“Our financial results for the second quarter demonstrate strong execution by the Surf Air Mobility team. Revenue exceeded our expectations and Adjusted EBITDA was materially higher than our initial plan. We remain focused on executing our strategy and on our unwavering commitment to expand our footprint and leadership position in the regional air mobility market,” said Deanna White, Chief Operating Officer and Interim CEO of Surf Air Mobility.
She continued, “In the last 90 days, we have moved rapidly to implement operational improvements and stringent management of operating expenses. These efforts resulted in second quarter positive adjusted EBITDA for our regional airline operations, formerly known as Southern Airways, reversing a longstanding trend. In addition to driving substantive improvement in those operations, we are simultaneously advancing our Technology operations, including the ‘SurfOS’ technology platform and our EP1 Caravan electrification initiative.
She concluded, “We are fundamentally improving our operating model and refining strategies to reduce our cost of operations. In addition, we plan to sub-capitalize key initiatives to drive efficiencies and more effectively manage capital. To that end, we recently announced a ground-breaking new venture, Surf Air Technologies, powered by Palantir Technologies. Together with Palantir, we will develop, market and sell AI-powered software tools to create a category-defining operating system for the advanced air mobility industry. This venture uniquely places Surf Air Mobility at the forefront of innovation in our industry.”
Second Quarter Financial Highlights:
Surf Air Mobility is providing unaudited results for the period ended June 30, 2024, on a quarterly basis, as well as unaudited pro forma results for the period ended June 30, 2023, which assumes the Southern acquisition closed as of the beginning of fiscal year 2023.
Revenue
Net Loss
Adjusted EBITDA
Developments on Key Initiatives:
Mobility
Software
Electrification
Capital Structure Update:
Financial Outlook
The Company’s expectations for the third quarter reflect the impact of unplanned maintenance on aircraft over the last two months resulting in lower completion factors. Due to these factors, the Company currently expects that its regional airline operations will be marginally unprofitable in the third quarter. The Company is executing a series of actions to improve profitability and is targeting profitable regional airline operations for the full year.
Consolidated Balance Sheets as of June 30, 2024, and December 31, 2023:
|
| June 30, |
| December 31, | ||||
Assets: |
| |||||||
Current assets: |
| |||||||
Cash | $ | 1,460 |
| $ | 1,720 |
| ||
Accounts receivable, net |
| 4,487 |
|
| 4,965 |
| ||
Prepaid expenses and other current assets |
| 9,928 |
|
| 11,051 |
| ||
Total current assets |
| 15,875 |
|
| 17,736 |
| ||
Restricted cash |
| 614 |
|
| 711 |
| ||
Property and equipment, net |
| 47,041 |
|
| 45,991 |
| ||
Intangible assets, net |
| 24,890 |
|
| 26,663 |
| ||
Operating lease right-of-use assets |
| 10,523 |
|
| 12,818 |
| ||
Finance lease right-of-use assets |
| 1,273 |
|
| 1,343 |
| ||
Other assets |
| 5,331 |
|
| 5,727 |
| ||
Total assets | $ | 105,547 |
| $ | 110,989 |
| ||
Liabilities and Shareholders’ Deficit: |
| |||||||
Current liabilities: |
| |||||||
Accounts payable | $ | 25,983 |
| $ | 18,854 |
| ||
Accrued expenses and other current liabilities |
| 78,897 |
|
| 59,582 |
| ||
Deferred revenue |
| 17,072 |
|
| 19,011 |
| ||
Current maturities of long-term debt |
| 4,922 |
|
| 5,177 |
| ||
Operating lease liabilities, current |
| 4,322 |
|
| 4,104 |
| ||
Finance lease liabilities, current |
| 256 |
|
| 215 |
| ||
SAFE notes at fair value, current |
| 6 |
|
| 25 |
| ||
Convertible notes at fair value, current |
| 8,014 |
|
| 7,715 |
| ||
Due to related parties, current |
| 47,371 |
|
| 25,431 |
| ||
Total current liabilities |
| 186,843 |
|
| 140,114 |
| ||
Long-term debt, net of current maturities |
| 18,346 |
|
| 20,617 |
| ||
Operating lease liabilities, long term |
| 3,894 |
|
| 5,507 |
| ||
Finance lease liabilities, long term |
| 1,078 |
|
| 1,137 |
| ||
Due to related parties, long term |
| 987 |
|
| 1,673 |
| ||
Other long-term liabilities |
| 22,489 |
|
| 19,426 |
| ||
Total liabilities | $ | 233,637 |
| $ | 188,474 |
| ||
Commitments and contingencies (Note 12) |
| |||||||
Shareholders’ deficit: |
| |||||||
Common shares, $0.0001 par value; 800,000,000 shares authorized as of both June 30, 2024 and December 31, 2023; 87,029,425 shares issued and outstanding as of June 30, 2024 and 76,150,437 shares issued and outstanding as of December 31, 2023 | $ | 8 |
| $ | 8 |
| ||
Additional paid-in capital |
| 538,385 |
|
| 525,042 |
| ||
Accumulated deficit |
| (666,483 | ) |
| (602,535 | ) | ||
Total shareholders’ deficit | $ | (128,090 | ) | $ | (77,485 | ) | ||
Total liabilities and shareholders’ deficit |
| $ | 105,547 |
|
| $ | 110,989 |
|
Unaudited Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2024 and 2023: (in thousands, except share and per share data):
|
| Three Months Ended |
| Six Months Ended | ||||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Revenue | $ | 32,366 |
| $ | 6,195 |
| $ | 62,990 |
| $ | 11,702 |
| ||||
Operating expenses: |
| |||||||||||||||
Cost of revenue, exclusive of depreciation and amortization |
| 27,729 |
|
| 7,049 |
|
| 56,218 |
|
| 13,699 |
| ||||
Technology and development |
| 5,658 |
|
| 816 |
|
| 12,667 |
|
| 1,629 |
| ||||
Sales and marketing |
| 2,578 |
|
| 1,927 |
|
| 5,587 |
|
| 3,321 |
| ||||
General and administrative |
| 19,596 |
|
| 9,296 |
|
| 44,205 |
|
| 17,736 |
| ||||
Depreciation and amortization |
| 2,062 |
|
| 261 |
|
| 4,040 |
|
| 519 |
| ||||
Total operating expenses |
| 57,623 |
|
| 19,349 |
|
| 122,717 |
|
| 36,904 |
| ||||
Operating loss | $ | (25,257 | ) | $ | (13,154 | ) | $ | (59,727 | ) | $ | (25,202 | ) | ||||
Other income (expense): |
| |||||||||||||||
Changes in fair value of financial instruments carried at fair value, net | $ | (154 | ) | $ | (30,404 | ) | $ | (669 | ) | $ | (38,500 | ) | ||||
Interest expense |
| (1,911 | ) |
| (525 | ) |
| (3,582 | ) |
| (697 | ) | ||||
Loss on extinguishment of debt |
| — |
|
| (389 | ) |
| — |
|
| (389 | ) | ||||
Other income (expense) |
| 304 |
|
| (48 | ) |
| (51 | ) |
| (305 | ) | ||||
Total other income (expense), net | $ | (1,761 | ) | $ | (31,366 | ) | $ | (4,302 | ) | $ | (39,891 | ) | ||||
Loss before income taxes |
| (27,018 | ) |
| (44,520 | ) |
| (64,029 | ) |
| (65,093 | ) | ||||
Income tax benefit |
| 35 |
|
| — |
|
| 81 |
|
| — |
| ||||
Net loss | $ | (26,983 | ) | $ | (44,520 | ) | $ | (63,948 | ) |
| $ | (65,093 | ) | |||
Net loss per share applicable to common shareholders, basic and diluted | $ | (0.33 | ) | $ | (3.14 | ) | $ | (0.80 | ) | $ | (4.60 | ) | ||||
Weighted-average number of common shares used in net loss per share applicable to common shareholders, basic and diluted |
|
| 81,890,955 |
|
|
| 14,168,091 |
|
|
| 79,599,848 |
|
|
| 14,138,856 |
|
Unaudited Pro Forma Financial Measures; Reconciliation of Net Loss to Adjusted EBITDA for the Three Months and Six Months Ended June 30, 2024 and Pro forma Net Loss to Pro forma Adjusted EBITDA for the Three Months and Six Months Ended June 30, 2023 (in thousands):
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in thousands) |
|
| 2024 |
| 2023 (Proforma) |
|
| 2024 |
| 2023 (Proforma) | ||||||
Net loss |
| $ | (26,983 | ) |
| $ | (16,673 | ) | $ | (63,948 | ) |
| $ | (32,184 | ) | |
Addback: |
| |||||||||||||||
Depreciation and amortization |
|
| 2,062 |
|
|
| 2,332 |
|
| 4,040 |
|
|
| 4,133 |
| |
Interest expense |
| 1,911 |
|
| 1,483 |
|
| 3,582 |
|
| 2,538 |
| ||||
Income tax expense (benefit) |
|
| (35 | ) |
|
| 151 |
|
| (81 | ) |
|
| (1 | ) | |
Stock-based compensation expense(1) |
| 7,353 |
|
| 1,653 |
|
| 19,996 |
|
| 2,798 |
| ||||
Changes in fair value of financial instruments(2) |
| 154 |
|
|
| — |
|
| 669 |
|
| — |
| |||
Transaction costs(3) |
| 588 |
|
| — |
|
| 1,176 |
|
| — |
| ||||
Data license fees(4) |
|
| 3,125 |
|
|
|
| 6,250 |
|
| — |
| ||||
Adjusted EBITDA | $ | (11,825 | ) | $ | (11,054 | ) | $ | (28,316 | ) | $ | (22,716 | ) | ||||
|
| |||||||||||||||
(1)Represents non-cash expenses related to equity-based compensation programs, which vary from period to period depending on various factors including the timing, number, and the valuation of awards. |
| |||||||||||||||
(2)Represents fluctuations in the fair value of financial instruments carried at fair value. The fair values of the convertible notes, preferred stock warrant liabilities, and derivative liabilities were based on the values of the notes, warrants, and derivatives upon conversion due to the weighted probability associated with certain events. |
| |||||||||||||||
(3)Represents costs related to a public company transaction, including accounting, legal, and listing costs. |
| |||||||||||||||
(4) Represents accrued costs related to initial license fees under the Textron Licensing Agreement. |
|
|
|
|