Wheels Up Experience (UP) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a record revenue of over $425 million for Q2 2022, representing a nearly 50% year-over-year increase [10] - Active members increased by over 20% year-over-year, reaching 12,667 [56] - The adjusted contribution margin improved to 4.7%, a 550-basis-point sequential improvement [63] - Adjusted EBITDA was negative $46.9 million for the quarter, within the guidance range [65] - The company ended the quarter with $427 million in cash and cash equivalents and no long-term debt [70] Business Line Data and Key Metrics Changes - Membership revenue grew 48% year-over-year, driven by a higher mix of core and business members [56] - Flight revenue increased by 34% year-over-year, with Live Flight Legs up 19% [59] - Aircraft management revenue grew 22% year-over-year, driven by higher owner usage [61] - Other revenue significantly increased to $56.7 million, including $21 million from Air Partner's group charter and freight businesses [61] Market Data and Key Metrics Changes - The company has seen strong demand in leisure travel and a steady pickup in business and corporate travel [59] - Prepaid block sales reached over $330 million for the quarter, up over 180% year-over-year, indicating strong future flying demand [10] - The company expects active users to start outgrowing active members as supply constraints ease [58] Company Strategy and Development Direction - The company aims to build a technology-enabled marketplace for private aviation, enhancing operational efficiency and customer experience [7][15] - The acquisition of Air Partner is expected to provide significant revenue synergies and has exceeded expectations in terms of revenue and profit [17][69] - The company is focused on achieving positive adjusted EBITDA by 2024 through operational improvements and technology investments [19][69] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the uncertain macroeconomic environment but believes there are several levers to drive continued growth [12] - The company is committed to delivering for all customers, including members and on-demand flyers, despite geopolitical and macroeconomic uncertainties [14] - Management expressed confidence in the demand environment, citing strong block sales and member retention rates [82][84] Other Important Information - The company launched a carbon offset program in June as part of its environmental initiatives [20] - The consolidation of FAA operating certificates is expected to enhance operational efficiency and is planned for completion in 2023 [45][132] Q&A Session Summary Question: What signals are being watched regarding demand? - Management indicated that block sales are a key indicator, with a reported increase of 187% year-over-year, and retention rates remain strong at over 90% for block buyers [82][83] Question: How will margins be affected by fuel surcharges? - Management noted that the fuel index charge was implemented in June, which is expected to improve margins in the third and fourth quarters [85][86] Question: What gives confidence in the 2024 adjusted EBITDA profitability target? - Management highlighted strong topline growth, a loyal membership base, and operational improvements as key factors supporting the timeline for profitability [90][94] Question: How are pilot retention rates being managed? - The company is closely monitoring pilot retention and has implemented the Aircrew 360 program to enhance career development and compensation [117][119] Question: What are the components of the other revenue line? - Other revenue included approximately $37 million from asset sales and about $21 million from Air Partner's contributions, with expectations for fluctuations in future quarters [122][123]