Wheels Up Experience Inc. Q3 FY2022 earnings call

• Quarter highlights: Revenue at $420 million, up 39% YOY and ahead of guidance. Driven by higher flight revenue per live leg and stronger other revenue from aircraft sales. Membership revenue up 25% YOY. • Management structure realignment: Eliminating president role, transitioning to granular design focused on operations, digital transformation, and marketplace. • Cash position: Recent EETC debt financing provides flexibility to invest in business. • Cost reductions: Plan to reduce SG&A ratio to low double digits by 2024 through focus, organizational design, and financial discipline, while prioritizing safety and customer experience. • Pricing: Constantly evaluating offering to ensure attractive and profitable product, with recent changes starting to flow through top-line. • Operational improvements: Focus on pilot staffing (hired over 450 pilots, working on simulator availability to expedite onboarding), maintenance availability (boosting mobile service unit capacity), FAA certificate consolidation, and building MOC in Atlanta. • Technology initiatives: Migrating fleet to UP FMS, developing consumer-facing mobile app to shape demand and optimize asset utilization.

Revenue for the third quarter was $420 million, a record for the third quarter and up nearly 40% year-over-year. Flight revenue was a key driver, with a 20% year-over-year increase in flight revenue per live leg due to indexed fuel surcharge and higher average pricing. Other revenue was stronger due to a $35 million year-over-year increase in aircraft sales. Membership revenue was up 25% year-over-year driven by new members. The revenue contribution from different segments: flight revenue, other revenue (including aircraft sales), and membership revenue each played roles in the overall 39% YOY growth.

• Full year 2022 revenue expected in range of $1.55 billion to $1.58 billion, with 4Q revenue up ~15% YOY. • 4Q adjusted contribution margin expected in 4.25% to 4.75% range. • 4Q adjusted EBITDA expected in range of negative $40 million to negative $45 million. • 4Q GAAP net loss expected between $90 million to $100 million. • Capital spending for 2022 expected a few million dollars below previous guidance of $125 million, with normal capital spending in mid-single digit range of revenue going forward.

• Macroeconomic concerns that could impact demand. • Pilot training bottlenecks taking up to 90 days for pilots to get simulator time. • Maintenance challenges in ensuring high safety standards while improving availability. • Dependence on third-party fulfillment costs if operational improvements aren't realized.

Q: Just on initiatives to reduce SG&A from double digits to low double digits and other buckets of savings, and how much fuel surcharge contributed to sequential improvement in adjusted EBITDA margin.

A: Overall, prioritizes safety and service first. Sees potential to reduce overhead spend, centralize activities, and use technology. Sequential improvement in 3Q due to about $6 million benefit from fuel surcharge. Working on 2023 budgets to develop cost framework.

Q: On live flight legs slowing down, thoughts on what's going on there.

A: Revenue per live flight leg up significantly (20% YOY, 25% YOY excluding Air Partner). Only ~20% of flight revenue in 3Q was on new June pricing, with ~50% still from pre-December 2021 blocks. Increasingly seeing pricing increases flow through, and outlook remains positive for live flight legs despite variables.