Surf Air Mobility Inc. (SRFM) Earnings

Management highlights

### Overall Financial and Strategic Position - Q1 2026 results outperformed guidance, with revenue hitting the high end of the guidance range and adjusted EBITDA loss of $12.3 million beating expectations. The company has met or exceeded guidance for 9 consecutive quarters. - Management reported improved business discipline and efficiency, with cost reduction efforts offsetting macro headwinds including higher fuel prices. - In April 2026, the company raised $30 million in new capital: $15 million via a non-dilutive aircraft-backed credit facility, and $15 million in common equity led by a co-founder with participation from existing leadership and investors. Company leadership purchased $5.3 million of common stock in the offering, signaling confidence in the business plan. ### Airline Operations - Maintained a 96% controllable completion factor, 72% on-time departures, and 78% on-time arrivals, all improved year-over-year and ranking among leaders in the regional airline peer group. - Carried ~65,000 passengers across ~13,000 departures in the quarter. Completed implementation of a mandatory Safety Management System (SMS) one year ahead of the FAA's 2027 mandate, making the company one of only 9 Part 135 commuter operators in the U.S. with an operational SMS. - Completed terminal renovations at the Honolulu Airport hub and took delivery of two new Cessna Caravans in April 2026, strengthening the company's position as Hawaii's largest inter-island airline by departures and airports served. - SurfOS-driven process automation for crew scheduling, aircraft dispatch, and maintenance has delivered measurable productivity and reliability gains, with compounding efficiency returns as more workflows are automated. ### Surf on Demand Private Charter - Q1 2026 set all-time revenue records, with revenue per flight increasing 38% year-over-year, driven by 149% growth in long-haul flights over 1,000 miles, 87% growth in international departures, and 49% growth in flights on larger cabin aircraft (over 9 seats). - The Powered by Surf on Demand program, which equips independent brokers with BrokerOS software under the Surf on Demand brand, grew from 6 active brokers at the end of Q1 to 29 active brokers post-quarter, with hundreds of additional applications in queue. The program enables scalable, incremental revenue growth without proportional fixed cost increases. - Achieved Argus Certified Charter Broker Accreditation (one of only 16 globally) and joined the Air Charter Safety Foundation, reinforcing industry-leading safety and compliance standards. - Signed a new wholesale agreement that expanded aircraft supply by 67% and added a new aircraft category to support growing demand from the Powered by Surf on Demand program. ### SurfOS Software Initiative - SurfOS is built and validated on the company's own airline and charter operations before being offered to external customers, and targets a $156 billion global market across charter aviation, private aircraft sales, and MRO aftermarket. - Q1 2026 product milestones included launching an aircraft intelligence tool for third-party fleet monitoring, integrating Palantir's AIP-enabled pricing into BrokerOS, expanding BrokerOS CRM capabilities, and launching post-quarter AI-supported fuel optimization and crew reserve optimization modules for airline operations, built on Palantir's Foundry and AIP infrastructure. - Three core products are being brought to market in 2026: - *BrokerOS*: Commercially launched in December 2025, monetized via a take rate on charter bookings. Early results show top brokers using BrokerOS closed 32% more bookings, cut quote-to-close time by 57%, and processed 40% more payments on-platform. - *OperatorOS*: Targeted for commercial launch in H2 2026 for small and mid-sized Part 135 operators, monetized via modular subscription fees and ancillary upsells. 17 LOIs and software agreements are already signed, with 2026 targets of 10 additional LOIs and 5 live operators on the platform. - *SurfOS Enterprise Solutions*: Targets large operators, brokerages, and aircraft manufacturers needing custom deployments. The company has an exclusive teaming agreement with Palantir, whose engineering and business development resources support sales and shorten sales cycles. The 2026 target is to close multi-year, multi-million dollar contracts, with multiple active discussions ongoing. - The unified data infrastructure on Palantir's platform enables fast deployment of agentic AI to autonomously optimize core workflows, creating a network effect where more platform participants increase value for all stakeholders. ### Electric Aircraft Partnership - Announced a firm order for 25 Beta Technologies all-electric aircraft with options for 75 more, with Surf Air designated as Beta's launch operator for commercial passenger electric service. The agreement also names Surf Air as Beta's exclusive maintenance, repair, and overhaul provider in the Hawaii launch market, with option to expand geographically. - The partnership allowed the company to eliminate up to $100 million in planned capital expenditure for its internal Cessna Caravan electrification program. The company still believes in the long-term potential of an electric Caravan and is exploring third-party paths to complete the initiative without deploying additional company capital. - Beta electric cargo demonstration flights are scheduled to begin in Hawaii in summer 2026, leveraging the company's existing inter-island operational footprint.

Guidance

- Full-year 2026 revenue guidance is maintained at $128 million to $138 million, representing 20% to 30% year-over-year growth. - Full-year 2026 adjusted EBITDA loss guidance was improved by approximately 40% to a range of $25 million to $30 million, down from the prior guidance of $40 million to $50 million loss. This upward revision is driven by four factors: 6% cost reduction for the airline segment and 15% cost reduction for the charter segment from SurfOS, 32% lower staffing requirements and 17% lower professional services spend from corporate automation and procurement discipline, incremental profitable growth from the Powered by Surf on Demand program without proportional fixed cost increases, and compressed development cycles and lower spend from AI-assisted SurfOS development. - Q2 2026 revenue guidance is $27 million to $30 million, and adjusted EBITDA loss guidance is $8.5 million to $10.5 million. The adjusted EBITDA guidance reflects partial offsetting of two external headwinds: elevated global fuel prices and elevated April cancellation rates in Hawaii from poor weather. - Management expects adjusted EBITDA loss to continue narrowing through H2 2026, absent unexpected macro or geopolitical headwinds, as the company accelerates its path to profitability.

Segment performance

1. Scheduled Airline Operations: Q1 2026 revenue was $15.5 million, representing a 13% year-over-year decrease, and contributed 60.5% of total Q1 2026 revenue. The intentional 13% decline is the result of exiting unprofitable routes to build a more profitable network. 2. Surf on Demand Private Charter: Q1 2026 revenue was $10.1 million, representing a 77% year-over-year increase, and contributed 39.5% of total Q1 2026 revenue. This was the highest revenue quarter for the segment since inception, with gross margins improving 340 basis points year-over-year. Total Q1 2026 consolidated revenue was $25.6 million, a 9% increase year-over-year.

Risks & headwinds

- Higher global fuel prices and adverse weather conditions create near-term headwinds for revenue and unit costs in airline operations, specifically impacting the Hawaii inter-island network in Q2 2026. - The Essential Air Service program does not allow for automatic rate resets to pass through higher fuel costs, though management notes that recent route rebids have already adjusted for current fuel prices and SurfOS fuel management tools provide partial offset. - Enterprise SurfOS contracts have longer sales cycles than core business lines, meaning meaningful revenue contribution from enterprise is expected to come further in the future. - Electric aircraft certification and commercial launch depends on Beta Technologies' progress, with the first delivery to the company not expected until late 2028. - Forward-looking statements around future performance, product commercialization, and electric aircraft adoption are inherently subject to risks and uncertainties that could cause actual results to differ materially from expectations, as detailed in the company's SEC filings.

Analyst Q&A

• Q: With the Powered by Surf on Demand program growing from 6 brokers at end-Q1 to 29 currently, and a 2026 target of 100 brokers, what is the visibility to hitting this target and what does onboarding look like?

  A: There are over 200 completed broker applications already, so management is confident the 100-broker target is achievable. Onboarding is fully automated via software built with Palantir, so qualified brokers can be fully onboarded and ready to sell in just a few days. Management prioritizes quality over speed, focusing on brokers with established industry and customer relationships to support long-term program performance.

• Q: For the Beta electric cargo demonstration flights starting in Hawaii this summer, what counts as early success, and how does the margin profile differ from passenger flights?

  A: The primary goal of the two-month summer trials is knowledge and data exchange between Beta's team and Surf Air's flight operations, maintenance, and ground teams. The trials will validate aircraft performance assumptions in Hawaii's ideal short-haul operating environment, inform development of training programs and operational manuals, and prepare the company for future aircraft entry into service, currently expected in 24 months. Margin improvement is a long-term goal: electric aircraft are expected to have 30% lower operating costs per aircraft than current Cessna Caravans, driven by lower fuel and maintenance expenses.

• Q: What are the key milestones for converting OperatorOS LOIs to live operators, and what is the primary driver of customer adoption?

  A: OperatorOS is designed to both aggregate aircraft supply for the BrokerOS platform and deliver meaningful internal efficiency gains to operators, based on the efficiency improvements Surf Air achieved using the product for its own operations. Management expects strong conversion from LOIs to full contracts as beta customers start realizing these efficiency gains during early testing.

• Q: How does the partnership with Palantir create a competitive advantage for SurfOS?

  A: Palantir provides enterprise-grade Foundry and AIP data infrastructure that is proven for large global organizations, plus dedicated development, deployment, and business development resources that accelerate SurfOS development and enterprise sales. Palantir's platform also enables much faster deployment of agentic AI on Surf Air's unified data foundation, and Surf Air has exclusivity for the charter broker and operator category. The network effect of the platform creates a compounding data advantage as more brokers and operators transact flights through SurfOS.