Good morning and welcome to day three of J.P. Morgan's Industrial Conference. My name is Bill Peterson, U.S. Clean Tech Analyst, and I'm really pleased to have the team from Blade here. I think it's the third year in a row we've had Blade at this conference, and this year we actually have the luxury of Rob Wiesenthal, CEO, and Will Heyburn, CFO here. They are going to help us understand more about the company and the direction and the high-level strategy. Maybe we will start off with that. Rob and Will, thanks for supporting the conference. Maybe, perhaps for investors who maybe know less about the story, you can take the opportunity to discuss the high-level strategy. You just had your earnings call this morning, so maybe there are a few areas you'd like to recap, and I'll pass over to you.
Sure. Thanks a lot, Bill, and thanks, J.P. Morgan, for having us today. We had a really strong end of the year, first full year of adjusted EBITDA profitability, driving real significant growth and an $18 million, approximately, improvement in EBITDA for the year. We feel really good about it. For those who are maybe not that familiar with Blade , we operate two big segments of our business, which are both air transport for human organs, where we're the largest air transport of human organs in the United States, and also our passenger urban air mobility business, where we fly more people by vertical transportation, predominantly helicopters, than anyone else in the world.
Key operations are here in New York, where we are one of one, the 100% market share, to and from the airport and to key leisure routes, and in Europe, the southern Europe, where we have a dominant market share. I think that the companies have finally made that kind of transition into profitability. On the medical side, the growth is really strong, both in terms of the underlying number of organs that are being recovered for transplant and then all additional ancillary businesses that accompany it. We recently launched an organ matching service, which not only adds with incremental profitability, but also allows us to get closer to hospitals that may not know about our air transport business. On the passenger side, we've been able to really take in price and optimize our schedule to kind of drive that profitability.
A great cost-cutting program, a cost rationalization program by the team over the past year that really have gotten us to this point where, on the passenger side, we have real, what I'd call, prudent growth, taking in price, making sure that we can be that bridge until electric vertical aircraft or eVTOL are here. At that time, when it is here, we have more people flying, a stronger brand, more routes, more captive infrastructure, a great technology stack. We just released our first really kind of next-generation native app, both here and in Europe, which is doing quite well and I think is really going to help supercharge sales.
On the medical side, I think the team that we have and the salespeople that we've just hired, both on the conventional air transport for organs business, but also for critical time cargo, which is a great area for us to expand into, we're kind of really feeling good about the year ahead.
Thanks for that, Rob. Maybe we'll spend some time on each of the main parts of the core business. It's really interesting having covered the company for three years, how it's really evolved. Now, at least from a revenue perspective, it's actually being driven by medical. Why don't we start there? It's been a big driver for the past several quarters: strong customer traction from, I'd say, maybe your core customers, and then obviously some new customers too. One of the areas we do get questions on is around the competitive landscape. Can you comment on the landscape within the organ transplant business in the U.S. and where Blade fits in?
Sure. I mean, typically, as the largest air transport of human organs in the United States, when we started this business, which we started actually in New York with just helicopters, it really was mom-and-pop jet operators. I think that the genesis of the business was really going to hospitals and saying, "Why are you taking an ambulance to meet a jet and then a jet for a couple hundred miles, and then taking an ambulance as well in the other direction, having a $60,000 price for an organ transport, as opposed to taking a helicopter and landing literally on the hospital of both, landing on the helipads of both hospitals and bringing that down to a $4,000 or $5,000 price?" As we expanded and as perfusion technologies improved and organs could travel much longer distances, we got involved in jets.
Now we have the vast majority of our business is jets. We do own a number of jets. We have a nice balance between owned and third-party aircraft. In terms of the competitive landscape, I think the fact that we can actually position jets at hospitals is very strong, unique, and a competitive moat because not only does it make for less repositioning and faster call-out times and a lower price for the hospitals, but it is better for patient outcomes. It really creates a competitive moat because if we are working with a hospital and we have jets literally on standby five minutes away versus someone calling an operator that may have to reposition a couple hundred miles, I think you own that customer for a very long time.
Great. Maybe someone just coming off your earnings, it's obviously kind of almost real time here. It was only an hour or so ago. You commented that the medical growth should outpace the growth of the broader industry over time. Should we consider that still to be the case outside of variability of what you're seeing here in the first quarter or maybe first half of this year?
Will, you want to take that?
Yeah, absolutely. When we think about our ability to have growth faster than the industry, we're continuing to win new customers. Then, as Rob mentioned, you have technology that's allowing you to fly farther to pick up organs than you've ever been able to fly before. You have some new regulation that's still working its way through the government, particularly the Continuous Distribution model, which has moved to lung but has not yet been rolled out for liver, which is the largest of the heart, liver, lung organs that we focus on and that require dedicated air transport. As those new regulations start to prioritize even more the sickest patients, you're going to see trip links continue to increase. For all of those reasons, we see the ability over the long term to grow more quickly than the market.
As you mentioned, we got a tough comp in the first half of this year, and we've seen some volatility, which we talked about on our earnings call, but that's our long-term view.
Maybe tying to kind of both sort of questions or earlier comments. I think Rob mentioned the vast majority is now jets. What is the mix of the business right now, and what is the mix of the business going to look like? I think it ties into the organs as well. Are you looking to further diversify exposure to various organs to kind of maybe soften the seasonality, if there is any seasonality variability? Just maybe a couple of questions following up from the prior two.
Sure. I think that there's a very wide value chain here in terms on the medical side. You got organ matching. You have surgeons that are doing recovery. You have lots of different medical devices. You probably saw our alliance with OrganOx. The more we're across that value chain of servicing those hospitals and anything they need along that route, which is a very long route from identifying an organ and having perfusion specialists and recovering it and moving it, all that, that's where you're going to see our growth along that value chain on the medical side. Additionally, our core competency in logistics, clearly, there are a lot of things in this world that need to be moved quickly, critically, and with really a next to zero chance of risk of a product or something getting there on time. That could be radioisotopes.
That could be what we call AOG, aircraft on the ground parts. That's something that we just can kind of snap on to our business. When we think about the mix of the business overall, we see these opportunities that are kind of organic on the medical side in addition to some M&A. On the passenger side, what we did is we got to the point where we are now, which I think many people used to be skeptical at, that we have a profitable vertical transportation business. It's the largest of its kind in the world, and that it is better positioned to take advantage of electric vertical aircraft than any other company. We're doing that on a profitable basis.
Whether the timelines are coming soon or later in terms of eVTOL, we're just going to have that many more landing zones, that many more terminals, that many more users, flyers, and impressions on that brand. When we do make that transition, we're going to be moving a lot of people to this type of transportation in terms of vertical flying. Because the first people flying eVTOL are not going to be guys taking taxis and subways and Ubers. It's probably going to be people in helicopters. I think we're going to really help jumpstart that industry.
Anything to add or about the mix?
Yeah, I think it's less about diversifying between different kinds of organs, and it's more making sure we can, as Rob mentioned, serve all those new and emerging constituents in the value chain. It's not even the way it was three years ago where it's only the transplant center. Now we're forging partnerships with perfusion companies like OrganOx. We're working with third-party surgical recovery companies. We're working more and more with organ procurement organizations that work regionally to identify organs, export kidneys, and increasingly, as we've talked about in other calls, actually perform normothermic regional perfusion to help repair the damage that's done to organs when a donor's heart stops. We're expanding the breadth of who we view as a potential partner to be best positioned, and we believe we are for this kind of diversifying world of constituents in this industry.
Yeah. Maybe a question on scale somewhat ties into what Rob was saying with your passenger business too, but can you better understand the benefits of scale in terms of how that better cost structure helps you with better pricing, the pricing advantage you have relative to competitors, and maybe also touching on now that you have basically you're positioning aircraft closer to customers. It is sort of two-part. You have the ability to use existing operator equipment for, I think, both your segments, but then, more importantly, more recently, you're putting the aircraft closer to customers.
We've talked a lot about how we've now structured the business so that we really benefit from the operating leverage of flying more. That's both in the passenger and in the medical business. In medical, pretty clear, we've purchased some airplanes that are in our highest demand locations. When you own those assets, the more you fly, the less it costs because we're amortizing those fixed costs over more hours. That makes our cost go down, to your point, around the competitive advantage on pricing. Because we're strategically positioning those aircraft at the locations of our customers, when those customers send their procurement surgeons out to go procure an organ and fly back, we won't have to reposition, and we save them money that way. It does give us a huge advantage.
The same thing is true on the passenger side, but we're doing that on an asset-light basis. We're entering into capacity purchase agreements that contractually have volume targets that once we hit them, our cost to fly an hour on a helicopter could go down by 30%. You're going to see that operating leverage in both businesses. Finally, in passengers, there's one more layer of leverage, which is we've now taken these routes like airports where you have to have a minimum load factor, a minimum number of passengers on each flight to make money. We're above that mark now, which means that next incremental flyer, the next paying passenger on an already profitable flight, that's going to be close to 100% incremental margin for us. You're really going to see great gearing in the business.
I think it's an awesome inflection point for the company. Being profitable is really, it's an important milestone, but this is just the start.
Yeah, maybe, and just kind of speaking to some additional growth opportunities from here, maybe you could speak to where this is going to come from. Ancillary revenue streams like TOPS, or is it further share gains within the existing customer base? How should we think about your growth as well as share from here?
I think it's all of the above. We're winning new customers. The aircraft strategy is helping us win customers that weren't accessible to us before. We're converting TOPS customers, as we talked about on our earnings call, to become logistics customers. That's on the basis of our great performance with that customer. We're never forcing anybody to do something like that. We want to earn it, and we are earning it. I think there's lots of opportunities. To your question on the underlying growth in the industry, we still view this as very early innings for the industry's ability to utilize those DCD organs, those organs from donors whose hearts have stopped. Those are the organs that most of the time are going to require some kind of perfusion in order to be viable. Perfusion historically has been very expensive.
Now, with new competitors entering the market and with new therapies like NRP, normothermic regional perfusion, those costs are coming down, and more transplant centers are able to utilize those organs. It is still very early days of making that accessible to the industry. We think it could drive even accelerated growth from what we have seen in the last few years. Really exciting time to be in this business.
Yeah. The company had kind of started off without owning any aircraft, but now you're currently balancing kind of remaining capital light versus owning aircraft when it makes sense. Can you speak to how the medical business can see further margin expansion, knowing that the first half may be lighter, but given that you've reached your 15% target in the calendar fourth quarter of 2024?
Flying more. The more we fly, the less it costs. We'll continue to optimize our fleet. As we talked about, you're going to see some lumpiness. We'll dip back below that target in the first half of 2025 as we have a number of aircraft that are going to be down for maintenance. You won't be able to fly more definitionally. That's really the answer. As we get to kind of steady state on the owned fleet and we continue to optimize the locations, we'll approach that high teens target that we set for medical segment adjusted EBITDA.
I think there's a real, it's important to pull back and say that there's a real competitive moat, not only by having the aircraft close to really right there by the hospitals, but also by having so much throughput into these planes that we can offer lower costs. I think if you think about just in terms of the medical cost for an American or for the hospitals, organ transplants are much more economic and have actually better outcomes than other types of therapies that do not require this. It actually, in terms of the healthcare system and patients, is both better economically for insurance companies, hospitals, and patients, and also better outcomes. Our prognosis for the growth of this industry is very strong. It's only going to continue.
I think that the more every day we see new opportunities along that value chain, like TOPS, which was started organically, or what we're looking at in terms of recovery surgeons and alliance with perfusion devices. When you think about the size of the industry, it's really difficult to say, okay, how much is the air transport business for medical? It's really that whole value chain going throughout any type of thing that involves organs and patients.
Maybe just wrapping up or wrapping a bow around this question around owned versus leveraged partners. Do you envision the owned aircraft becoming a primary strategy going forward if demand warrants it? Maybe just kind of how it ties to the financial performance. What steps are you taking to optimize the financial performance of your owned aircraft fleet?
I think you always want a mix. I think that when we started it, we set out really strong ROI targets and margins. I think we got there in the margins. I think it's important that as people start looking at this company, that they realize, as we talked about on our call today, that maintenance schedules can change. If you buy an aircraft, a lot of them are in the same year, and the hours in those aircraft are similar, you may have downtime. The fact that we have capacity use agreements and we have all these other aircraft that we can use makes it certain that we can service our clients. Over the course of time, we already see, and we are confident that the numbers will pan out, that that incremental margin that we get and that strong ROI is there.
It kind of serves the hospitals. A lot of hospitals require us to use owned aircraft, but it also gives us kind of this flexibility to, as things kind of ebb and flow or grow, to use these third-party capacity usage agreements that we have.
Yeah. I'm going to pause and see if there's any questions, particularly if there's any questions on medical, because I'm going to pivot more to passenger from here. Any questions? All right. We'll continue on. I'm actually going to start kind of high level on passenger because we've been discussing this, I think, close to three years now or maybe longer. And we've seen a big evolution. We've seen the company acquire Canada. We've seen the company divest Canada. We've seen the company acquire France and have some fits and starts, but it kind of appears to be maybe on the right track. Super high-level question, 30,000-foot view. What is the long-term strategy of this business, and how does this look three, five, ten years out?
Sure. I think we got to where we wanted to be, which was to have either have a strong position in the most important markets of the world. Right now, we're one of one and have 100% market share in the largest vertical transportation market, which is the kind of northeast United States centered around New York City. We have dominant market share in southern Europe, which goes between Nice, Monaco, Cannes, in the winter, the Alps, Geneva, Courchevel, and all summer destinations like Saint-Tropez. We have all the leisure destinations here in the New York area as well. We did that, and we built captive infrastructure both in the U.S. and in Europe. We've now gotten to the point of profitability, which I think a lot of people originally were quite skeptical on, and using conventional aircraft for that.
In terms of our strategy, it was to first get to profitability on here, which we've done. Now what we want to have is prudent growth. We've done that by not only the cost side, but by taking in price. Despite the fact that you can go to the airport for $195, the price of an Uber Black, and get there in five minutes instead of having a two-and-a-half-hour.
Nobody's paying $195, are they?
What?
Nobody's paying $195, are they?
They're paying more. We literally wanted to have that bandwidth of the people being able to do that. We're basically taking certain options like fare classes or cars meeting them on the other side when they land in the city. We get to a point where actually a lot of these prices are kind of can be high twos or north of $300. You give people that choice because with any new product, it actually tends to be a high-end customer. Despite the fact that there's a huge dressable market, the first early adopters have money. We've done a great job of attracting that. Also, with the ebbs and flows of the economy, we've historically seen less impact on our business.
I know that a number of the airlines have come out and said, with some kind of concerns about the consumer and what does this uncertainty mean, in terms of what we're seeing right now, in terms of a really strong—we've seen a really strong winter season in the Alps. In terms of pre-sales for things in Europe, including the Monaco Grand Prix, which is obviously the largest event of its kind and probably the largest movement of non-military movement of helicopters in the world on a single day, it's strong. Where do we want to be?
We want to be so when the point when eVTOL is here, call it late 2027, early 2028, that we have all of that entire platform from the consumer-to-cockpit technology stack to the captive infrastructure to the brand to the hundreds of thousands of customers, our new app, our staff on the ground at airports and on our terminals and lounges, that we can make that transition from having people just on helicopters to electric vertical aircraft. It is going to be a cohabitation phase because you have spoken to a lot of manufacturers here. They have one SKU, right, to start. We need different types of aircraft to get to the airport versus ones to get through weather, long distances, ones with weights, one that are certified for medical. We are so big, we need a portfolio of these aircraft.
I think in the beginning, you'll see us with eVTOL, but also with helicopters working in tandem. Eventually, over time, it will be 100% electric. Now, will that be in five years, more? I can't tell you exactly. The big opportunity in terms of where the growth comes in, which is what we're all waiting for, which is the reason we don't want to burn any cash, and we're not. We're now profitable on the passenger side. The fact that these aircraft are quiet and emission-free are going to open up new landing zones. Because unless you have places to land, it is not a product. I think you've heard from all of the OEMs that there's finally a realization that we're going to be landing at places that Blade lands at. We're going to be landing at places that have Blade terminals, Blade lounges.
They're fair and fair use heliports, but we have the infrastructure on the ground to process passengers, aggregate them, do them with or only with other Blade passengers to make for a seamless, great, and safe experience.
It's kind of related, but I want to just try to understand how much more growth potential do you see in the passenger business? This is kind of maybe a bit more near term, though. I can get the long-term view, especially when there's more opportunities to fly electric. If we kind of peeked out here where we are, I mean, you exited the Canada market, didn't meet the criteria for your profitability. France looks like it could be getting better. I mean, New York, I don't know. I mean, you have the I guess you'll be doing more from the tip of Manhattan now, but how should we think about the growth potential?
Yeah, I think when you take a look at let's take a look at New York. We got 27 million, 28 million people taking cars between the airport and Manhattan every year. We're doing obviously just a microscopic portion of that. We've been very prudent on schedule, turn time, so the time between flights. We've been cautious on price. I think that even within our own ecosystem of passengers that we currently have, right, we can now start modulating both on price and on schedule and on even some diversity where we talked about this Skyports deal with Wall Street, where we're actually economically protected from any type of utilization loss. I think we have that you're going to see growth from.
Which is really interesting, we are seeing a number of deals in place where people, companies, and communities are coming to us and saying, "We will backstop routes." It could be to a stadium that is a bit far away that cannot seem to get New Yorkers there. We recently announced a couple of months ago a deal with Windham ski resorts that will probably start in full steam next winter, where how do I get people up to skiing that so they will do it for the day or happy doing it for two weekends instead of having a six-hour drive, where they are actually creating the routes, paying for any potential utilization losses in an effort to get people to where they are. We are also seeing it by communities as well. I think you are going to see a lot more of that.
We have pockets of communities throughout the New York area that essentially, in a way, are crowdsourcing daily flights to get to work, to get to events. I think that in the next fall, we're going to have probably the biggest, one of the biggest sporting events in the world, which is the Ryder Cup, where we're actually having eight landing pads in Bethpage, Long Island, to service probably the biggest global golfing event in the world. More and more of this kind of stuff is happening. I think in the short term, you're going to see the growth from cautious expansion of schedule, finding different types of pricing, and passes have been very successful for us, backstop routes. To your point, we're only talking about kind of 36 months, so to speak, where we're going to start introducing electric.
That will probably take away certain curfews. I think you'll see some additional landing zones pop up. I think certain communities who have existing landing zones that have been basically shut down, those relit, like what we did in New Jersey and we did in Atlantic City.
Yeah. We occasionally get questions from investors on, would the company just consider spinning off the business? I mean, you're squarely profitable now, so maybe that's becoming kind of a moot point. We like to remind investors too, there are some synergies. What are your thoughts on that? Medical has been the key driver, albeit maybe a bit slowing here in the near term. What are your thoughts on that?
Look, I think they're two great businesses. As we're fond of saying, we are economic animals. We're here for the benefit of the shareholders. We see transactions all the time. We look at opportunities all the time. If we felt that there was a real opportunity to capture the value that we see ahead by some type of transaction, whether it be for passenger or for pieces transforming the company in some way, whether in the public markets or through other vehicles, we're open to it. Right now, what we got to do is kind of focus on this business, get to profitability, which we've done, and now let's get back into prudent growth on the passenger side.
You speak to synergies maybe? I think there has been in the past, but the more, I guess, your other business shifts towards jets, maybe there's less so on helicopter. I'm not sure.
Yeah, we get some synergy in the markets where we use helicopters, which is really focused on the New York City area. As we talked about, the vast majority, high 90% of the flights are on fixed-wing aircraft. It is helpful. I think it allows us to offer those rotorcraft flights, which are extremely convenient for New York City hospitals at a much lower price. The business has expanded dramatically and diversified dramatically geographically.
Yeah. Kind of tying into some prior questions, but how much further margin expansion opportunities do you see happening in passenger, maybe pre-eVTOL, really? How much would be volume? I assume you could still drive a little bit of volume, but how much maybe you can still push price a bit?
Yeah, I think that we've been very pleased with our ability to take in price. I think it's going to be about, especially with our new technology, being much more dynamic about it. I think that it was a bit manual in the past. I think now we have so much data, exhaustive, Blade is so strong since it was a digital-first company started 10 years ago, that we now have the data from everything from weather to TSA numbers to just historical pricing that we've had and how that's impacted utilization. I think we'll be a lot smarter in terms about pricing.
Also, having prices change not only when a flight's put up, but as you get closer to the point of departure, and as we look at utilization on that flight even in the same day. I think that optimization still remains. As I said before, you probably know about our Airport Pass, our pass for our leisure markets such as the Hamptons. We've done the numbers on all those, and those are very highly profitable for us. I think there are more of those to come and also a lot of corporate deals. I think that especially in New York City and Manhattan, as we were fond of saying, New York is kind of tilted down to the right. People are back to work. Hudson Yards is full, going $200 a foot.
We're seeing more and more corporates using airport and Airport Passes as kind of part of getting their employees around. I would just say those are all great operational drivers that we're going to push to higher flight profit margin and segment adjusted EBITDA margin and passenger. Additionally to that, we've made structural changes that have not yet flown through the full year results. Canada was loss-making on the flight profit line. You're going to see the full year positive impact of that in 2025. The European restructuring, we pulled costs not just out of the SG&A line, but also out of the COGS line. You'll see margins expand both areas as we get the full year benefit of that. I think there probably hasn't been as much of appreciation for when we got into Europe, the drag that was originally versus where we are today.
It really has been economically restructured in a positive way. We're really pleased with the results so far.
Maybe tying both, I was going to wrap it up more later, but I think it would be helpful to understand how we should think about the margin, not only in the near term, right? You talked about the medical being down in the first half. I would like to understand for each of the key segments, but maybe also corporate-wide, how much more margin expansion do you have? Where should we think about this heading over the next few years? I suppose with eVTOL, maybe there are other opportunities to even drive it further.
On the medical side, we've been clear that our target is to get to the high teens on segment adjusted EBITDA. We're going to get there through increased scale and also continuing to grow some of these ancillary products like ground that operate at a higher than average margin of our legacy book of business there. I think by kind of achieving our 15% target in this quarter, I think we've already demonstrated the achievability of that. We're going to continue driving on that very hard. On the passenger side, I think we covered it a bit in your last question, but there's the structural changes that we've made that are going to have some built-in margin expansion. All the things that Rob just talked about, they're not a moment in time.
We see a continued ability to take price, be smarter about dynamic pricing, and also give people an opportunity to pay more for something that they value. It could be something they value that does not actually cost us all that much, like flexibility. We are going to continue pushing on all of those things. Everything we have seen so far is that not only do customers accept it, our customers prefer to pay a little more for those things. That pushes our profit margins up. I think we are really in a great position. It is not going to be a binary shift just this year. There are continued opportunities to grow that profit line.
Yeah. I want to pause and see if there's any questions. Again, okay. Maybe as we kind of come towards the end, I guess, Rob, I guess the investment thesis has changed a bit since the beginning of the company. If we look out, what do you think is maybe least understood or misunderstood about the company? Maybe, I don't know, including competitive modes or growth opportunities or margin expansion opportunities. Are there any key milestones or other things you want to leave the investors with as part of your closing remarks?
Sure. I think that for the past year or so, I think that our number one milestone short term was reached, which was profitability. We have a great balance sheet. We have a lot of cash that I am confident that we can deploy with high returns for specific tactical acquisitions that will really help boost our business, specifically on the medical side. That being said, I think prudent investments on the passenger side could make sense, albeit that's probably not an acquisition focus for us right now. I think that in terms of what's misunderstood, I think we're kind of getting our message out there pretty clearly. I think we're probably a bit underestimated in terms of the importance that we have to the transportation market in the key areas that we serve here in the U.S. and in Europe.
I think it is going to be extremely difficult for OEMs who are focused on manufacturing, who haven't actually taken hundreds of thousands of people in cities, put them on aircraft, dealt with everything from people who are physically challenged to people who don't have IDs to people who have too much luggage. To do that in the kind of scale and velocity that we do, that's something that took 10 years. That is something you really can't do yourself. It is one thing to kind of build this aircraft. It is another thing to actually have the service, the brand, the infrastructure, and the technology to move people rapidly through cities. I think we got that down. Now for us, it is just an asset swap. Every other piece of that ecosystem is there.
When you fly Blade today from the city to the airport, it takes about five minutes. When you go into an eVTOL, it's going to take you about five minutes. The difference? Quiet, emission-free. What does that do besides making it maybe a little quieter in your flight? It's going to enable cities to say, you know what? I want to open more landing zones. Every two landing zones, it's its own business. That's the exponential growth that we see ahead in that business.
Great. Rob, and Will, really appreciate you sharing the insights. Congrats. Really, congrats on really a successful year. We'll look forward to following the progress here in 2025 and beyond. Thank you.
Thanks.