Strata Critical Medical, Inc. (SRTA) Q1 2024 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Blade Air Mobility Fiscal First Quarter 2024 Earnings Release Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to Mat Schneider, Vice President of Investor Relations and Strategic Finance. Mathew, you may begin.

Thanks, and good morning. Thank you for standing by, and welcome to the Blade Air Mobility Conference Call and Webcast for the quarter ended March 31, 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 the 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 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 as a substitute for financial results prepared in accordance with GAAP. Hosting 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. Rob?

Thank you, Mat, and good morning, everyone. I'm very pleased to report a strong start to 2024 that represents an early but important first step in achieving the 2024 and 2025 financial guidance that we provided last quarter and reaffirmed today. Most notably, this was the best quarter in company history for our medical business. We achieved record revenue and segment adjusted EBITDA, building upon our dramatic growth driven by increased trip volumes and trip distances, both from existing and newly added hospital clients. This should address issues that have been raised on the impact of competition. We are America's largest dedicated air transporter of human organs for transplant, and we are confident we are the most cost effective as well. Total revenue in the first quarter ending March 31, 2024, increased 13.8% to $51.5 million versus the comparable period in 2023. Excluding the impact of last year's discontinuation of BladeOne, our scheduled jet service between New York and South Florida, total revenue increased 21.5% year-over-year. Profitability continues to improve across the business, driven by several initiatives, including a shift to dedicated aircraft and vehicles in our medical business, meaningful profitability improvements in our New York by-the-seat airport service and a continuation of cost rationalization programs across the company, including the elimination of unprofitable services such as BladeOne. While total revenue increased 13.8% year-over-year, total flight profit increased by 41.5% year-over-year, as flight margins rose to 19.7% in Q1 2024 as compared to 15.8% for the comparable period last year. We achieved significant year-over-year improvement in both Medical and Passenger segment adjusted EBITDA, which, when coupled with a 19% year-over-year decline in our adjusted unallocated corporate expenses, drove a strong $4.2 million improvement in adjusted EBITDA in Q1 2024 versus the comparable period last year. Medical revenue increased 34.6% in Q1 2024 year-over-year. And importantly, we saw the resumption of sequential revenue growth in the quarter with revenues increasing 12.6% versus the fourth quarter of 2023. Medical segment adjusted EBITDA increased 134.5% year-over-year as adjusted EBITDA margins rose over 500 basis points versus the comparable period last year. Additionally, our clients' use of perfusion and other organ preservation devices continues to grow the overall market beyond industry expectations, giving the ability to move organs over much longer distances and accept organs that just a few years ago would not have been suitable for transplant. When our contracted clients utilize these devices, they continue to use Blade's logistics services. We have now closed on 7 of the 8 jet aircraft acquisitions that we announced last quarter. This is a win-win as it enables lower cost and improved service delivery for our clients and improved flight margins per trip for Blade. The vast majority of our flying will remain with third-party owned and operated aircraft as part of our layered asset-light approach, enabling maximum flexibility and availability for the hospitals we serve. In our Passenger business, despite inconsistent year-over-year revenue comparisons due to the discontinuation of our BladeOne scheduled jet service, poor flying weather for ski season in Europe and lower passenger volume in Canada, the Passenger segment still reported a $0.4 million year-over-year improvement in adjusted EBITDA. Importantly, we continue to see improvement in our New York by-the-seat airport service, with revenues increasing 26% year-over-year and our third consecutive quarter of positive flight margin. The airport business remains our most strategic route given the combination of the large addressable market of 27 million annual flyers and our proprietary passenger infrastructure in New York City. We have also seen continued growth in revenue per seat, while the total number of airport passes outstanding, which allow flyers to travel between Manhattan and JFK or Newark Airport for as low as $95 per seat, rose more than 30% year-over-year. Given the annual cost of our passes of $795 per pass, purchasers are signaling that they expect to fly Blade Airport more than 8 times during the course of the year. As a reminder, Q1 is the seasonally lightest quarter for our short distance business. Regardless, I'm pleased to see that we're delivering on the cost savings and profitability improvements we promised both in the Passenger segment and on the corporate level. Before I turn the call over to Will, I would like to address our long-planned management transition in the Medical division. Seth Bacon, Founder of Trinity Air Medical, which we acquired in September 2021, will assume the role of Executive Chairman of Blade Medical. He will continue to be involved in all strategic manners, key client relationships and high-value sales processes. Our current medical COO, Scott Wunsch, will assume the role of Chief Executive Officer of Blade Medical. Scott has been with Trinity since 2018 and previously spent 13 years at one of the largest organ procurement organizations in the country. Scott has served as Trinity's COO for the past 4 years, where he's been responsible for day-to-day oversight of Trinity and, following our acquisition, Blade medical operations. Seth has built an incredible team in Phoenix. He is a large shareholder. And from his new position, he will continue to foster the culture of excellence that has led to our incredible success. With that, I'll turn it over to Will.

Thank you, Rob. I'll now walk through a few financial highlights from the quarter. Starting with Medical, we're benefiting both from solid industry fundamentals and our strategy to establish and refine the most cost-effective and reliable end-to-end organ logistics platform in the United States. Nationwide heart, liver and lung organ transplants rose approximately 9% year-over-year in the first quarter of 2024. Blade's growth, both in terms of trip volumes and in terms of revenues, continues to exceed that market growth given new client additions and strong trip growth within our existing client base. We continue to see growth related to our clients' use of multiple new perfusion and organ preservation technologies, which have expanded the transport market by enabling organs to travel over longer distances and by increasing the pool of viable organs for transplantation. Market growth in company initiatives are evident in the commercial momentum we're seeing in the business. Medical segment revenue rose 34.6% year-over-year in the first quarter to $36 million, and rose 12.6% sequentially versus Q4 2023. New clients represented approximately half of the growth in the quarter, and we continue to drive strong revenue growth with our existing clients. We're pleased with the sales pipeline and expect to onboard several new clients, both for logistics and for TOPS, our organ matching service, over the coming quarters. We also wanted to highlight how our ground strategy is allowing us to build a deeper, more integrated and more cost-effective relationship with our clients. Blade now directly operates more than 30 medical vehicles, with many more available through our growing network of third-party drivers, all deployed in our densest markets. Ground represented more than 10% of Medical revenue this quarter, at above average margins, and it grew more than 70% versus the prior year. Several factors are contributing to improved profitability in the Medical segment. Our increased use of dedicated aircraft and ground vehicles provides a mutual benefit to our clients and Blade. We also continue to see an increase in average trip distance, which all translates into improved profitability metrics within our Medical business. Medical flight profit rose 84.5% year-over-year to $8 million in Q1 2024. Medical flight margin increased 6 points to 22.3% in the quarter versus the comparable period last year and 2 points versus Q4 2023. Medical segment adjusted EBITDA rose 134.5% year-over-year to $4.4 million in Q1 2024, as margins rose over 500 basis points to 12.2%. Going forward in Medical, we expect to average single-digit sequential quarter-over-quarter revenue growth for the remainder of the year. As always, the timing of new client onboarding and other factors influences sequential growth rate in any quarter and can result in some quarter-to-quarter lumpiness. Our next quarter ending June 30, 2024, is a particularly tough year-over-year comp given our support of a large hospital on a temporary basis during the 2023 period, which we have discussed on our prior earnings calls. For medical SG&A, we continue to expect single-digit sequential quarter-over-quarter growth for the remainder of the year as we ramp up our organ placement and ground offerings. As Rob mentioned, we closed on 7 of the 8 previously announced aircraft acquisitions. While these closings happened after quarter end, we're pleased with the free cash flow benefits we've seen in these early days, and we look forward to providing a more thorough update once we close on all the aircraft and have accumulated more operating data. Turning to the Passenger business, in short distance, 26% growth in airport this quarter was more than offset by poor flying weather for European ski routes and lower passenger volume in Canada, leading to a 5.9% revenue decrease year-over-year. In Europe, where travel to and from the Alps is the primary driver in the first quarter, weather-related cancellations approximately doubled compared with last year. In Jet and Other, revenues decreased 29.7% year-over-year driven by our decision to discontinue BladeOne at the end of the 2023 winter season, which had generated losses and $2.9 million of revenue in Q1 2023. Excluding BladeOne, Jet and Other revenue rose 9.4% year-over-year, driven by increased jet charter activity and growing brand partner revenues. Q2 will be our last quarter for this BladeOne revenue headwind expected to be in the range of $1 million. We are delivering on the profitability improvements we promised in Passenger, cutting loss-making products like BladeOne and optimizing the cost structure. Importantly, Passenger segment adjusted EBITDA improved by $0.4 million year-over-year, even in the face of disappointing weather in Europe. Going forward in Passenger, we expect continued year-over-year improvement in Passenger segment adjusted EBITDA, driven by SG&A cost efficiencies. On the corporate cost side, we once again reduced our adjusted unallocated corporate expenses with a 19% decline in Q1 2024 versus the prior year period. This, combined with our improvement in both Passenger and Medical segment adjusted EBITDA, led to a $4.2 million improvement in adjusted EBITDA versus the prior year period to negative $3.5 million in Q1 2024. For the remainder of the year, we expect adjusted unallocated corporate expenses to be flat to down. On the cash flow front, cash from operations was a $15.6 million usage in the quarter. The difference between adjusted EBITDA and cash from operations in the quarter was primarily driven by a $2.6 million increase in accounts receivable and a $10.2 million reduction in accounts payable and accrued expenses, which was driven by cash payments for the Trinity contingent consideration resulting from our acquisition and by our 2023 short-term incentive plan. Please note that this will be the last Trinity contingent consideration payment. Capital expenditures of $1.1 million were driven primarily by leasehold improvements related to the build-out of larger office space in Tempe, Arizona for our growing medical business, along with investments in software development. We ended the quarter with no debt and $151 million of cash and short-term investments, providing flexibility for strategic investments, acquisitions and opportunistic share repurchases. On the guidance front, we are reiterating the 2024 and 2025 guidance we introduced last quarter. Most notably for positive adjusted EBITDA in 2024 and double-digit adjusted EBITDA in 2025, and we believe this quarter's results represent an important first step in achieving those goals. Last but not least, I'd like to take this opportunity to welcome Mat Schneider to the team as VP of Investor Relations and Strategic Finance. Mat has had a long career spanning sell-side research and public equity investing with a focus on aerospace. We're lucky to have him on board, and I look forward to introducing many of you to him in the coming weeks. With that, I'll turn it back over to Rob.

Thank you, Will. I just have a few catch-up items to review. From time to time, we receive questions regarding quarterly stock sales by senior executives. Please note that these sales represent a sell-to-cover mechanism, whereby the company transfers vested RSUs to executives, net of shares sold, to pay taxes owed and due at the time of vesting, this program is clearly noted in our Form 4 filings. With respect to our corporate SEC disclosure and investor materials, given the intense interest in our rapidly growing medical business, Blade MediMobility, we are refocusing these materials to provide greater clarity and insight into this business, which is now the largest in our company. In closing, we are off to a great start to the year, and we're increasingly confident in the improving profitability outlook for our businesses. And now I'll turn it over to Mat for questions.

Thanks, Rob. [Operator Instructions]

[Operator Instructions] Our first question is going to come from the line of Jason Helfstein with Oppenheimer.

Two questions. First on Medical Mobility and the second on Passenger. So you've kind of given us pretty much detailed kind of growth guidance for the rest of the year. As we think about next year, do you think about, can you still grow faster than the industry next year or just you just start to look more like the industry next year? And maybe just talk about the factors around the growth of that as we're thinking of maybe a year or 2? And then second, in passenger, I think gross margin came in a little bit weaker than we expected. Maybe just talk about the dynamics there and how you're thinking about passenger gross margin or gross profitability for the rest of the year? And just whatever initiatives you have that might factor into that.

Thanks for the questions, Jason. Will speaking. On the Medical side, yes, I do believe we continue -- can continue to outpace the market growth in medical because remember, when you think about the unit of an organ, our unit is a flight block hour and then we have a lot of ancillary revenues that we can make on a trip, as well, particularly the growth in our ground business and the introduction of the TOPS service. So if you still see that high single-digit growth in the number of organs that are being transplant in America because of some of the new technology and centers getting more aggressive, that incremental organ is often coming from further away. So there's a multiplier on the growth for us. And then we hope to be able to continue to go deeper with all of our customers, help them on the ground and help them with organ matching as well. So I think there's multiple ways to exceed that market growth in Medical. Let me talk about passenger for a second. I think in terms of the margins, obviously, Q1 is historically the lightest quarter, and it's very easy to have noise in those numbers. As I mentioned previously, Europe had a really difficult ski season in terms of cancellations of flights due to weather. And the best way we look at that is to take a look at bookings versus revenue. And when you look at bookings versus revenue, you see a much stronger picture in terms of flights that would have happened if were not for weather. And so overall -- and then on the U.S. side, we saw a really solid improvement in the performance there. So I think we remain confident on the passenger side. I'd really look at this as kind of the -- it's really just kind of an enlargement of the performance -- of any kind of performance that you noticed for Q1 just because it's at the small quarter historically. And just for the business in general. I think I'll say that. Anything else, Jason?

I mean just any thoughts just about how you think passenger margins kind of the rest of the year?

You're always going to see better margins once you get into our summer season. Those are our highest gross margin products, and it's also our opportunity on growing products like Blade Airport to get the highest load factor in terms of number of seats that are full on the aircraft. So you should see improvement particularly going into Q2 and Q3. And of course, when you think about something like Europe, almost half of the revenue comes through in Q3. So that's really the most important quarter. And we do expect to see a pretty significant year-over-year segment adjusted EBITDA improvement in passenger this year.

And if you take a look at the market also taking on the U.S. side increases and per seat prices, that's something that's held really well. We expect that to continue. And I think now that we have a new management team in place in Europe, you're not -- you're going to see stronger pricing in terms of per seat basis because we're starting to introduce fare classes like we have in the U.S., which has been a huge driver of incremental pricing for passengers. So they have the choice to get a kind of low-cost opportunity to fly Blade, say, from between Nice and Monaco, but then also can pay for flexibility that can add 20%, 30% to the price of its seat. So that's starting to be adopted into Europe. So a lot of the strategies in the U.S. are starting to move to Europe with this new management team that we have in place. So I'm pretty confident about that flowing over the Atlantic and enjoying a continued improvement, especially as Will said, in our most important quarter, which is Q3.

And one moment as we move on to our next question. Our next question is going to come from the line of Edison Yu with Deutsche Bank.

Great. I wanted to maybe get your thoughts on the buyback. Obviously, you do have a lot of cash in your launch, which I think is very encouraging. What are the, I guess, thoughts into the quantity and the timing -- potential timing of it going forward?

Okay. Sure, I'll take that. We have not purchased any stock yet. We did authorize the repurchase program, so we have that tool in our toolbox to further enhance shareholder value when we see major disconnects between the trading value of our company and the intrinsic value. But at the same time, we need to evaluate that option in the context of organic growth investments and accretive acquisitions that we're focusing on finding and analyzing considering almost every day. And that's the right way to supercharge the growth of the company and to create the most value for shareholders for the long term. And clearly, right now, when you take a look where interest rates right now being so high, we're at a huge competitive advantage versus our competition in terms of evaluating acquisitions with -- because we don't have that need to lever up any kind of deal, given our cash balance, makes a lot more competitive versus private equity or any kind of management LBO. So again, if you have another tool in our toolbox, and whatever number we would ever use in terms of buying back stock, it would be prudent and in the context of our overall capital structure.

Understood. And a separate follow-up. I'm curious if you looked at some other areas of expansion on the ground side, I saw you recently had this partnership with the Jet. Just curious if there's more kind of niche opportunities there you maybe actually could tap into?

Sure. Look, I think there are 2 things, just to mention on the partnership with the Jet. That really was driven by marketing. As you saw, I think we even announced that we had strong performance in our brand partnership revenues, tons of brands on a global basis wants to get in front of our passengers and are willing to pay for that privilege. So that product, while not incredibly meaningful in terms of scale gives what the -- our brand partners want, which is another canvas to get in front of passengers in this time for a longer period of time than by air. And it's something they want and it's something they're willing to pay for, and we're happy to oblige. But in terms of kind of what you said the kind of expansion in terms of movements and such, we view ourselves as a company that is -- that moves critical cargo, whether passengers or surgeons with organs. So we are hard at work looking at everything from moving blood samples, tissue samples, other types of critical cargo, AOG parts for aircraft, and anything that needs to get some place quickly, have a good chain, a kind of very visible chain of custody, and a really strong logistics background. And I think we're really well equipped because of our logistics strength on the passenger and especially on the medical side to move a lot of other critical cargo besides organs. And I think you'll probably hopefully see more to come in the coming year.

And one moment for our next question. Our next question is going to come from the line of Jon Hickman with Ladenburg Thalmann.

I just have 2 questions. Could you just talk about why Canada was weak for a minute? And also, what are we supposed to expect from depreciation as you now own 7, well, potentially 8, aircraft?

Thanks for the questions, Jon. Canada, we're still seeing some weakness in terms of overall seats flown that we believe is driven by a shift towards still more remote meetings with government officials and the provincial capital of British Columbia versus what we saw in the pre-COVID period. So we think that's the major driver there. In terms of what we expect to see on the new aircraft that we own, it's early days. We closed on 7 aircraft after the quarter end, but we're already seeing an overall free cash flow benefit, and we still expect to see, on a free cash flow margin basis, a 5- to 10-point increase in the performance for those owned aircraft versus aircraft that would use under a capacity purchase agreement. So irrespective of the depreciation, you'll be trading some expense that was an hourly rate paid to a third party for some depreciation. But what we care about is the free cash flow, and that's where we expect to see a 5- to 10-point expansion. And once we have a little more data, a quarter or so, we'll come back to you with some more specific details about all the different line items, but we're definitely seeing the performance benefit we expected so far in this -- these early days.

So from a model point of view, the expense that would have been kind of a cost of goods sold, that should go down a little bit. And then on the SG&A -- on your operating, there will be higher depreciation from those, and you'll have to pay for your own gas and stuff like that.

It's sort of just moving into different buckets, but the overall bucket of the cash that we pay to get the lift that we need for our medical customers, we're going to spend less, we believe, on a per hour basis, and you'll see that benefit in the cost of revenue line. Correct.

Just one thing I'd add. I mean, we're looking still at a very small percentage of overall fleet being owned. But I have to admit that I believe that you're going to see a very meaningful increase in margins that more than -- that more than make up for any concern you might have on the free cash flow in terms of depreciation and -- looking at depreciation or CapEx. So it really is a balancing act where we believe we're -- we're still asset light, but what we're trying to do is just make sure that we have all -- have 24/7 access for all our customers and are able to accommodate them when needed. And when we see something opportunistic like these acquisitions of these planes and to have them well placed, we can just enjoy so much better margins than we could if we were not owning them. And essentially, what it works out is when you're operating a plane 24/7, you're pretty much just giving money away if you're not owning them. But again, we just got to be very careful, and we are being prudent, in making sure that the vast majority of our lift is on an asset-light basis.

And just one more question there. On the pilot side, do you -- is that still a cost of goods sold? I mean paying the pilots.

Remember, we're not operating -- remember, we don't operate these aircraft. We just own them. So we're going to be benefiting from pass-through billing, but you'll still see that come through on the COGS line for something like pilots. So it will now get the fixed cost leverage of that. Instead of paying a fixed hourly rate per hour that we fly, now you're going to have the fixed cost leverage of, the pilot salaries are what they are. And as we fly more, of course, we're only acquiring aircraft in areas where we have multiple overlapping contracts with different hospitals, and we're highly utilizing the aircraft in terms of hours flown per month. So you'll be able to get that incremental fixed cost leverage through the pass-through economics that we couldn't get before when we were just paying x rate flat per hour flown.

And then can I just ask, so I noticed you've started this like luxury bus service from Manhattan to the Hamptons. Is that true?

Yes, I think we just covered that real quick. That's not going to be any type of in the short term, any kind of meaningful driver of revenues, but it's not going to be any kind of drag on profit whatsoever. Again, this was really driven by our brand partnerships where our brand partners wanted an additional canvas to kind of to market their products. But also when you think about weather in the New York area in the summer, this gives us an opportunity to kind of keep people with our ecosystem. So if there's a flight that's canceled for weather, they can go on a Streamliner. If people have excess luggage, which sometimes they do, we can easily move it to their destination on the Streamliner and charge them for that. So it does fit in nicely with our core leisure business as well. So we've got -- I think it's a good thing to have on 2 prongs.

And our next question comes from the line of Bill Peterson with JPMorgan.

I wanted to come to first start with Medical and about the competition. So I guess, first of all, are you seeing any shifts in terms of the transplant center customers as a result of competition? For example, are most choosing a dual source for these services if they weren't doing this prior? Are any new customers changing their contract length or size versus historical norms? And I guess the context is, I guess there's about 250 transplant centers. One competitor now is talking about 105. So I guess trying to get a sense of how to think about the growth of this business and how to think about it in the context of potential dual sourcing for these transplant centers.

Thanks for the question, Bill. We've seen nothing but really positive momentum in the Medical business, both in terms of new customer acquisition. We've got a great pipeline for the rest of the year. You saw about half of our growth was from new customers, but we've also seen incredible growth within all of our existing customers. That's any way you slice it. That's the number of trips that we're doing with them, that's trip distances, that's overall revenue from our existing customer base. So if there's a shift, what we're seeing is that our customers are getting more aggressive in terms of how far they're willing to fly to pick up an organ, and they're taking advantage of a bunch of new technologies, both perfusion and other organ preservation technologies, that are enabling some of those efforts. And our model remains a contracted first call model. That's how we're able to position aircraft strategically to lower costs for our customers and eliminate repositioning. And so that's what we've continued, and we've seen great progress from folks in the industry that are making perfusion equipment that's growing the market. And it's been a benefit to us across the board.

Bill, I just want to add in here, because I'm glad you asked the question. And I think that the quarter speaks for itself. We had a record high revenue of $36 million in Medical, and we grew 135% in EBITDA. And we've gotten this question before. We continue to see growth. We think our competitive stature is strong. We are the largest in the industry. And when, with respect to any competition, not only our contracts -- people obviously abide by all their contracts and we're getting new customers every day. But the perfusion devices that are out there have only supercharged our business by the ability to move these organs longer distances. So I cannot be more confident about our competitive stature. And I'm not -- I'm someone who's not prone to hyperbole.

And Bill, if it's helpful, we're still seeing kind of a teens percentage of trips that use some kind of perfusion or organ preservation equipment. The vast majority of the flying that we're doing for our customers is still using traditional cold storage. And it's really been a positive on all fronts.

And we're moving organs with perfusion devices every day.

Okay. I want to pivot over to the passenger business. So especially, I guess, the context of the revenue growth in Medical and your reiteration of the guidance and focus on profitability. Want to kind of talk about the seasonality of the business, how to think about it from here from a passenger volume. But then I guess there's the other component of revenue and profitability about pricing. I believe your airport was around maybe 300 exiting 4Q on an average sort of average seat basis. Kind of wondering how the trends were in the first quarter and then how we should think about trends in pricing for the second quarter and back half of the year? And then I think you alluded to earlier, maybe some potential for uplift in European pricing. Should we -- is there any benefit there this year? Or is that more maybe beyond this year? So components about the Passenger business, please.

Yes. So Bill, I think the seasonality is going to remain pretty consistent with what you've seen in short distance historically. Just looking at kind of the general distribution of revenues last year in short distance should still be a really good guide as to what we expect for this year. In terms of pricing, we continue to see benefits. We're above that $300 per seat pricing on average in the airport product here in the U.S. today. We're seeing the ability to take some price and some of our seasonal products here in the Northeast. We're also seeing the ability to pass through some expenses like credit card fees on the much more expensive charter products, which is something that we hadn't done in the past. So I think there's a bunch of different ways that we can benefit on those mature routes. And -- and that's really our focus kind of doubling down on the profitability in places where we have great scale, and we have customers that love the experience, love the brand and love to come back.

Okay. If I can sneak one more in, just kind of housekeep -- so thanks for the guidance on the Medical SG&A, and I guess with Passenger SG&A, it seems to remain flat or to down. The Medical SG&A growing. How should we think about SG&A in aggregate through the course of the year? Maybe trajectory-wise and then in aggregate, sort of kind of flattish to low single digits as a whole?

Yes. I mean I would say, overall, in the unallocated corporate expense, we guided flat to down. You should see the same thing in passenger flat to down. Overall, I think if you were to look -- we call it our adjusted SG&A, which is just kind of all the SG&A items added together. Same thing there. You blend it together, and it's probably flat to down for the year.

Yes. I mean every day, we're learning how to do more with less, and that's just -- as we get into new businesses, the SG&A sometimes going to start a little heavy to make sure that you have a good product. But every single day, as we get more mature in a specific business and know -- and have a better knowledge of what we're doing, it's just -- that's kind of job one, and it's working so far.

And I'm showing no further phone questions at this time.

Great. We will now take a few questions investor questions from the Say Q&A platform. The first question is about the biggest challenges to transition to eVTOLs from traditional aircraft. Rob, why don't you take that one?

Okay. I think that the time lines for eVTOL manufacturers or we call EVA, electric vertical aircraft, have consistently been delayed. I think that both Joby and Archer have announced really strong programs in the Middle East, which I think will be a very good forum to show that these aircraft are actually viable. But that's where I would expect to see them first in the world and then kind of coming to the U.S. probably in the '26 range, maybe call it second half potentially '27, but I would still kind of put a number out there in terms of the year kind of second half '26. But again, they're closer to this than we are. And in terms of adoption, all these manufacturers, in order to be profitable, need to get to automotive scale. They will need someone of our scale, which is -- we were the largest air transporter of people for commuting or transportation just basically not counting tourism or B2B for oilfield services and such. So we believe that they're going to be in a situation where they're going to want to sell to our operators. We are not going to be buying them. They will be asset light. And we're expecting them to offer very strong financing packages for our operators. So the transition, I think, will be fairly simple. We already have deals in place with BETA. BETA, as you may know, also just announced their first successful public transitioning of their aircraft. We have deals in place with other manufacturers as well, and we expect that to continue. And so one of the great opportunities that we have here is that not only do we have the entire ecosystem kind of from passenger technology to the cockpit, have all this captive infrastructure, we recently announced that we're going to have having terminals in Terminal 1, 2 and Nice behind the tarmac security to get people straight to their planes and bypassing airport security, the strength of our airport business here in New York or our leisure market. There's no one bigger that can accommodate these aircraft, and we have all the parts that they need in order to make sure that these things are flying, flying safely and taking a lot of passengers.

Great. The next question is on TOPS. Will, can you provide just an update on TOPS?

Yes. Overall, we're getting great customer feedback and that's really our #1 focus right now. We're not going to be providing a quarter-to-quarter update on new customer acquisition, but we've got a great pipeline. We do expect to onboard several incremental new customers throughout the balance of the year. It's not going to be a huge contributor for the fiscal year 2024, as we've talked about previously, but we think it sets us up in a really advantaged position strategically, moving us up the value chain with organ transportation and enabling us to have an open door to expand in some of those other critical cargo markets and ground transportation markets for our customers, like specimen transfers, eventually being able to help out with things like kidneys. So we really think it's an important plank of the strategy, and we're happy with the results so far.

Thank you. The next question is about the strategic value in NORE, the medical competitor. Will, can you address that?

Sure. We think it's a fantastic business. We're always evaluating all growth opportunities, both organic and inorganic. NORA has built a great company. We're particularly impressed with their ground business. It's inspired us to offer some of those same services to the customers that we have across the country, and we think we're already seeing the benefits of that. In this particular case, it seems like it went for a great multiple. And we've determined that our best path forward for growth was to continue the organic strategy, but it's a great business and we're impressed by what they've built. And I think it's a good company.

I think let me just go a little deeper on that. Just to make it clear to the people on the call, NORA was sold, I guess, about how long ago? I think probably I think in the past year. It is something that we did evaluate and we're always thinking about build versus buy. And frankly, I think this is one where we felt more comfortable continuing to build this -- our business, which turned out to be a good outcome for us if you take especially looking at our recent performance. And frankly, when -- after passing on this opportunity when it's sold to private equity for kind of 14x to 15x forward multiples, which is what I believe it's sold for, that's obviously not something that is not confirmed. That makes me feel very comfortable with the kind of value we've created on our own Medical side.

Great. Well, that was the last question we're going to take from the plot. Rob, do you have any closing remarks?

I just want to thank everybody on the Blade team for really putting together a terrific building towards a terrific quarter. Obviously, the performance on the Medical side speaks for itself. This is historically a slow quarter for Passenger. And I think we're really in strong shape on Passenger as we come into the high season here, and we look forward to answering any questions. You can obviously e-mail us at investors@blade.com if you've got any further questions, and we look forward to working with you guys in the future and continuing to perform. Thanks for your time.

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