SURF AIR MOBILITY INC. Q4 FY2024 earnings call

• In 2024, the transformation phase of the four-phase transformation plan was completed. Currently, Phase 2, which is the optimization phase, is being carried out. The goal is to make airline operations profitable in 2025 by rationally adjusting every route flown. - For the essential air service (EAS) business, which makes up a large part of the network, the company incorporated the recent FAA Reauthorization Act into its EAS bidding strategy. This is expected to give the company an advantage with its low-cost caravan fleet. - Regarding fleet management, in the fourth quarter of 2024, 4 new Cessna Caravan aircraft were accepted and put into operation. The saw fleet was disposed of, and 5 older Caravans were returned to the lessor in the first quarter of 2025, with the schedule optimized accordingly. - In the on-demand business, the membership program is being rebranded to the Surf On-Demand Jet Card. The salary and commission structures have been realigned, the on-demand sales team has been reduced by 50%, and direct integrations with charter supply partners have been launched. - The SurfOS operating system platform has been developed, and it was rolled out to beta users in the first quarter of 2025. Features such as direct integrations, a self-service chat function, and a mobile crew app have been introduced. - For electrification initiatives, the company has been engaging with the FAA for certification planning, key suppliers have been finalized, a customer advisory board has been established, MOUs have been signed with 7 customers, and an agreement has been entered into with Electra Aero.

For the fourth quarter of 2024, revenue stood at $28.05 million, surpassing the upper end of the guidance range. The adjusted EBITDA loss improved by $11.5 million, or 63%, to $6.9 million, which was within the guidance band of $5 million to $8 million. For the full year 2024, revenue increased by $6.5 million, or 6%, year-over-year to $119.4 million, and the adjusted EBITDA loss improved by $6.8 million, or 13%, to $44.1 million. In the fourth quarter, scheduled service revenue decreased by 6% mainly because of the elimination of unprofitable routes, while on-demand service revenue jumped by 58% compared to the comparable period. For the full year, scheduled service revenue was flat year-over-year, with the elimination of unprofitable routes offset by the addition of subsidized route revenue, and on-demand service revenue rose by 28% due to better charter sales and an increase in completed departures.

• For the first quarter of 2025, the guidance is for revenue to be in the range of $21 million to $24 million, and the adjusted EBITDA loss to be between $12 million and $15 million. - For the full year 2025, the company reaffirms the expectation of achieving at least $100 million in revenue and profitability in airline operations. - In 2025, the goals are to achieve profitability in airline operations, continue the development and rollout of SurfOS to beta users, and strengthen investor engagement.

Q: Does a full-year continuing resolution passed by Congress affect when new contracts can be received or renewals of essential air service flights can be made?

A: Currently, the DoT has several awards and bids pending. Some routes that the company operates have been extended for 90 days, four months, etc. When the routes are extended, the company can operate them at the higher subsidy rates allowed by the FAA Reauthorization Act, which could potentially increase revenue.

Q: Given the strong revenue growth from the increased mix of on-demand service and the offer of a jet card, does the company plan to shift more fleet airframes to flying on-demand flights from scheduled air service or expect a more even mix?

A: Currently, the company mainly uses its on suite or fleet owner certificate for scheduled service, both in the EAS program and in non-subsidized situations. Most of the on-demand business is serviced by operators, and the company works with approximately 400 operators on its on-demand platform.

Q: Can you provide more details about the specific offerings provided to recently announced SurfOS customers and whether they will be monetized in 2025?

A: The customers have access to the broker OS platform and the operator OS platform. These are beta customers who have been involved in the product development process. Currently, they are in a pre-revenue stage.

Q: Are the joint ventures for the electrification opportunity potential 2025 milestones or further out?

A: The company is actively engaging in discussions with potential joint venture opportunities in the supply chain. However, there are no final decisions yet, and the company will announce when such decisions are made.

Q: As SurfOS gets closer to commercial launch, are there any next milestones we should watch for now that the beta launch is underway?

A: Early feedback from beta customers has been positive. One of the well-received aspects is that the product allows operators to go direct-to-consumer. Although it's too early to share significant results given the timeframe, early feedback indicates the product is valuable and unique. Internally, new talent is enthusiastic about the development, and metrics such as a 50% reduction in the on-demand sales team and a 20% reduction in call center volume have been observed.

Q: Part of making the airline business profitable involves dealing with the maintenance backlog. Can you share the timeline or pace of going through this backlog?

A: The first quarter EBITDA guidance assumes that a significant portion of the maintenance backlog will be resolved in the first quarter. It is expected that this resolution will continue, with the backlog being more concentrated in the first half of the year.