperform in the pre-COVID period during the fall and winter offseason. On the other hand, a slow return to office may delay the recovery in business travel which would reduce demand for Blade Airport. Additionally, short distance revenues were weighted heavily towards the September quarter pre-pandemic. Thus we expect the fact that our short distance business has not yet fully recovered from COVID impacts, will have a more significant effect on that business lines results next quarter. Looking to our cost of revenues, we expect a predictable unit economics and strong utilization on our matured routes to continue to provide a positive contribution. Moving forward, we plan to leverage the contributions from these matured businesses along with our strong balance sheet to aggressively ramp up new routes, starting with Airport this year and moving to the northeast corridor in calendar year 2022. As Blade Airport did not relaunch since of June, this quarter saw limited net negative cost impact from its ramp. We expect Airport to be running at a loss for at least the next 18 months as we continue to aggressively invest in additional passenger capacity and new airports. As a result, we expect cost of revenues would increase as a percentage of revenues in the coming quarters. We've also been building our team in order to support our public company transition and to executed against our growth plans. Many of these additions took place recently and may not be fully reflected in the June or September quarter. Our current SG&A run rate on a non-adjusted basis is a good proxy for future quarters as one-time transaction costs fall away but new cost of employees and marketing will be added as we accelerate our growth. Looking at our asset-light business model requires limited capital expenditures as well as consistent negative networking capital position, our free cash flow profile should actually be better than EBITDA as we grow. For this quarter we did pre-pay over $5 million of public company D&O insurance which hit prepaid expenses. Looking ahead, Blade's expansion strategy is keenly focused on new routes with significantly less seasonality such as inter-city connections, airport transfers and year-around commuter routes. Given this shift in our recent transition to reporting as a public company, we've begun evaluating a change to a more typical December 31st fiscal year-end. We've had preliminary discussions with our board on this topic and expect them to consider a formal change in early 2022. In closing, we have a strong debt-free balance sheet with more than $330 million to support our growth strategy. We will continue to focus on the largest markets where Blade can maintain its leadership status and achieve sustainable unit economics today. Moving forward, we believe the transition to electric vertical aircraft will only serve to improve our cost structure and make Urban Air Mobility accessible to more people around the world. With that, I'll turn it back over to Rob.

Thank you, Will. Let me take a moment as to our strategy within the broader emerging Urban Air Mobility industry. First, a few data points. Over $5 billion have already been invested in the design and manufacturing the electrical vertical aircrafts. Five EVA manufacturers have either gone public or in the process of going public with expectations to rate incremental capital of more than $4 billion during this year alone. Outside space transportation, there may be no more ambitious task and for a standalone company to build certified and manufacture EVA and to do it as scale into do it on budget and to do it on schedule. Simply put, that is not our business. We will continue the similar focus we have of we have had for the past six years, building, creating, an acquiring all of the necessary elements to provide the best Urban Air Mobility service layer possible ensuring deployment of EVA to the public in a seamless convenient cost effective and safe manner. These elements include our network of exclusive terminals in key locations in the most important markets in the country, our partnerships with leading aircraft manufacturers, our consumer-to-cockpit technology stack, and our 24/7 on the ground flier experience team as well as our trusted brand in over 200,000 users. These are competitive strengths and they are extremely difficult to replicate. As we continue to build new services using conventional rotorcraft, we will be in a powerful position to enable manufacturers to deploy their EVA to the flying public achieve safely and as quickly as possible. Unlike many companies in the Urban Air Mobility ecosystem, we have a strong and growing business today using conventional aircraft. As such, we've set a number of important milestones for this pre-EVA period through our investors. Two accretive acquisitions by calendar year end, the addition of two remaining commercial airport routes in the New York City area by this fall as well as the launch of an important northeast corridor business route in early 2022. This was a great quarter both financially and operationally and while going public and raising more than twice the amount of cash we require to execute upon our business plan. Before we close, I'd like to briefly discuss the current capital current market's environment. This quarter has continued to be a valuable time in the market for emerging growth companies like Blade. With our strong financial performance and approximately $4.80 of cash per share on our debt-free balance sheet, it is both managements and our board's view that the current share price does not adequately reflect the launching prospects to our company. We hope that our performance starting with a great quarter we announced today couple with achieving our upcoming milestones for new services and acquisition will serve to eliminate this gap. However if we need to, given now we have more than twice the cash necessary to fund our business plan, we have the balance sheet strength to enhance shareholder value and we are prepared to do so if and when the time is right. With that, I'll turn it over to Tom for questions.

Thanks, Rob. As a reminder, we will take questions from Analysts and Investors on this call today. Reporters should send enquiries to me directly. Operator, we're now ready for questions.

Thank you. [Operator Instructions] The first question comes from Etah Michelle with Citi. Please go ahead.

Hi great, thanks. Good morning, guys.

Good morning.

Just to do the first question on the recovery that you saw this past quarter. The passenger that were flown, can you maybe share kind of how many were new to the Blade platform versus those who were prior fliers kind of coming back?

Well, I would say the majority of the passengers this quarter were passengers that we had seen before, given that we didn’t introduce Airport until June. And that's the biggest driver and new passengers for us. That will change as we go into the next quarter but for this quarter, given our reliance on those matured core commuter routes in the Northeast. We did see a lot of the same passengers. At the same time, I think if you were able to disaggregate it and say who was flying during the week. We saw in a lot of our leisure routes, people that had not been flying Blade prior because of the ability to fly seven days a week and just kind of shift from this weekend-only cadence to when we've back in April we saw ourselves flying seven days a week. So, that really opened up the business to a brand new flier which we did see during those kind of business days and we're not breaking out the numbers for both of those segments.

Got it, that's very helpful. And then just maybe two questions on kind of the upcoming couple of quarters. So, I know still really tough to predict as you mentioned during the delta variant. Any comments around perhaps how July trends trended out for you. And then maybe I think well you mentioned some of the about you know the new route gross margin dilution you can have as you bring back Airport over the next 18 months. Anyway to roughly quantify how we should think about that kind of models going forward over the next few quarters of that impact?

You're saying impact of delta?

The impact of -- so, maybe just for delta if you could just comment on July trend, kind of if you're seeing anything thus far early in the quarter. And then secondly, just on the Blade Airport ramp at the beginning June. I think that you mentioned it should run at a loss typically in the beginning. Anyway to quantify what that can be in terms of the gross margin impact from the Airport ramp?

Sure. I'll let Will take the second part in terms of Airport ramp, in terms of what we've been seeing. Again, it's always kind of this mixed bag. What I would say is because of our health and safety protocol, we did not see fall of our passengers who chose not to fly Blade and take other forms of transportation because of safety concerns. So, that’s wrong. Additionally, because of delta variant at the same time and I'm talking about this basically whole summer to-date, there were definitely a lot of Blade fliers that may have had plans to travel longer distances perhaps overseas that cancelled their plans. And so, we definitely saw for some of our closer term leisure routes. We just consistently seen across the travel business a much more much greater focus by our travelers on staying nearby this summer.

And then in terms of the margin impact from Blade Airport, if you look at revenue less cost of revenues, we're ramping very aggressively. And as we mentioned, we'd be adding those additional routes this year. So, I would expect a low single-digit million dollar negative impact. So, that revenue less cost of revenues for the rest of the year.

For Airport?

For Airport, yes.

And again, we breakeven on Airport flights typically at anything above 2.2 passengers out of six possible passengers on that aircraft. So, luckily that hurdle is not very high but how we still need a very robust schedule to really engage our fliers and let them well they can fly they can a time that's most meaning to them.

Terrific, that's all. Very helpful. Thanks, so much.

Thank you.

The next question comes from Jason Helfstein with Oppenheimer. Please go ahead.

Hey guys, thanks. I'll ask you three. First, may we talk about like the cost to you to secure the EVA deals, what's kind of the - just what's the cost to you, what are you kind of committing to, et cetera. Second, will the Airport service to be any different or want to resume as remaining airports are basically same as it was before. And then, can you talk about the seasonality of MediMobility, should investors assume like that does that business should generate kind of the same revenue which quarter, give or take your ability to grow it or is there a seasonality in that. Thanks.

And in fact, if we take a look at our conventional businesses, we often get phone calls from conventional aircraft manufacturers who'd say we know you work with operator X on your platform, how many hours you think you could do this year. And people finance again the kind of volume that we do. So, we expect that model to continue going forward. What was the second question? Okay. In terms of the Airport service, you're saying being any different, are you talking about the actual service itself, is there any asset --.

Yes. I mean I guess, any improvements that you guys have kind of to trust them and you apply then imagine it's been a while since they used it. Would there be any improvements or changes given kind of pre-COVID or just kind of things that or was just bring it back to the other airports?

Yes. Look, I think it's we obviously learnt a lot when we first did it and I think we're getting a turn time in the tarmac much quicker. We're dealing with the recovery much more effectively in terms of when there's increment weather. But most importantly, we continue to work with airports and airlines to enjoy behind the tarmac service that we have had with American Airlines where you can actually get off the plane when you land at JFK and be driven by American behind the tarmac directly to your Blade helicopter. That not only saves this two-hour drive which we turn into a five in a flight say 20 minutes probably walking to an airport and finding a car. So, I think more of those alliances we got a few to see that in the future. I'll let Will talk about MediMobility.

Jason, on your seasonality question, the sort of the few things in that revenue disaggregation line, the MediMobility business did not show seasonality. However, and it's been showing good growth. However, there is some jet charter and by the seat jet, it's also in that line. And on the buy the seat jet business that is seasonal. So, that's our Blade One service if that is focused on the winter months at Miami and then Aspen. So, you see a couple of million positive impacts from that over the season. And then the jet charter side of things, it can be a little bit unpredictable. So, that piece there is not I wouldn’t say its specific pattern to it but it can be lumpy quarter-to-quarter. So, hopefully that helps you breaks down to pieces. There's a strong phase of revenues in there that it doesn’t have seasonality but there are some moving pieces. And was there a follow-up?

Anything else?

I mean now, yes I'll go back in the queue. I'll ask another one depending there's other people, I'll go back in the queue, thanks.

Yes. But I think the segment, this segment obviously the vast majority is MediMobility which is fast growing and not seasonal. We're opening, that's where we'll be focusing on.

[Operator Instructions] And we have a follow-up from Jason Helfstein from Oppenheimer. Please go ahead.

Thanks, why not. Just Rob, how are you thinking about any of the potential risk of policy changing at any landing location to the extent you -- I'm particularly thinking about kind of the Hampton, where I think there are some stuff coming up with the time or how do you think about it kind of any commentary with other parties et cetera and just kind of concentration issues on the business there, thanks.

Sure. The good news is we have the leisure route especially out to Long Island. Our passengers are not going to stop flying. The had -- since this is the legacy market of ours, it's not core to our future growth strategy which is identifying short distance routes that are well-suited for EVA. Now, I mean none-the-less we fly to all areas there many in which we'd be actually even in the Town of East Hampton, Montauk Airport, Southampton, Westhampton, and even amphibious seaplanes into local bodies of water that are only 10 minutes away from the Easthampton airport. So, I think that the close to the airport would be very shortsighted, our fliers are going to keep flying. We've multiple opportunities for them to fly to that area. So, it's not something that we see as frankly impacting our business as much as some people may think. There is just tremendous economic benefit to that community you know I think it was about minor jobs $77 million in terms of the economic impact. So, we are hopeful they'll continue to keep it open, it's been open for over a 100 years and if not our fliers will keep flying and they're not going to be a landing too far away from they were originally intending to fly.

One final think I will mention is that I think there is a growing understanding that it could be very short sighted for airports or heliports all over this country that may be considering what to do, mitigation strategy in terms or noise because we really are on the precipitous of emission-free and quiet electric aircrafts. So, our deal with magniX that's 2023. That's not a -- that is not a large hurdle in terms of that certification where this. You're essentially taking an existing aircraft and changing the motor to an electric motor that is quiet and emission free. So, I think we're in a pretty good shape in that front.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Rob Wiesenthal, CEO of Blade, for any closing remarks.

Well, I think we're fine. We appreciate you joining us for this call today. And we look forward to take any questions that you have. If anybody in this call had not had their questions answered because of time constraints, feel free to reach over to Tom Cook at ICR and he'll take those and refer them back to us. And we look forward to talking to all of you soon.

The conference has now concluded. Thank you, for attending today's presentation. You may now disconnect.