Wheels Up increases revenue outlook as losses mount

By Doug Gollan, May 12, 2022

Q1 revenues for Wheels Up increased 24% to $325 million as adjusted EBITDA loss jumped to $49.4 million year-over-year

The story continues with Wheels Up. Revenues were up. Flying was up. Sales of funded accounts were up. And so were expenses, so the losses increased.

However, the outlook for private jet charter remains bullish, and in fact, the company increased its 2022 revenue guidance.

“Overall demand remains strong at the start of the second quarter, and our average pricing is increasing. Our core member retention continues to be robust, and our core members continue to spend more than $80,000 per year with us on average. Our newest cohorts spend more than our prior cohorts,” Chairman and CEO Kenny Dichter told analysts in discussing Q1 results.

…the company is taking the necessary steps to better position the company for growth and profitability improvement.

– Michael Bellisario, Analyst, Baird

Wheels Up Q1 2022 Financial Results

The highlights:

  • Q1 revenue increased 24% from $261.7 million to $325.6 million year-over-year
  • Q1 operating expenses from $289.3 million to $418.4 million
  • Updated guidance for 2022 revenues to reach between $1.47 billion and $1.52 billion. 2021 revenues were $1.2 billion; 2020 was $695 million; 2019 was $385 million
  • Adjusted EBITDA went from an $8.7 million loss to a $49.4 million loss year-over-year
  • Q1 Net Loss increased to $89.0 million from $32.2 million year-over-year
  • Q1 Operating Loss increased to $92.7 million from $27.7 million year-over-year
  • Cash and cash equivalents dropped to $537.7 million at the end of Q1 from $784.6 million at the end of Q4 2021 (includes acquisitions of Air Partner, Alante Air Charter, and aircraft on leases from Textron)
  • Aircraft value increased to $548.3 million from $482.8 million in Q4 2021
  • Prepaid blocks grew 153% in Q1 to $175 million year-over-year
  • Live Flight Legs increased 15% year-over-year to 17,626 in total
  • Flight revenues increased to $236.3 million in Q1 from $190.5 million year-over-year
  • Membership revenues increased to $20.6 million in Q1 from $15.0 million year-over-year
  • Active Members grew 26% year-over-year to 12,424 in total

Wheels Up Active Members

PeriodActive Members
Q1 202212,424
Q4 202112,040
Q3 202111,375
Q2 202110,515
Q1 20219,896
Source: Wheels Up


Analysts’ View

Michael Bellisario, Baird – Neutral – Target Price $5.00

Michael Bellisario of Baird titled his report, “1Q22 Revenue Upside, Stable Near-Term Earnings Outlook Are Positives.”

He wrote, “Demand is strong and expense pressures remain a challenge.”

The Baird analyst continued, “While supply chain-related disruptions, labor/staffing headwinds, and other cost pressures persist and continue to affect profitability, these challenges are better understood today, in our opinion, and the company is taking the necessary steps to better position the company for growth and profitability improvement.”

Don’t expect profits anytime soon. Bellisario says, “Wheels Up should reach run-rate profitability in 2025 (previously 2024, originally 2022) based on our model as Adjusted EBITDA benefits from higher revenues and positive operating leverage; on a normalized basis, cash flows should be positive given the company’s asset-lighter business model and net working capital benefit from prepaid blocks.”

However, he adds, “The company’s strong balance sheet (net cash position) and access to the public capital markets should allow Wheels Up to be in a position to grow the platform if/when acquisition opportunities arise and to continue investing in sales, marketing, and technology initiatives.”

Sheila Kahyaoglu, Jefferies – Buy – Target Price $8.00

Sheila Kahyaoglu of Jefferies titled her first look report, “Profitability Better Than Feared.”

She took note of Wheels Up updated guidance for 2022 revenues to reach between $1.47 billion and $1.52 billion.

With the estimate including a $90 million contribution from the Air Partner acquisition organic revenues will increase 18% this year. She notes that’s versus the previous guidance for a 15% gain.

Looking ahead, she writes, “Q2 revenue guidance is >28% y-o-y, implying revs of $366MM vs. our est/cons. of $345MM/$339MM.”

On May 15, Kahyaoglu issued a full Wheels Up analysis titled “On The Up; Looking To Control Costs.”

Her key takeaway was, “UP raised rev guidance to reflect both the acquisition of Air Partner ($90MM to 2022) and better Q1 growth. EBITDA margins of -15.2% were better than feared w/ -12.0% expected for 2022 given the fuel surcharge implemented on April 9 and the June 1 price increase including an index to fuel expense. We expect EBITDA to reach +0.7% in 2024E with volume and cost containment.”

She expects Wheels Up to be profitable on an EBITDA basis by 2024.

Gary Prestopino, Barrington – Market Perform – No Current Target Price

Barrington’s Gary Prestopino highlights, “The company stated in its press release that it has made meaningful improvements to address operational challenges, is ahead of plan on pilot hiring and is adding to maintenance capabilities. The benefits of these actions should become evident in the upcoming quarters.”

He notes among other things, “Cash and equivalents totaled $538 million at the end of Q1/22 versus $785 million at the end of Q4/21 with no long-term debt on the balance sheet.”

Looking ahead, he notes, “Consensus expectations for Q2/22 are at $339 million for revenue and $(45.6) million for adjusted EBITDA. Q2/22 includes $30 million of revenue from Air Partner.”

He concludes, “We are maintaining our Market Perform investment rating on Wheels Up.

There is no target price, however, Prestopino tells Private Jet Card Comparisons, it’s “hard to value a company in this kind of market environment that is losing buckets of money. They are working on correcting issues with pricing as well as efficiencies-but still a long way to go to achieve positive adjusted EBITDA.”

As additional analysts update their reports, we will add them to this summary, so check back.

Kenny Dichter

“The record first-quarter revenue is a testament to the company’s unique market position and iconic brand as an innovator in a supply-constrained market. We are looking forward to leveraging our recent Air Partner acquisition to expand globally,” said Dichter.

He continued, “Over the past several months, we have made meaningful improvements to address operational challenges and expect to realize the benefit in the coming quarters. We are ahead of plan on pilot hiring and continue to add to our maintenance capabilities while also delivering on several key strategic and technology initiatives.”

Vinayak Hegde

Wheels Up President Vinayak Hegde noted, “Continued execution on these initiatives, coupled with the acquisition of Air Partner, the implementation of fuel surcharges and additional capped rate price increases gives us confidence that the company will show strong margin improvements over the course of the year.”

The company said it had converted the majority of the owned and operated fleet to its UP fleet management system. It allows Wheels Up to automate aircraft and crew scheduling and more effectively and efficiently manage daily operations.

Hegde said in-house maintenance is being progressively moved in-house where it’s 20% faster and 20% cheaper.

The company is busy hiring techs.

Hegde says, “This increase in technicians will boost our mobile service unit capacity by over 50% this year, providing faster response time to address unscheduled maintenance at remote airports because we fly to thousands of destinations, this is a critical capability.”

The goal is to improve reliability.

“Our aircraft return to service time is a challenge, which adversely affects aircraft dispatch availability. One of the main challenges in this area is our reliance on third-party providers that are experiencing their own issues relating to labor, parts, and work backlogs,” Hedge told the analysts.

Fuel Surcharges

Executives said the increased cost of fuel added $9 million to its losses in Q1.

It added a fuel surcharge on March 10, however, it didn’t go into effect until April 9.

Earlier this month, Wheels Up announced new program rules and pricing effective June 1. That includes a new fuel surcharge formula that begins next month.

The new formula which tracks weekly against current pricing for jet fuel will cover incremental fuel expenses.

Visit our Fuel Surcharge Estimator.

Wheels Up Eric Jacobs CFO resigns

In related news, CFO Eric Jacobs will leave the company, effective May 18, 2022. He will act as an advisor to the Company for a period of 12 months.

Eric Cabezas, age 37, currently Senior Vice President of Finance will serve as interim CFO. Russell Reynolds Associates will conduct an external search for a permanent replacement

UP shares closed at $2.40, an 18-cent gain. The Q1 2022 results came after the market closed today. It has traded as high as $15 over the past 52 weeks.

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