Blade: Margins Remain An Issue

Core Insights - Blade Air Mobility, Inc. achieved its first positive adjusted EBITDA quarter as a public company in Q2, with medical revenue continuing to grow and jet revenue rebounding, although overall growth remains sluggish due to a pullback from economically questionable activities [1][14] Market Conditions - The Medical segment is experiencing solid growth driven by technology and regulatory changes, with organ transplant volumes for heart, liver, and lung increasing in the high single-digit range in Q2, slightly down from a 9% YoY increase in Q1 [2] - Perfusion technology is enhancing organ transportation capabilities, benefiting Blade by increasing air transport and flight distances, although future stabilization of volume growth and distance traveled needs consideration [3][4] Competitive Landscape - Blade's Medical segment faces increasing competition, particularly from TransMedics, which is aggressively pursuing the market and reported a 32% sequential increase in transplant logistics revenue to $19.1 million [4] - TransMedics has expanded its logistics operations and aircraft fleet, which could impact Blade's market position as it currently relies on a fragmented ground transportation market with an estimated total addressable market of $200 million [4][5] Business Updates - Blade has exited unprofitable passenger routes, including restructuring its Canadian operations, which is expected to improve margins over time [5][11] - The company is expanding its short-distance infrastructure and has launched a new codeshare with Emirates, while also opening new terminals and a rooftop helipad [5] - Blade closed 7 of 8 announced jet aircraft acquisitions in Q2, with expectations that these will generate a return on invested capital exceeding 30% [5] Financial Performance - Blade reported Q2 revenue of $67.9 million, an 11.4% YoY increase, with medical revenue at $38.3 million, up 11.5% YoY, driven by increased hours flown and revenue per hour [7][8] - Short-Distance revenue grew 9% YoY to $20.9 million, while Jet and Other revenue increased 17.4% YoY to $8.7 million [9] - Q3 is off to a strong start, with expectations of $240-250 million in revenue for 2024, reflecting a 9% YoY increase at the midpoint [9] Profitability and Margins - Blade's Medical flight margin improved to 23.6% in Q2, attributed to pricing and growth in ground logistics, with expectations of a 10-20% improvement in flight margins from using its aircraft [10] - The company is progressing towards GAAP profitability, but significant growth is needed to achieve consistent profitability, with current operating losses largely due to stock-based compensation [12][14] Future Outlook - eVTOLs are seen as a potential growth driver, with Blade anticipating deployment in international markets by 2025/2026 and in the US by 2026, although initial market constraints may provide an advantage [6] - Blade's current EV/S multiple is around 0.5, indicating limited growth or profitability priced into the stock, with a need to reduce CapEx and demonstrate sustainable growth in the Medical segment [14][15]