Okay, good afternoon and welcome to JPMorgan's 53rd Annual Tech Conference. My name is Bill Peterson, U.S. Clean Tech Analyst. We're pleased to have the team from Blade here. We have Matt Schneider, the VP of Investor Relations and Strategic Finance. Matt, thanks for joining the conference.
Bill, thanks for having me at the conference.
Maybe as an introduction, we just had earnings here recently. Maybe we can give just a brief overview of the business and highlights from your recent earnings call this week.
Sure. Excited to be here. Maybe just starting with the business overview. Blade really has two businesses. We have a medical business, which is about 60% of revenue. We have a passenger business that many of you are likely more familiar with, that's 40%. The medical business, we're one of the largest transporters of human organs for transplant in the United States. The business has scaled significantly over the last few years. We did approximately $150 million of revenue and about a 13% EBITDA margin in that business over the last 12 months. We operate a fleet of 30 aircraft, 10 owned and 20 dedicated, to service our customers. I really think there's an attractive set of characteristics within this industry. The industry growth rate is approximately in the high single digits, driven by technology adoption and regulatory change. It's a contracted business. Our customers are transplant hospitals.
We don't have direct reimbursement risk in that business. We think there's a very attractive growth and margin expansion story within that medical business. On the passenger side, we're one of the largest transporters of passengers for short-distance transportation in the U.S. and Europe. We operate primarily in the Northeast United States and Southern Europe. The business has increased profitability significantly over the last few years. Over the last 12 months, we've generated approximately $6.3 million of adjusted EBITDA in that business. Like I said, significant improvement over the last few years. The business is well-positioned for the transition to electric aircraft. We have a strong brand, infrastructure in key markets, scale, and technology for this transition that we're excited for. Maybe just quickly recapping the quarter, we reported first quarter results earlier this week.
Really strong start to the year that exceeded our expectations, really driven by the passenger segment. That is really just a quick recap of the business and the first quarter earnings.
Great. Thanks for that, Matt. I think we'll double-click on a number of these things, starting with medical, move on to passenger, probably talk a little bit about eVTOL or what the company's called EVA, Electric Vertical Aircraft. Probably stop Bob midway through to see if there's any questions. If there are, please use the microphone as we're webcasting. Maybe starting with medical, as you pointed out, largest share of the revenue today. What are the key growth drivers within this business? Maybe you could sort of touch on areas such as pricing, volume, how to see those growth trends, the ancillary services, as well as any sort of technological advancements you have made.
Yes, maybe just to pick up where I started a little bit in the intro. There is a really strong industry growth rate that I mentioned earlier. The number of transplants in the United States are increasing at a high single-digit level. That is really driven by technology adoption that is increasing the number of organs that are available for transplant. That is machine perfusion and regional perfusion that has increased the industry growth rate from a low single-digit rate to a high single-digit rate. There has also been a series of regulatory changes that have prioritized patient sickness rather than geographic proximity. That has also driven an increase in the distance that organs are traveling for transplant, which has been an important part of the overall growth rate. We also continue to add new customers. We mentioned on our last call, we just added two new high-volume transplant centers.
We have approximately a 30% share in our core air logistics market, and we're continuing to add new customers there. We also have a series of ancillary services that are growing at or above our overall growth rate. We have a ground logistics business that we're adding new hubs and new vehicles and servicing our customers with. We launched an organ placement service business in late 2023 that continues to scale. We added two new customers this quarter for that business.
Maybe going a little bit deeper on market share and maybe the competitive landscape more broadly, what are the barriers to entry for other players in this space? We're aware of companies that are a bit more vertically integrated. What are the barriers to entry, and what's your confidence, and what should give investors confidence in your ability to defend or really actually grow share in the coming years?
Yeah, I think what's really important is our scale. We operate aircraft, and the ability to leverage your fixed costs with your aircraft are really important. Our scale, our ability to place aircraft close to our customers to reduce repositioning costs and lower our cost is really important. The overall ability to schedule our staffing for the fleet is really important as well.
Yeah. The company's spoken to achieving 15%+ EBITDA margin in the business this year, albeit with some quarterly variability. How is Blade able to achieve this target by optimizing flight hours on owned aircraft versus maybe third-party operated aircraft?
Right. We generate a much higher margin with our owned fleet. We have three different types of capacity that we have. We have our owned fleet. We have aircraft that are dedicated where we have capacity purchase agreements with. We have a large pool of third-party aircraft. Optimizing the capacity within each of the three different buckets is really important. That is a big piece of it. Also within that, on our owned fleet, the timing of maintenance could impact the margin we are generating on our owned fleet. If you think about where we were in the first quarter, about 11% adjusted EBITDA margin, we have a 15% target for the year. The improvement from the 1s t quarter to our target of 15% for the year, we expect to be above that in the second half.
That's really going to be driven by us optimizing the capacity mix. In the first half of the year, we're seeing a really heavy maintenance period. Maintenance should decline in the second half of the year into '26, and that should drive the margins from where they are in the 1st quarter towards our target.
As this is a tech-focused conference, I was hoping you could speak more about the tech stack the company employs to enable efficient coordination of organ placement and transport. What are some of what you would consider to be key sort of proprietary capabilities the team's developed?
Yeah, we have a technology platform in our medical business that manages the logistics of each trip. It interfaces between our logistics center, our transplant center, and OPO customers, and also our vendors, real-time logistics information. There is also chain of custody information that could be accessed by our customers to understand where the organ and where the teams are real-time. We also have the capability within that for data analytics and tracking that we can provide our customers on a monthly basis.
Great. I guess on the earnings call, you talked about April being highlighted as a record month for organ volumes. What trends are you seeing thus far into May? I guess, how does the team sort of adapt to the monthly variability that exists?
Yeah, it was great to see an improvement throughout the year so far. There was some variability earlier in the year. We saw a pickup in March. We said on the call that April was the highest volume month that we've seen in the medical business. There is month-to-month variability, but what I could say is we've continued to see solid year-over-year growth in May so far on a tough comp. Our comp is the toughest in May that we have all year, and the comps ease for the remainder of the year.
At least in this business, it's a little hard to imagine a seasonality, but is there a seasonality in this business or not really?
There is some seasonality. It's not the same months and quarters every year, but generally when there's a lot of vacation or holidays, that kind of drives some of the changes within the volume as surgeons are not available to do the actual transplants. Typically in the third quarter, often you'll see somewhat of a moderation in volumes and then a pickup from there.
Yeah. Obviously, when Blade was started, it was really kind of really largely considered to be an urban air mobility passenger business, which we're going to get to in a moment. Obviously, you took on the medical business. Are there any other inorganic opportunities that can add, whether it be ancillary services or even just more capacity? How do you think about augmenting the business from an inorganic point of view?
Yes. From our capital allocation strategy, it's really focused on deploying capital within the medical business. We have the ancillary services we talked about in terms of ground today and organ placement services. We have talked about medical being a key area of capital deployment. Anything within our core business today and other services around the core organ transplant market is a key focus. It is a big priority of ours.
Before moving on to the passenger segment, I wanted to pause and see if there's any audience questions. All right. Why don't we go ahead and move to passenger? Again, this is really the core business, and we've been covering the stock for a few years now, and that was kind of the key focus. We've actually seen a nice improvement in terms of the profitability profile. You talked about now turning the EBITDA break-even this past 1st quarter, despite actually being a seasonally lighter quarter. Can you speak to some of the steps that the team's been taking to reduce costs in the business? I guess, how should we think about it as we move ahead?
Right. This has been a significant improvement, as I alluded to earlier. There have been a few different drivers of the improvement of profitability in passenger. We have restructured our European business with our partner there. That has reduced costs. That has made the operations more efficient. We are really just starting to see those changes come to fruition in the 1st quarter of this year, and that should continue for the rest of the year. Last summer, we made the tough decision to exit our Canadian business, and that was nominal losses in that business. You are seeing that improvement within the results, and that should continue for the rest of the year. We have also been scrutinizing all of our costs in our passenger business, and you are starting to see, you have seen, declines in our SG&A the last few quarters as a result of those actions.
I guess, how do we think about margin expansion opportunities in this business? We can think about maybe further pricing, optimization, route availability, which will have impacts on utilization. Utilization trends are key here. How should we think about further opportunities in this business?
Yeah, I think the key driver from here is a continuation of the factors I just mentioned on an annual basis. Just Europe, Canada, and the SG&A rationalization actions we've taken. I think beyond that, it's largely going to be driven by volume growth and the operating leverage on our fixed costs.
How much more organic growth potential do you see in the passenger business? I guess, how much is Blade investing into customer acquisition? When I think about your New York business, I mean, maybe you do not have to do as much as you are, maybe the brand name is sort of out there, but how should we think about that?
The way we think about that is that the big unlock in the passenger business is the transition to eVTOLs, electric aircraft. We think there is a potential for new landing zones. Each new landing zone is really a new, we view it as a new business. That is really the step function potential in terms of growth rate and passenger. As we just talked about, the focus has been strengthening the platform that we have today and pulling forward the profitability as you are seeing in the results. Ahead of that transition, we have guided to a low single-digit growth rate in the business, excluding Canada for this year.
Yeah. I asked that earlier about the tech stack within organ transplant, but I guess you had this business even before the medical business. Can you describe the tech stack here in passenger and maybe if there's any sort of overlap or synergies that exist, or is it really kind of two separate ways to think about it from a tech stack point of view?
I think it's two separate tech stacks here, but we have a consumer-facing app. We have a new native app that we just launched this year, which is great. I encourage everyone to check it out. We have an app that enables booking and a lot of other services direct to the consumer and to the passenger. We have technology that's in cockpit that enables our operators and pilots with visibility into logistics and passengers and flight schedules. We have obviously a backend for our operations team that manages all the flights and manages all the operations.
It was something that came to mind as you were speaking, and obviously you have somewhat of a, let's call it, a capital light. You have your own assets in medical, but passengers really rely on other parties. Can you explain the advantage of that maybe relative to other players in the space and why not have any assets in this space?
Right. So it's an important point. Overall, we have an asset light model where we don't own any aircraft in the passenger business. The majority of our flights are done on third-party aircraft, even in our medical business. In passenger, there's significant seasonality in the business with much higher volume in the 2nd and 3rd quarters and lower volume in the 1st and 4th quarters. Obviously, just somewhat of a higher level of economic sensitivity relative to the medical business. We've made the strategic decision to operate that as a completely asset light business.
Yeah. We asked you earlier about the sort of near term, but what are the demand trends you're seeing in the passenger business thus far in May? I mean, obviously, you're kind of in a seasonally stronger period, but there's been obviously some news and consternation around New York Airport. Other airports may be fine. Just what kind of demand trends are you seeing?
Yeah, we highlighted on our call earlier this week some softness in the New York kind of centric products following the helicopter incident. Outside of that, I would say in May, there's a real seasonal pickup towards the end of May into the summer for the summer season. We've seen strong bookings so far. I would say that about half of the bookings happened within the week of the flight. I'm not sure it's a hugely meaningful metric, but there's positive signs.
Yeah. Blade has actually sponsored some various events, and I think Rob has talked about various events through time. How does the company go about being the preferred sort of helicopter supplier, if you will, for some of these events that you've spoken to? I mean, how do you even think about it on a go-forward basis?
Yeah, we have a really strong, obviously, we have a really strong brand and marketing team at Blade that is really focused on this and partnerships. If you look at our investor presentation, we have a large number of partnerships and relationships with a lot of consumer brands that's really focused on this. We're constantly thinking about how we can create new partnerships and leverage the brand and participate in more of these events.
Great. When we first started covering the stock, it was a few years out at that time, but it was really the move and the long-term value proposition of having electric vertical takeoff and landing, or again, EVA or electric vertical aircraft that Rob's like to say. What is your latest expectation of when these, maybe just for lack of a better word, flying cars will really launch in the U.S.? And can you touch on your expectations around a cohabitation phase that you've discussed, whereas obviously this will be a supply-driven market at first, and there'll be clearly helicopters for the foreseeable future?
Yeah, I think some of the leading eVTOL OEMs are largely pointing to 2026, around that time period for certification and commercialization in the U.S. I'm not sure we could add much more to that. I mean, the only thing I will say is that typically these things do take a little longer than folks expect, but that's kind of the time frame that they're contemplating currently. The way we're kind of thinking about the introduction, as Rob likes to call it, is a cohabitation phase where we will operate both traditional helicopters and eVTOLs. I think that has to do with the fact that it's likely that the eVTOLs will not be able to meet all the missions that are going to be required that traditional helicopters would be able to meet.
That could be for things like for different range, payload in terms of number of passengers.
Yeah. Maybe you want to speak a little bit about the competitive landscape. There are a few companies that have sort of, I do not know, sucked all the oxygen out of the room in terms of their expected launches. Two of these companies have talked about New York businesses. How should we view the competitive landscape in the U.S. once these other carriers launch product? Again, especially talking about similar routes as what you already currently have with your Blade Airport business.
Yeah, I think it comes down to our really strong business we have today providing these transportation services to passengers. We have an established brand today, scale, infrastructure in terms of terminals in key markets. We're kind of viewing this as really like an asset swap where we'd be operating both of the aircraft and really just swapping out some of the traditional helicopters for eVTOLs. We think we're really well positioned for this transition. We also think that it's going to be a large market opportunity in terms of TAM. I think you have to think more broadly about it relative to the markets we're in today.
Maybe just to be clear, because some companies are making partnerships with airlines directly and want to sort of launch or operate their own services, but there's other players in the space, meaning OEMs that are likely to be more like partners, or at least the operators can buy from them, and then you can team up with them. How do you think about the broader availability of these aircraft? Again, maybe it's '26, maybe it's '27, or even beyond. How do you see the availability of the variety of players that are out there that could eventually be partners?
Yeah, for example, we have a relationship or an agreement with Beta, which is, as far as we understand, not planning on operating their own aircraft. We think it's going to be there's going to be many different OEMs out there with many different business models. We think the market will likely evolve over time with many different aircraft available out there.
Right now, I think you have primarily two sites in New York, mainly the West . I think people are talking about lower Manhattan as well. How do you see this business potentially evolving when you do have these much quieter aircraft that exist? What would New York look like potentially over time?
Yeah, we operate on the West Side of Manhattan, on the East Side, East 34th. We also announced a partnership with SkyPorts to operate at the downtown heliport. We announced that earlier this year. Like I said earlier, I think the introduction of these eVTOLs and the noise signature and the emissions profile of them will enable new landing zones to be established relative to the ones today. I think more landing zones in more places.
The teams talked in the past about the criticality of infrastructure and also even things like lounges and stuff like that. What would give you a potential advantage, or I do not want to call it a moat, but maybe there is a moat in terms of having infrastructure. And maybe even more importantly, just the company has been operating these businesses for a period of time using helicopters, developing know-how, understanding utilization trends, things like that. How does that give you an advantage potentially in this market, even when there are other players that have product?
Yeah, so having the infrastructure today in these markets is critical. We've been at the West Side, heliport for a long period of time. Being an incumbent there, we view as critical overall. Just the history of operating. The business was started over 10 years ago on the passenger side. That's 10 years of data, operational data, customer data, experience, managing flights, customer service, the whole operation. That overall experience, I think, is critical to how we're viewing the ability to leverage that in this transition.
Yeah. I want to just see again if there's any questions from the audience on more passenger, medical, or this eVTOL topic we've discussed. Okay. It's been a question of ours, and we've talked about it in the past. I mean, I guess we generally think of these businesses as being kind of disparate, the medical and passenger, but I mean, are there synergies here? If so, can you help us understand the operators you use? Are they somewhat similar, somewhat different? I guess the second part of that is kind of related to this whole eVTOL question. Can these eVTOL potentially be used in the medical side, even potentially even more so than on the passenger side?
Yeah, we operate the business largely separately today. I would say the operational learnings and capacity has really helped our ability to grow the medical business. Like I said, there are three types of capacity: our own dedicated, and then this pool of third-party capacity. A lot of those relationships were really initiated on the passenger side. That has been really important. There are some flights that are done, helicopter flights done on the medical side. That is definitely a real synergy between the two. We operate the businesses largely separately.
Yeah. I think that's mainly my questions around passenger, but you talked earlier about you exited the Canadian market. You're focused generally on New York and southern France, Monaco. Where do you see the next emerging markets? We've heard UA E as one example, but where do you see the next emerging markets? And how does the company view maybe potential opportunities to expand in the passenger business?
That's a great question for Rob. I think that, like I said, when this transition happens to electric aircraft, there will be an opportunity to add new landing zones to different markets. The way Rob often talks about it is you really need density, you need friction in terms of traffic, but you also need landing zones near population centers. A lot of markets have one and two, but not three. When this transition happens and you're able to open new landing zones, that kind of unlocks many new markets. There are probably many ones to talk about in that that could potentially be new markets for us.
Yeah. I'd like to move on to kind of capital allocation. Maybe what is Blade 's capital allocation strategy, especially, and how should we think about this evolving as you're consistently generating positive free cash flow in the coming quarters and years?
Yeah, so we view the balance sheet as really a strategic asset for us. We have $120 million of cash and no debt on the balance sheet, really focused on disciplined allocation of our excess cash. Priority for us is strategic acquisitions in medical, along with investments in additional aircraft and vehicles. On the acquisition side, it could be things, bolt-on acquisitions that complement our existing business, along with ancillary services within the organ transplant market. We have talked in the past about our long-term vision of opportunity to grow in other time-critical logistics markets. We really view the medical business as a logistics platform. There are opportunities within medical and expansion to other markets as well.
We've been covering the company for a number of years. What would you say at this point is maybe least understood or maybe people just don't really get about the story that you'd like to kind of comment on?
Yeah, I think we meet a lot of investors still that are familiar with the consumer passenger business, but are just not as familiar with our medical business. A lot of investors don't know we have a medical business. Really understanding what we're doing and the growth and margin opportunity within medical. I think also just the optionality with the balance sheet and our excess cash. I think those are the main ones.
I guess when we think about just wrapping up our questions, maybe summarize the investment thesis, like why invest in Blade and how should we think about the investment thesis if we just wrap us up here?
Yeah, I think overall, we're at a really interesting inflection point going from basically break-even adjusted EBITDA and burning a small amount of cash to generating EBITDA and positive free cash flow. A lot of, like I said earlier, really under the radar and undiscovered. I think as we continue to grow the business, there's really opportunity within medical to really grow revenue and margins over the next few years. We guided to a high teens adjusted EBITDA margin in medical. We did 13% over the last 12 months. It was a significant opportunity to grow that business and to expand margins. There is the real attractive optionality within the passenger business right ahead of this transition to electric aircraft.
We have a few minutes left, but I think why don't we just go ahead and close it there, Matt? Thanks for sharing your insights, and we'll look forward to following the progress.
That's great. Thanks, Bill.
Yeah.