Surf Air Mobility (SRFM) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter revenue was $23,500,000, at the high end of the expected range of $21,000,000 to $24,000,000, keeping the company on track to meet the full year expectation of over $100,000,000 in revenue [7][25] - Adjusted EBITDA loss in Q1 was $14,400,000, within the expected range provided in the last earnings release [7][26] - Scheduled service revenue decreased by 23% year over year, primarily due to the elimination of unprofitable routes and a brief interruption of service in January [26] - On-demand service revenue decreased by 25% year over year, driven by lower sales and flight completions [26] Business Line Data and Key Metrics Changes - The Essential Air Service (EAS) Program represents approximately 40% of revenue, with the company being the lowest cost provider on routes below 500 miles [5][21] - The company returned five older aircraft to lessors during Q1, focusing on operationally efficient Cessna Grand Caravan [10] - Flight completion factors improved to above 92% in the first six weeks of Q2, with a goal to return to 96% prior to route expansion [12] Market Data and Key Metrics Changes - The company operates almost exclusively in the US, with minimal impact from tariffs due to domestic operations and aircraft manufacturing [4][20] - The current economic environment has benefited the company, particularly with lower fuel costs [22] Company Strategy and Development Direction - The company is focused on three growth vectors: expanding air mobility operations, commercial rollout of the regional air mobility software platform, and marketing electrified powertrains for the Cessna Caravan [28] - The transformation plan includes an optimization phase, with a goal to achieve positive adjusted EBITDA in airline operations in 2025 [19][24] Management's Comments on Operating Environment and Future Outlook - Management noted substantial changes in the economic, regulatory, and political environment, but expressed confidence in the company's competitive advantage as a low-cost provider [4][5] - The company anticipates minimal impacts from potential tariffs and is actively managing operations to improve cost structure and efficiencies [20][28] Other Important Information - The company raised an incremental $5,000,000 in funding after the end of Q1 [8] - An interline agreement with Japan Airlines was announced, expanding access to over 435 million customers [12][48] Q&A Session Summary Question: Thoughts on changes to the essential air service budget - Management acknowledged the potential budget cuts but emphasized their competitive advantage as a low-cost operator [31][34] Question: Discussion on core versus non-core scheduled and charter flights - Management identified Hawaii as a core area and discussed the importance of profitability in route selection [35][36] Question: Plans for adding new profitable routes - Management indicated that while they have targeted drafts to exit, some routes are being held longer than planned due to additional subsidies [38] Question: Service interruption details - Management clarified that the service interruption in January was unplanned and related to maintenance issues [47] Question: Potential for more interline agreements - Management expressed excitement about the Japan Airlines partnership and indicated interest in expanding to other carriers globally [48]