Wheels Up: Q3 revenue up 39%, losses continue, and a top exec leaves

By Doug Gollan, November 10, 2022

Wheels Up’s 2022 Q3 revenues increased to $420 million, net loss jumped to $86 million, and Vinayak Hegde exits the #2 spot

Quarterly earnings calls for Wheels Up are becoming consistent: Big revenue growth, big losses, and top executive departures.

Wheels Up Executive Changes

After it was announced CFO Eric Jacobs was leaving during the Q1 call (ex-GE exec Todd Smith replaced him), Vinayak Hegde is exiting after his position as president was eliminated.

“We are implementing a streamlined organizational structure, with senior leadership focused on driving key initiatives at an accelerated pace, which is a significant step in delivering profitable growth and an enhanced experience for our members and customers,” said Chairman and CEO Kenny Dichter, announcing the move.

Hegde joined the private aviation company in May 2021 as Chief Marketplace Officer before being promoted in October last year.

The ex-Amazon and Airbnb executive was hired to lead what Wheels Up is hoping to be its digitalization of what is still a very archaic industry driven by phone calls and emails.

Over the summer, COO Thomas Bergeson retired.

Cost focus

Smith made clear that cost-cutting is a priority as the company aims to become profitable.

The CFO told analysts, “As a result of building our business via a number of acquisitions and the manual nature of a number of our processes, our cost base is higher than it needs to be.”

He said the company plans to reduce selling, general, and administrative costs from 16% to the low double digits by next year.

Smith alluded to a hiring freeze and headcount reductions during the call. However, a spokesperson says the freeze does not apply to hiring pilots, maintenance techs, and other operational positions.

The spokesperson declined to comment on whether there have been other executive departures.

The company hired over 450 pilots this year and increased its remote maintenance capabilities, designed to reduce delays when aircraft have mechanicals away from a maintenance base.

Still, Smith said Wheels Up is battling new logistical issues, such as training bottlenecks. Scheduling simulator time can take up to 90 days.

Wheels Up Q3 2022 Financials

Looking at the financials, as third-quarter revenues increased 38% to $420 million, net loss spiked 46% to $86 million, while EBITDA loss grew 89% to $45 million.

Year-to-date revenues grew to $1.17 million, with full-year 2023 revenues expected to fall between $1.55-$1.58 billion.

Cash and Cash Equivalents increased from $427 million at the end of Q2 to $545 million, including net proceeds of $259 million via equipment notes.

Dichter said, “Our strong foundation, with an iconic brand and large base of loyal customers, helped drive another record revenue performance in the third quarter, further reinforcing the strength of our demand, even in this uncertain macroeconomic environment.”

Smith told analysts the company would improve operational performance via a new centralized operations center due to open mid-next year in Atlanta.

According to its presentation, renewal rates remained around 90% for members who deposit funds.

Wheels Up Q3 2022 Financial and Operational Highlights

  • Q3 2022 YOY Revenue increased 38% year-over-year from $302 million to 420.4 million, even with Q2’s $425 million
  • Q3 2022 YOY Net Loss increased from $59.5 million to $86.8 million from 2021, in line with Q2’s $92 million loss
  • Q2 2023 YOY Adjusted EBITDA increased $23.9 million in 2021 to $45.2 million, in line with Q2’s $47 million loss
  • 2022 YTD Revenues increased 38% from $849.2 million to $1,171.5 million
  • 2022 YTD Net Loss increased from $120.6 million to $268.3 million
  • 2022 YTD Adjusted EBITDA loss increased from $41 million to $141.5 million
  • Q3 2022 YOY Prepaid Block Sales decreased to $151 million from $172 million, compared to $333 million in Q2. The Q2 numbers were boosted by a sales push before its June 1, 2022, price increase
  • Cash and Cash Equivalents increased from $427 million at the end of Q2 to $545 million, including net proceeds of $259 million via equipment notes
  • As of Sept. 30, 2022, Long-term Debt increased from $0 to $270 million from the equipment notes
  • Q3 2022 YOY Live Flight Legs increased 7% from 19,714 legs in 2021 to 21,025, in line with Q2’s 21,705 flight legs
  • Q3 2022 YOY Flight Revenue per Live Leg average revenue increased 20% from $11,076 to $13,266, compared to Q2’s $13,088

Wheels Up Membership (as of Sep. 30, 2022)

PeriodActive Members
Q3 202212,668
Q2 202212,667
Q1 202212,424
Q4 202112,040
Q3 202111,375
Q2 202110,515
Q1 20219,896
Source: Wheels Up

Analyst’s View

Michael Bellisario of Baird writes, “With demand solid and revenue trends positive, the focus continues to be on operational efficiencies and cost reductions.”

He continues, “The company is taking more aggressive steps to achieve its target of Adjusted EBITDA profitability in 2024; importantly, quarterly Adjusted EBITDA losses have stabilized/bottomed recently, and the outlook is steadily improving, which is embedded in our modeling assumptions.

Bellisario further notes, “Management is focused on better financial discipline and reducing operating costs, and the company announced headcount reductions and a further streamlining of the overall organization.”

Sheila Kahyaoglu of Jefferies adds, “(The) -10.8% Adjusted EBITDA margins (were) dragged by supply constraints and operating costs.”

She also pointed out, “Technology & Development expenses of $16.6 million were up 90% year-over-year and represented 4.0% of sales in Q3 versus 2.9% in Q3 of 2021.”

Looking ahead

What’s next?

The company will be pushing hard to sell fund deposits between now and Dec. 1, 2022, when new price increases for 2023 go into effect.

New and existing customers who deposit funds lock-in rates for up to 24 months.

However, that’s good and bad.

Smith pointed out that many members are paying legacy prices even as the costs of flying them increase.

Only about 20% of third-quarter revenue reflected June 1, 2022, price increases, and 50% of Q3 revenues were flown at price levels locked in before Dec. 1, 2022.

“A key feature is our value proposition is the ability of our members to lock in capped rate pricing and guaranteed availability through the purchase of pre-paid blocks,” Smith told the analysts.

Read: Does stock price matter to private aviation flyers

He warned, “That remains the case today; however, as we have announced pricing and program changes, we are constantly evaluating our offerings, both in terms of price as well as guarantee levels, call-out periods, peak days, and minimums, all with the goal of assuring an attractive product, but also one that we can efficiently and profitably deliver.”

Vista Global’s XO recently eliminated guaranteed pricing, although sister brand VistaJet continues.

Across the industry, fixed hourly rates were up 33% between the end of Q3 2022 and December 2020, according to our analysis of over 250 jet card programs.

The Wheels Up financials were announced after the market closed. It closed at $1.50. Its 52-week high was $8.10, with a low close of $0.99.

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