Wheels Up Experience (US:UP)2023-05-09 12:18PART I. Financial Information Item 1. Financial Statements Wheels Up reported Q1 2023 revenue of $351.8 million (up 8%) and a net loss of $100.9 million, with cash decreasing to $363.2 million Condensed Consolidated Balance Sheets Total assets decreased to $1.71 billion due to reduced cash, while liabilities fell to $1.55 billion and equity declined to $163.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $363,177 | $585,881 | | Total current assets | $603,129 | $819,619 | | Total assets | $1,710,463 | $1,923,225 | | Liabilities & Equity | | | | Deferred revenue, current | $975,735 | $1,075,133 | | Total current liabilities | $1,231,648 | $1,344,220 | | Total liabilities | $1,547,276 | $1,671,305 | | Total equity | $163,187 | $251,920 | Condensed Consolidated Statements of Operations Q1 2023 revenue grew 8.0% to $351.8 million, but increased costs led to an operating loss of $96.7 million and a net loss of $100.9 million Q1 2023 vs Q1 2022 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Revenue | $351,812 | $325,635 | | Cost of revenue | $353,791 | $332,758 | | Loss from operations | $(96,650) | $(92,718) | | Net loss attributable to Wheels Up | $(100,866) | $(88,653) | | Net loss per share (Basic and diluted) | $(0.40) | $(0.36) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $202.5 million, with a net cash decrease of $220.4 million for the quarter Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(202,482) | $(121,216) | | Net cash used in investing activities | $(11,035) | $(119,552) | | Net cash used in financing activities | $(6,752) | $(6,107) | | Net decrease in cash | $(220,355) | $(246,875) | Notes to the Condensed Consolidated Financial Statements Notes detail revenue by service, $270 million Equipment Notes financing, and a March 2023 restructuring plan with $10.5 million in charges Disaggregation of Revenue (in thousands) | Service Type | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Flights, net | $231,762 | $236,363 | | Aircraft management | $63,694 | $60,506 | | Memberships | $21,680 | $20,647 | | Other | $34,676 | $8,119 | | Total | $351,812 | $325,635 | - In October 2022, the company issued $270.0 million in Equipment Notes with a 12% fixed interest rate, secured by 134 of the company's owned aircraft. The notes include a covenant to maintain minimum liquidity of $125 million6364 - In March 2023, the company announced a restructuring plan involving headcount reductions. This resulted in $10.5 million of expenses recorded in Q1 2023, with total charges estimated at approximately $17.7 million125126 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 revenue growth, operational efficiency initiatives, and a goal of positive Adjusted EBITDA in 2024 - The company is implementing key initiatives for efficiency and cost reduction, including member program changes, FAA certificate consolidation, strategic review, and a March 2023 restructuring plan to reduce headcount148149150 Key Operating Metrics | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Active Members | 12,285 | 12,424 | (1)% | | Live Flight Legs | 15,389 | 17,626 | (13)% | | Flight revenue per Live Flight Leg | $15,060 | $13,410 | 12% | Non-GAAP Reconciliations (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net loss | $(100,866) | $(89,040) | | Adjusted EBITDA | $(48,915) | $(49,428) | | Gross profit (loss) | $(16,424) | $(21,351) | | Adjusted Contribution | $6,355 | $(2,691) | | Adjusted Contribution Margin | 1.8% | (0.8)% | - The company's principal sources of liquidity are financing activities and cash from operations, primarily from the sale of Prepaid Blocks. As of March 31, 2023, cash and cash equivalents were $363.2 million203204 Quantitative and Qualitative Disclosures About Market Risk No material changes to principal market risks (interest rates, aircraft fuel, foreign currency) since the 2022 Form 10-K - There has been no material change to the market risk disclosures from the company's 2022 Form 10-K. Key risks remain related to interest rates, aircraft fuel, and foreign currency exchange215 Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2023, due to ongoing remediation of material weaknesses - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2023218 - The ineffectiveness is due to ongoing remediation of material weaknesses in internal control over financial reporting first described in the 2022 Form 10-K218 - Remediation plans are underway, including implementing preventative controls for segregation of duties, improving journal entry controls, ensuring IT general controls are operating effectively, and formalizing accounting policies220221 PART II. Other Information Legal Proceedings The company does not expect pending legal proceedings to materially affect its financial condition, results of operations, or cash flows - The company does not expect that the ultimate resolution of any pending legal actions will have a material effect on its consolidated results of operations, financial position, or cash flows225 Risk Factors No material changes to significant risk factors previously disclosed in the 2022 Form 10-K have occurred - No material changes to the significant risk factors disclosed in the 2022 Form 10-K have occurred226 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds occurred during the period - There were no unregistered sales of equity securities during the period227 Defaults Upon Senior Securities No defaults upon senior securities occurred during the period - There were no defaults upon senior securities during the period228 Mine Safety Disclosures This section is not applicable to the company's operations - This section is not applicable to the company229 Other Information No other material information to report for the period - There is no other information to report for the period230 Exhibits This section lists the exhibits filed with the Quarterly Report, including CEO and CFO certifications